Inflation: How to prepare?

17 years ago

Dave suggests that inflation in our future.

#1. That's right, Dave has reached the point that you merely need to say his first name in this forum. Kinda like Cher or Madonna... or rather, Sting.

#2. More to the point: So what are the strategies best suited for inflation? Gold? Specific sectors of the stock market?

Sort by:Oldest

Comments (10)

fandlil
17 years ago
Gold, about 5% or less of your investment assets. Could be gold coins (American Eagle, Canadian Maple Leaf, or whatever); or, an ETF that's indexed to the price of gold. I bought our coins before the ETFs were around. Today, I would opt for the ETF, because it's easier. With coins, if you're selling, you have to ship them & insurance costs a lot. Another alternative is something like Vanguard Precious Metal mutual fund. That one invests in gold mining stocks and stocks of companies of other precious metals like platinum, nickel and a bunch of others I've never heard of. It's a little less volatile that a straight gold strategy, because it's diversified across the other metals.

Of course Energy prices are also likely to rise, so something Vanguard Energy mutual fund might be good. It soared last year when gas was selling at $4/gallon, and then fell when the price of gas declined.

As for me, we bought our gold a few years ago, and some shares of Vanguard Precious Metals and Energy funds. So I think we're set. I didn't "plan" for inflation. I just assumed about 10 years ago that some day if there is a collapse in the economy, gold could go to $2-3K per ounce, or even more. That's when I'll sell to meet living expenses, so I don't have to sell stocks at a loss to make ends meet.
dave_donhoff
17 years ago
Hi Kelton,

#1. That's right, Dave has reached the point that you merely need to say his first name in this forum. Kinda like Cher or Madonna... or rather, Sting.

HAH!!!! (Leaving aside Sting comparisons regarding trantric accomplishments....)

"BEST" and "easiest" are different questions.

EASIEST are precious metals (the specie, not paper proxies. Actually, proxies are the easiest, but least secure.)

BEST (in my opinion) would capture the benefits of monthly cashflow/yield, leverageability (more control for less of your own cash, and using a locked balance of other's cash which is decaying at the rate of inflation. The BEST asset for this purpose is residential rental real estate.

Cheers,
Dave Donhoff
Leverage Planner
Related Discussions
How to prepare thyme and oregano in pots for winter outside, zone 7A?
Q
Comments (12)
@floral_uk z.8/9 SW UK Thank you, I get it :) :). Kind of like lavender. I did not know oregano is a sub shurb too. @CA Kate z9 I thought so too....the soil in the pots are going to freeze solid, how can this possibly work? But you can leave hardy plants in pots outside. There have been roses in grow bags that I meant to plant and forgot and they were fine the next spring, no problem, just leafed out like the other in ground roses and kept on ticking. And these were not near the house, but way out there. I have forgotten to plant a gardenia and a tea olive that I meant to plant in the ground, and these were meant to be experiments to see if I could even grow them in the ground in my area. They were just fine. And still are fine in the pots. Thyme and oregano are usually cold hardy to zones 6, even zone 5, so I think they are going to be fine. I will know in spring. They is a YTer that grows these two herbs ( and others) in pots outside in Zone 6b.
...See More
How would you prepare for a freeze right now?
Q
Comments (12)
Good morning, Sue, I always enjoy photos of your garden. You do a great job with placement. And I like that building in the background. Is that something you had built and is it a shed or intended for something else? It's attractive. All your bulbs are looking great. I need to try to add Anemone and every spring I vow to add more bulbs and then something comes up to prevent me from taking the time to install them, so I don't order them. Maybe I should start saying in the spring that I'm not going to add more bulbs in the fall. [g] Maybe that will work. If the wind is becoming routine and at your elevation is especially becoming a problem so you don't enjoy working out there in early spring, maybe you can change the way you work. And your garden plan a little. With the wind in mind, perhaps you can plan a windbreak somewhere and a sitting area or work area shielded by it. And clean up the garden more in the fall than the spring. Your garden is pretty so sitting enjoying the garden out of the wind might be something to look forward to in spring. Or a work area where you can start to put all your pots together for the season. As for climate change, I do blame all of our weather changes on that. And I agree, I'm expecting the weather is going to get warm too fast again this year. I was just thinking the other day of reminding my husband to get the a/c in the windows soon, when really I don't normally think about that until the end of May. But, I think what we all need to do is adapt as best we can. I'm grateful our part of the country seems to have it better than so many other places in the country. All the areas that are putting up with brush fires and worse heat, etc. It appears that little is being done to reverse climate change, so eventually we may have it worse than we do now. So, I'm trying to enjoy every minute of what seasonal weather we have now and try to make it work for me. When I buy more daffodil bulbs I'm going to be buying late blooming bulbs. And if we are going to keep having early heat, then I am increasing my planting of roses that enjoy the heat. I'm trying to notice what is responding well to changes in the weather and what is struggling and do more of what works. I know that doesn't amount to much, and really it's more up to nature to adapt and for us to observe and work with that.
...See More
Have your shopping behaviors changed with inflation?
Q
Comments (47)
Economics is systems science. Multiple variables, operating at different times and rates, all contributing to the functioning of the system, but not simple one cause one effect situations, so trends take time to develop, evaluate and respond to. The price of gas at the pump is a quick snapshot, but I wouldn't make wild broad policy recommendations based solely on that, anymore than I would use a medical anecdote as the basis of a diagnosis and treatment plan. Over the long haul, I would hardly expect the price of fossil fuels to go down, even though they might fluctuate widely over periods of time due to rising or falling demands. Tech service prices are going to go up, demand is going to continue to rise. I doubt is is going to be totally unbridled, but how to tweak it to make it work for the majority is a really important issue. Again, I've already thought about it and figured out how to maximize the utility I get from media, but I am constantly re-evaluating. So far, public options have proved still to be a very good option, although the delivery system is much more varied. (Public "radio" public broadcasting, public media (which is increasingly digital although I am a lover of old school print on paper that doesn't give off radiation), and public libraries. Trouble has been brewing in the agricultural/food production sector for years, (the disappearance of local and regional brands and the domination of a few multinational companies, for example) but the "nothing to see here, nothing wrong here" drumbeat marches on for those who either don't want to change or are profiting from the system. A "profitable" agricultural system doesn't mean long term agricultural resources are being conserved, well paying careers are being sustained, or people have easy access to healthful food or that agricultural largess is evenly distributed. Never has been this way, and is becoming increasingly concentrated. Again, the lack of diversity is a red flag that for some of us portends potential problems downstream . . . GDP says nothing about what is being produced or how it is being distributed. So it can rise even if the economic activity only benefits a few. Stock market gains for example. I can only imagine when the propped up stock market starts to readjust how that is going to affect all us Boomers retirements. Again, I've thought about it an am now trying to figure out how to position myself ahead of time to be as resilient as possible, what actions I need to take. The real ponder for me is how to prepare for and mitigate the changes I know are coming as fossil fuel politics becomes increasingly prominent. (As if they weren't prominent enough already). I wonder what resilience is going to look like 25 years from now if I make it to 87 like my Mom did. I certainly won't be one of the strong ones necessarily, I'll be one of the weak and vulnerable at that point . . . I think the time to plan for economic hardship is way, way before it smacks you in the face . . . One helpful hedge against inflation is to not buy new stuff . . . I haven't totally suffered because I have dialed down my consuming already . . . and I have plenty of maintenance tasks with what I already have to keep my mind occupied instead of "retail therapy" and going out to entertainment venues . . . Edited to add that if someone wanted to take on an extra job to help pay for rising cost of consumer goods, there are no shortage of help wanted opportunities . . .
...See More
How do you prepare your raised bed garden in the fall?
Q
Comments (5)
Most of my beds are Huglekultur type that settle a few inches each year. As a disease precaution plants and fruit are removed to compost for later use in landscape beds. Native soil and partly finished compost is dug in to refill beds. Some are seeded with Hairy Vetch and weeds are allowed to grow in others. Growing weeds are turned under 2-3 weeks before planting. Weeds that flower before time to prep bed for planting are mowed or turned under to prevent going to seed. Landscape beds are topped year round as needed with wood chip mulch.
...See More
western_pa_luann
17 years ago
Dave!
I had no idea you are that famous!
dave_donhoff
17 years ago
In my own little mind I be ;~)
D
C Marlin
17 years ago
In my own little mind I be ;~)
D

Ohhhh, the wonderful power of the internet...

may yours be longer than 15 minutes.
behaviorkelton
Original Author
17 years ago
Being a landlord?

That is certainly not the easy way, but it is an interesting idea.

I'm thinking of refinancing my paid-for house at this crazy low rate. At this "rate", it is hard to argue against it...right?
dave_donhoff
17 years ago
Hi Kelton,

I'm thinking of refinancing my paid-for house at this crazy low rate. At this "rate", it is hard to argue against it...right?

Ahhhh Kelton... while it *MAY* be hard to argue against, I'm QUITE confident there'll be PLENTY of folks who'll step up to the plate and have a swing... ;~)

Dave
behaviorkelton
Original Author
17 years ago
Well, let's say that one finances their paid-for house, but does nothing special with the money received. Just a money market getting well under 2%.

Does this have any merit?... or does refinancing demand that the money get invested in a riskier prospect?
C Marlin
17 years ago
Well, let's say that one finances their paid-for house, but does nothing special with the money received. Just a money market getting well under 2%.

Does this have any merit?... or does refinancing demand that the money get invested in a riskier prospect?
Doing "nothing special with the money" is not using it to its fullest advantage, not good leverage, you're going to pay more than 2% for your money. What is the advantage, it is only good to hold it there while looking for your real investment.
Residential real estate is not a risky prospect, the tenant is paying your mortgage, over time your RE will increase in value.
Risky is buying in a bad area (Detroit comes to mind), or buying for the short term. It is possible to find very good, stable tenants, buy in a desirable area. I don't know your area, but in mine RE gives so many benefits. I don't know the future prospects of the tax advantage, but in the past it has been good.
dave_donhoff
17 years ago
Hi Kelton,

Well, let's say that one finances their paid-for house, but does nothing special with the money received. Just a money market getting well under 2%. Does this have any merit?...

It *might*... which brings a few questions to the forefront;
A) WHY would someone "do nothing special" with their equity?
If it is because there is nothing CURRENTLY that beats a 3% after-tax cost of money... what is the likelihood of inflation dramatically increasing rates (paid on deposits) in the future? It is EXTREMELY likely, I would suggest. When that time comes, the window of opportunity to CAPTURE the 3-4% mortgage leverage will be a distant memory.

B) If your cost of money is 3-4%, and your "nothing special" yield is 2%, you have a current NET cost-of-liquidity of 2%-ish. When you run into either a super-duper opportunity in the future (let's all hope!) or a super-duper emergency/tragedy in the future (God forbid... but better to be prepared,) then how much is that available-cash worth to you at that time?

If its tied up in your real estate, what will it THEN cost you to access it (if you even qualify at that time, considering the character of the "emergency.")

If you have to use alternative borrowing because its inaccessible, what might THAT cost you at that point of desperation?

If you simply cannot access your equity from ANY resource, and you suffer the consequences of the desperation or emergency at that future point in time, what is your potential scope of losses?

Lots of "IFs" to consider... but a current 2%-ish "cost of safety & security" (which is very likely to become a positive rate of return whenever inflation hits, or a "safety net" in cases of emergency) is relatively safe & boring in comparison. Superior "insurance" in my mind.

Cheers,
Dave Donhoff
Leverage Planner

Inflation: How to prepare?

Comments (10)

fandlil

dave_donhoff

Related Discussions

western_pa_luann

dave_donhoff

C Marlin

behaviorkelton
Original Author

dave_donhoff

behaviorkelton
Original Author

C Marlin

dave_donhoff

COMPANY

BUSINESS SERVICES

GET HELP

CONNECT WITH US

Inflation: How to prepare?

Comments (10)

Related Discussions

behaviorkeltonOriginal Author

behaviorkeltonOriginal Author

COMPANY

BUSINESS SERVICES

GET HELP

CONNECT WITH US

behaviorkelton
Original Author

behaviorkelton
Original Author