Positioning for inflation

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villiagegate

New Member
The more I read the more I think we're bound to see higher inflation in the years ahead, no doubt as our housing market corrects and debt deleveraging picks up then that's deflationary but as the world continues to unravel, a lot of capital will be looking for a home. Some of that is bound to end up here, increasing the monetary base over time.

I don't think Gold is an inflation hedge (Aud gold is a crisis + forex hedge.. Forex being seperate to underlying monetary inflation).

I'm curious what folks view as good long term inflation hedges. The one that springs to mind is fair value real estate.
 
I agree, gold is not an inflation hedge, that's not why I stack it. But I don't think gold will suffer too greatly in the medium to long even if we see inflation above the norm.

I'm curious what you mean when you refer to "fair value real estate"?
 
Well, historically real estate does little except track inflation. If you can buy it at its inflation adjusted average price, it'll appreciate over time (assuming a benign economy) at pretty much the same rate as inflation. Hence, a good place to park wealth long term.
 
Physical Assets of any type are inflation hedges. Gold wins out because of its compact, dense size. Anything that is not cash.
 
I believe gold to be a hedge in inflation and deflation.
It is a physical asset universially accepted.
In an inflation - gold or real estate
In a deflation - anything that can retain purchashing power (or at least lose it slower than everything else). Gold is a good candidate for this as well.
 
Wiemar Germany/Zimbabwe/Argentina etc have shown us that fixed assets (like gold) still fall behind...theyjust fall behind the least compared to the others.

The only thing that can truely keep up with inflation is a cash generating asset like a farm, oil well, rental property or small business, where you can continually raise your prices. But the risk you run is getting the wrong asset and customers just won't have the cash to buy your product at ever increasing prices.
 
I saw a graph which showed (historically) that gold at certain points in time not keeping up with inflation.
But in this current situation, where people are loosing confidence in currency and with central banks printing, I think gold will do well. It did well during QE1 and 2 didn't it?
Unfortunately housing isnt really an option at the moment in australia, the bubble needs to pop. Too bad the FHOG was doubled in 09
 
Clawhammer said:
Wiemar Germany/Zimbabwe/Argentina etc have shown us that fixed assets (like gold) still fall behind...theyjust fall behind the least compared to the others.

The only thing that can truely keep up with inflation is a cash generating asset like a farm, oil well, rental property or small business, where you can continually raise your prices. But the risk you run is getting the wrong asset and customers just won't have the cash to buy your product at ever increasing prices.
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You also can develop a skillset that is able to be taught/passed on, at a price. This is something you can control, and raise prices, without paying additional costs re stock etc etc. Just saying. Or you could invest in Time Cube now, ask me how! :lol:
 
mmm....shiney! said:
I agree, gold is not an inflation hedge, that's not why I stack it. But I don't think gold will suffer too greatly in the medium to long even if we see inflation above the norm.
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Aaaarkkk. What am I saying? I just reread my post and now I disagree with myself. Of course that's why I stack gold. I must have been on acid or something.

Gold is about the only thing that manages to retain it's purchasing power over the long term. But sometimes it doesn't, and this may be over a 20 - 30 year period, when compared to other commodities. For now it's the best. There was a period when real estate outpaced inflation and gold - but that won't happen again for a while, same with stocks.
 
Just my opinion but I think inflation will be low for the 1st half of the year and pick up in the second half - I'm seriously looking at fixing my interest rates for half my loans shortly and if I can get 5.5% fixed for 2 or 3 years I will pull the trigger.
 
Ask yourself where is all the "Smart" fiat going and where has it always gone in recent history.
Also keep in mind the possibility of a devaluation of currency where anything on paper is at risk of a virtual overnight loss . It might seem far fetched but if it were to happen tangible assets such as physical PM's gain what the paper loses in the same time frame.

Just remember if you dont hold it you dont own it. Physical assets such as productive farmland and transport, water infrastructure may be viable but they are also subject to sovereign risk and may be deemed as necessary to the nation at times of need and therefore seized as such with arbitrary compensation, that and they are nowhere near as transportable as PM's.
 
Gold is the anchor that holds the ship steady in stormy seas, I think everyone should have some physical gold in their portfolio, as a hedge against incumbent governments/central banks and to hedge their other investments
 
Wiemar Germany, Zimbabwe, Argentina and a few others have experienced hyper inflation. I believe there are signs of it in Iran today even, but these are isolated cases. I cannot recall a time when the world in general fell into hyper inflation but I can recall many depressions in the last few hundred years where it fell into depression and deflation. All the countries listed above put themselves out on a limb. Germany attacked France and England, when England was the leading empire at the time. Zimbabwe turned against European rule and Argentina refused to play the IMF game and defaulted on it's $US debts. Some years prior it also rebelled against England and triggered the Falklands war. It rebelled, as the others did, against the status quo of ruling nations. We are very much a part of this club of ruling nations.

We are clearly entering a period of global turmoil with market prices collapsing across the board for nearly everything, excluding energy, and excluding food. But oil prices did fall after the 2008 stage in the collapse, due to reduced demand, deflation in energy prices. I am not convinced inflation in general prices is ahead of us. It doesn't matter anyway. gold AND silver do well in both inflation and deflation.


villiagegate said:
Well, historically real estate does little except track inflation.
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With RE currently 170% above general inflation over the last 40 years? I don't think so.
 
Clawhammer said:
Wiemar Germany/Zimbabwe/Argentina etc have shown us that fixed assets (like gold) still fall behind...theyjust fall behind the least compared to the others.

The only thing that can truely keep up with inflation is a cash generating asset like a farm, oil well, rental property or small business, where you can continually raise your prices. But the risk you run is getting the wrong asset and customers just won't have the cash to buy your product at ever increasing prices.
Click to expand...

The bigger risk is that the asset will be taken from you by others or the government.
 
nowaydude said:
I saw a graph which showed (historically) that gold at certain points in time not keeping up with inflation.
Click to expand...

Yep, you just gotta live for 1000 years and it'll all work itself out in the long run.
 
Fe Mike said:
You also can develop a skillset that is able to be taught/passed on, at a price. This is something you can control, and raise prices, without paying additional costs re stock etc etc.
Click to expand...

Any ideas?... I considered naturapathy or some other form of home medicine that may become popular as the babyboombers age and belts get tightened.... but then the thought of massaging 70 year old feet all day (etc) puts me off. :o
 
Clawhammer said:
Fe Mike said:
You also can develop a skillset that is able to be taught/passed on, at a price. This is something you can control, and raise prices, without paying additional costs re stock etc etc.
Click to expand...

Any ideas?... I considered naturapathy or some other form of home medicine that may become popular as the babyboombers age and belts get tightened.... but then the thought of massaging 70 year old feet all day (etc) puts me off. :o
Click to expand...
Feet ? Its the groin strains i would be worried about :D
 
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