hyperinflation strategy? [Should hyperinflation affect my investment strategy?]
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hyperinflation strategy? [Should hyperinflation affect my investment strategy?]
I recently stumbled across this article Re: one CEO's prediction of hyperinflation coming to the US and the rest of the world (which is odd, since I usually avoid consuming financial news media).
https://www.cnbc.com/2021/10/23/twitter ... world.html
Now, I'm not a "chicken little" type of guy, but it did make me wonder:
I'm a typical 3 fund passive Boglehead investor; IF/when it comes, should hyperinflation affect my investment strategy?
https://www.cnbc.com/2021/10/23/twitter ... world.html
Now, I'm not a "chicken little" type of guy, but it did make me wonder:
I'm a typical 3 fund passive Boglehead investor; IF/when it comes, should hyperinflation affect my investment strategy?
o Theós paréchei
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Re: hyperinflation strategy?
Noise.
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Re: hyperinflation strategy?
acknowledging Dorsey's obvious potential bias,
my question is more of a 50,000 ft philosophical one, not because I think "the sky is falling!".
my question is more of a 50,000 ft philosophical one, not because I think "the sky is falling!".
o Theós paréchei
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Re: hyperinflation strategy?
My suggestion is to stop reading sensationalism click bait
Re: hyperinflation strategy?
Recent SEC filings showing the Form 10-Qs of Twitter and Square (the two company’s jack Dorsey is the CEO of) show they hold a combine $8.5B in cash, which is about 30% of total assets on their balance sheets. Not sure why you would do that if you really thought hyperinflation was going to happen.
- ClevrChico
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Re: hyperinflation strategy?
I plan on maxing out i-bond purchases long-term, because I just learned about them, not because of noise like the linked article. Other than that, I'm changing nothing.
Last edited by ClevrChico on Sun Oct 24, 2021 7:42 pm, edited 1 time in total.
Re: hyperinflation strategy?
First, 16% is not hyperinflation.
Hyperinflation is 50%+ per month.
Second, worldwide hyperinflation would be a wealth equalizer for the vast majority.
Hard assets would still be worth something. Anything denominated in currency, not so much.
Strategy: Buy a bunch of ag land and stock up on seeds so you can be part of the new aristocracy. For those who choose to accept your authority in return for access to the means of food production, anyway. Also, you'll need to appoint a security force to protect your crops from those who choose otherwise.
I like dude's shirt. He has a decent beard.
Hyperinflation is 50%+ per month.
Second, worldwide hyperinflation would be a wealth equalizer for the vast majority.
Hard assets would still be worth something. Anything denominated in currency, not so much.
Strategy: Buy a bunch of ag land and stock up on seeds so you can be part of the new aristocracy. For those who choose to accept your authority in return for access to the means of food production, anyway. Also, you'll need to appoint a security force to protect your crops from those who choose otherwise.
I like dude's shirt. He has a decent beard.
"The only thing that makes life possible is permanent, intolerable uncertainty; not knowing what comes next." ~Ursula LeGuin
Re: hyperinflation strategy?
It's a plausible enough deep risk to consider. The productive value of stocks cannot be inflated away but poor (-er than expected) economic conditions can cause stock drawdowns and the consequences of hyperinflation may lead to alteration of property ownership arrangements. Hard assets including land are probably safer but might still be affected by the latter risk. Then there are other well known alternative assets, one with a multiple millennia history and another that shall not be named here.
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Re: hyperinflation strategy?
Check the fifth paragraph of the article. Dorsey might be right. Dorsey might be wrong. But there's no doubt that Dorsey has a direct, personal, financial interest in sewing fear, uncertainty, and doubt about national currencies.
Last edited by nisiprius on Sun Oct 24, 2021 7:41 pm, edited 2 times in total.
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Re: hyperinflation strategy?
If you are that concerned, go out and buy yourself a few wheelbarrows so you can haul enough cash down to your local S&P to buy a loaf of bread and jug of milk.xemit wrote: ↑Sun Oct 24, 2021 6:44 pm I recently stumbled across this article Re: one CEO's prediction of hyperinflation coming to the US and the rest of the world (which is odd, since I usually avoid consuming financial news media).
https://www.cnbc.com/2021/10/23/twitter ... world.html
Now, I'm not a "chicken little" type of guy, but it did make me wonder:
I'm a typical 3 fund passive Boglehead investor; IF/when it comes, should hyperinflation affect my investment strategy?
Media focuses on three things: weather, traffic, inflation
Always has, always will.
CyclingDuo
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Re: hyperinflation strategy?
Hyperinflation (i.e., 50% inflation per month) seems to be extremely unlikely to occur in the U.S. But if it did, you would want to own real assets. Pre-existing nominal fixed income instruments like 10 year Treasuries would basically become worthless.
The Sensible Steward
Re: hyperinflation strategy?
That CEO doesn't know jack and only thinks about BTC.xemit wrote: ↑Sun Oct 24, 2021 6:44 pm I recently stumbled across this article Re: one CEO's prediction of hyperinflation coming to the US and the rest of the world (which is odd, since I usually avoid consuming financial news media).
https://www.cnbc.com/2021/10/23/twitter ... world.html
Now, I'm not a "chicken little" type of guy, but it did make me wonder:
I'm a typical 3 fund passive Boglehead investor; IF/when it comes, should hyperinflation affect my investment strategy?
Re: hyperinflation strategy?
I recently learned about I-bonds. I’m going to build a bond portfolio/ladder through Treasury Direct (ibonds and tips) to cover a 5 year retirement “floor”. Everything else will be in equities, but that will help me sleep at night, and should protect from inflation. I also have a couple of rental properties and real estate should be a good hedge against inflation.
Re: hyperinflation strategy?
The best thing to counter inflation is a market index fund - like the S&P 500 (VOO). Most of the large companies in that index will be able to pass on the inflation costs to their consumers.
Re: hyperinflation strategy?
I am not changing my investment strategy.
"I started with nothing and I still have most of it left."
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Re: hyperinflation strategy?
Just because some dude runs a tech company, no matter how successful, does not mean he actually understands anything about macroeconomics. In this case, he does not appear to know what the word hyperinflation means.
Re: hyperinflation strategy?
delete
Last edited by TT on Mon Oct 25, 2021 5:56 am, edited 1 time in total.
Live Life Simple and Less Soft
Re: hyperinflation strategy?
delete
Last edited by TT on Tue Feb 06, 2024 3:48 pm, edited 1 time in total.
Live Life Simple and Less Soft
Re: hyperinflation strategy?
Well, 'sewing fear' is a novel idea but generally, and probably more correctly, we can say 'sowing fear'. As in 'sowing seeds into the earth'. We can sew pants and shirts but that's different.
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Re: hyperinflation strategy?
But sewing fear conjures up such fascinating visual images! Little old ladies needlepointing the word "Fear" onto pillows.
Re: hyperinflation strategy?
If you are 100% certain hyperinflation is coming, your best move is to borrow as much money as you can and buy hard assets with it now.
That being said, I've heard hyperinflation in the US is just around the corner every year of my 45 year investing history.
That being said, I've heard hyperinflation in the US is just around the corner every year of my 45 year investing history.
Re: hyperinflation strategy?
If you think 10 % per year is hyperinflation, you've been hyped.
Re: hyperinflation strategy?
Dorsey should have elaborated, particularly, if square data supports. otherwise, shouting hyperinflation is borderline irresponsible. that said, shouldn't surprise anyone who's been observing monetary policy, and has a basic understanding of economics, inflation has arrived back on the scene and is not transitory.
Re: hyperinflation strategy?
Your updated portfolio: 3 fund portfolio with TIPS to taste
Last edited by Ramjet on Mon Oct 25, 2021 9:32 am, edited 1 time in total.
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Re: hyperinflation strategy?
As someone who has worked for one of Jack Dorsey's companies I can safely say the man can prognosticate like none other.
Re: hyperinflation strategy?
Maybe he should start a newsletter!HawkeyePierce wrote: ↑Mon Oct 25, 2021 9:32 am As someone who has worked for one of Jack Dorsey's companies I can safely say the man can prognosticate like none other.
Matching Harry Dent ("Harry Dent: Stock Market Crash Likely Within 3 Months") at prognosticating shows world class talent!
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Re: hyperinflation strategy?
Help, please!HawkeyePierce wrote: ↑Mon Oct 25, 2021 9:32 am As someone who has worked for one of Jack Dorsey's companies I can safely say the man can prognosticate like none other.
I am deeply cynical about anyone's ability to predict the future. When faced with someone claiming the ability, my go-to move is to look up their old, failed predictions. It's usually so friggin' easy to find something ludicrously horrible.
But I'm failing with this guy. Maybe because he's so young? Or I'm just looking in the wrong places.
Someone please find a quote of him spouting something ridiculous 10 years ago. It will make my day.
N.B. It is irrelevant to find predictions he got right. Everyone in this game gets some right. That's the selection bias. Without that, they aren't even considered. What I need is the example showing them to be equally confident, but proven wrong.
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Re: hyperinflation strategy?
If actual hyperinflation comes, it's likely a nation dissolves right along with it. I would argue at least 2 of the 3 fund portfolio is largely wiped out in that scenario. Foreign markets would also implode as well if the US went through it. That's when you want hard assets like physical ownership of precious metals, and I say that as someone that thinks owning gold is usually dead money.
The word "hyperinflation" is thrown around too much, that's like a wheel barrow full of money to buy a loaf of bread. It's supposed to be over 50% per year, I don't find that scenario here to be realistic.
But I do think serious inflation is here (despite so many people being sure it was some relic of the past) and going to get much worse if painful steps aren't taken. I just know in my personal life and what I purchase, I have seen WAY more than 5% inflation in the last 12 months, more like 10%+ and it seems to be getting worse every time I turn around. I don't buy into the idea its all over supply chain issues because of CA ports and will just work itself out on its own.
The word "hyperinflation" is thrown around too much, that's like a wheel barrow full of money to buy a loaf of bread. It's supposed to be over 50% per year, I don't find that scenario here to be realistic.
But I do think serious inflation is here (despite so many people being sure it was some relic of the past) and going to get much worse if painful steps aren't taken. I just know in my personal life and what I purchase, I have seen WAY more than 5% inflation in the last 12 months, more like 10%+ and it seems to be getting worse every time I turn around. I don't buy into the idea its all over supply chain issues because of CA ports and will just work itself out on its own.
Re: hyperinflation strategy?
For hyperinflation - more TIPS.
Have a lot of debt.
Have a lot of debt.
Re: hyperinflation strategy?
Well I do think the inflation we're seeing is mostly transitory. The fact is the economy has been through a demand and supply shock because of covid. First demand across the board plummeted, then everything realigned to face the pandemic (medical supply demand skyrocketed, work from home purchases, home improvements due to everyone stuck at home) and finally now its all supposed to snap back to normal all while everyone has buckets of money lying around. Something very similar happened after WWII and while for a couple years people were scared the world would slip right back into the Great Depression in fact the 1950s sprung out of that period of massive government stimulus and innovation (from war spending).
The lesson from this really is how fragile our supply chain is. Even a relatively modest increase in goods purchases has utterly snarled the ports. Airlines reducing their international flights has completely saturated the air freight market to where cargo airlines are bursting at the seams and passenger airlines are using a few all-cargo flights with boxes strapped to the seats.
All this is because of the situation we're in right now. If you believe in capitalism it's going to straighten itself out. Either passenger airlines go back to normal and take a load off all-cargo airlines or those cargo airlines will buy up passenger planes and convert them into freighters. If the ports stay this snarled eventually ports will expand to meet the higher demand. If people keep buying this much furniture eventually IKEA and Pottery Barn will up their factories to meet demand. And most importantly eventually that increase of supply will spur other companies to try and take their slice of the pie and thus competition is restarted.
So to me, inflation is only a concern if you don't believe in capitalism. The dramatic rise in prices across the board should be a massive opportunity to anyone looking to get their piece of the action. That alone will spur competition and bring price increases under control. The labor market will sort itself out (people can only walk away from jobs for so long, even enhanced unemployment has an expiration date) and those with skills will continue to be desirable workers while those that aren't will be stuck with whatever's left. Those that keep saying "this time its different" can never really point to exactly why it is. At best they go on a political rant pulled straight from their favorite prime time "news" editorial with absolutely zero concrete facts to back it up.
The lesson from this really is how fragile our supply chain is. Even a relatively modest increase in goods purchases has utterly snarled the ports. Airlines reducing their international flights has completely saturated the air freight market to where cargo airlines are bursting at the seams and passenger airlines are using a few all-cargo flights with boxes strapped to the seats.
All this is because of the situation we're in right now. If you believe in capitalism it's going to straighten itself out. Either passenger airlines go back to normal and take a load off all-cargo airlines or those cargo airlines will buy up passenger planes and convert them into freighters. If the ports stay this snarled eventually ports will expand to meet the higher demand. If people keep buying this much furniture eventually IKEA and Pottery Barn will up their factories to meet demand. And most importantly eventually that increase of supply will spur other companies to try and take their slice of the pie and thus competition is restarted.
So to me, inflation is only a concern if you don't believe in capitalism. The dramatic rise in prices across the board should be a massive opportunity to anyone looking to get their piece of the action. That alone will spur competition and bring price increases under control. The labor market will sort itself out (people can only walk away from jobs for so long, even enhanced unemployment has an expiration date) and those with skills will continue to be desirable workers while those that aren't will be stuck with whatever's left. Those that keep saying "this time its different" can never really point to exactly why it is. At best they go on a political rant pulled straight from their favorite prime time "news" editorial with absolutely zero concrete facts to back it up.
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Re: hyperinflation strategy?
xemit wrote: ↑Sun Oct 24, 2021 6:44 pm I recently stumbled across this article Re: one CEO's prediction of hyperinflation coming to the US and the rest of the world (which is odd, since I usually avoid consuming financial news media).
https://www.cnbc.com/2021/10/23/twitter ... world.html
Now, I'm not a "chicken little" type of guy, but it did make me wonder:
I'm a typical 3 fund passive Boglehead investor; IF/when it comes, should hyperinflation affect my investment strategy?
"Little old ladies needlepointing the word "Fear" onto pillows." is more fascinating than the linked article, which is not helpful at all.dodecahedron wrote: ↑Mon Oct 25, 2021 7:50 amBut sewing fear conjures up such fascinating visual images! Little old ladies needlepointing the word "Fear" onto pillows.
We will make no changes in asset allocation or fund selection.
Per the second law of thermodynamics the entire universe is transitory.
So how long is "transitory" for inflation?
"Everything should be as simple as it is, but not simpler." - Albert Einstein |
Wiki article link: Bogleheads® investment philosophy
Re: hyperinflation strategy?
Yes, I've heard about the post WW2 period and this seems analogous. FTIW, something that cost $1 in 1945 cost $1.44 in 1951. So "transitory" can still be fairly devastating, if defined as "like after WW2".ClassII wrote: ↑Mon Oct 25, 2021 10:49 am Well I do think the inflation we're seeing is mostly transitory. The fact is the economy has been through a demand and supply shock because of covid. First demand across the board plummeted, then everything realigned to face the pandemic (medical supply demand skyrocketed, work from home purchases, home improvements due to everyone stuck at home) and finally now its all supposed to snap back to normal all while everyone has buckets of money lying around. Something very similar happened after WWII and while for a couple years people were scared the world would slip right back into the Great Depression in fact the 1950s sprung out of that period of massive government stimulus and innovation (from war spending).
Re: hyperinflation strategy?
I don't know, but your question implies the right approach - what till it happens, then adjust as necessary. High inflation is a slow moving train and there is no need to take extraordinary measures to avoid it before it comes.
Re: hyperinflation strategy?
whatever strategy you use to hedge, just remember that inflation is occurring because of many factors (insert supply chain meme), but certainly NOT because the federal reserve is printing money!!
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Re: hyperinflation strategy?
Maybe an investor could sew fear in order to cover a naked short...
Answering a question is easy -- asking the right question is the hard part.
Re: hyperinflation strategy?
I have no idea if we will see hyperinflation, and neither does Dorsey or anyone else. We could have deflation in the future. Who knows? So I will continue to stick with a diversified three fund portfolio. No changes for me.
Re: hyperinflation strategy?
I'm having a hard time conceptualizing how truly global hyperinflation could even be coordinated on purpose.
It would be a debt bonanza though. Bye-bye debt!
It would be a debt bonanza though. Bye-bye debt!
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"
Re: hyperinflation strategy?
my strategy is to keep my investments and my job and take on as much debt at 2-3% ratexemit wrote: ↑Sun Oct 24, 2021 6:44 pm I recently stumbled across this article Re: one CEO's prediction of hyperinflation coming to the US and the rest of the world (which is odd, since I usually avoid consuming financial news media).
https://www.cnbc.com/2021/10/23/twitter ... world.html
Now, I'm not a "chicken little" type of guy, but it did make me wonder:
I'm a typical 3 fund passive Boglehead investor; IF/when it comes, should hyperinflation affect my investment strategy?
Last edited by manuvns on Tue Oct 26, 2021 9:43 am, edited 1 time in total.
Thanks!
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Re: hyperinflation strategy?
Re: hyperinflation strategy?
Low quality comment.HawkeyePierce wrote: ↑Mon Oct 25, 2021 9:32 am As someone who has worked for one of Jack Dorsey's companies I can safely say the man can prognosticate like none other.
I'm assuming you are a sufferer of the Halo effect https://en.wikipedia.org/wiki/Halo_effect
Re: hyperinflation strategy?
+1junior wrote: ↑Tue Oct 26, 2021 9:55 amLow quality comment.HawkeyePierce wrote: ↑Mon Oct 25, 2021 9:32 am As someone who has worked for one of Jack Dorsey's companies I can safely say the man can prognosticate like none other.
I'm assuming you are a sufferer of the Halo effect https://en.wikipedia.org/wiki/Halo_effect
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Re: hyperinflation strategy?
Hmmmm.....namajones wrote: ↑Tue Oct 26, 2021 9:57 am+1junior wrote: ↑Tue Oct 26, 2021 9:55 amLow quality comment.HawkeyePierce wrote: ↑Mon Oct 25, 2021 9:32 am As someone who has worked for one of Jack Dorsey's companies I can safely say the man can prognosticate like none other.
I'm assuming you are a sufferer of the Halo effect https://en.wikipedia.org/wiki/Halo_effect
I understood Hawkeye's comment exactly opposite.
I thought he was saying Dorsey would make all sorts of predictions, without any real insight or expertise.
Re: hyperinflation strategy?
Could be, it's hard to detect tone at times in a text medium.vanbogle59 wrote: ↑Tue Oct 26, 2021 10:02 amHmmmm.....namajones wrote: ↑Tue Oct 26, 2021 9:57 am+1junior wrote: ↑Tue Oct 26, 2021 9:55 amLow quality comment.HawkeyePierce wrote: ↑Mon Oct 25, 2021 9:32 am As someone who has worked for one of Jack Dorsey's companies I can safely say the man can prognosticate like none other.
I'm assuming you are a sufferer of the Halo effect https://en.wikipedia.org/wiki/Halo_effect
I understood Hawkeye's comment exactly opposite.
I thought he was saying Dorsey would make all sorts of predictions, without any real insight or expertise.
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Re: hyperinflation strategy?
+1
$3 trillion of additional federal reserve printing in just under 4 months, but its all those pesky shipping containers.
Re: hyperinflation strategy?
Apparently everyone is an expert on inflation on the internet. People on the internet with alarming claims about inflation is something I recall encountering since at least 2009, it's probably as old as the Internet.
I'd personally just rely on this info as "good enough" for inflation predictions and drown out other sources:
" There are two popular methodologies for predicting inflation. The first is to rely on the Survey of Professional Forecasters, the oldest US survey of macroeconomic forecasts by economists, and the second is to rely on the breakeven rate, the spread between the US Treasury yield and the yield for TIPS, as a measure of market expectations."
https://mailchi.mp/verdadcap/on-inflation [link formatted by admin LadyGeek]
I'd personally just rely on this info as "good enough" for inflation predictions and drown out other sources:
" There are two popular methodologies for predicting inflation. The first is to rely on the Survey of Professional Forecasters, the oldest US survey of macroeconomic forecasts by economists, and the second is to rely on the breakeven rate, the spread between the US Treasury yield and the yield for TIPS, as a measure of market expectations."
https://mailchi.mp/verdadcap/on-inflation [link formatted by admin LadyGeek]
Re: hyperinflation strategy?
+1moneyflowin wrote: ↑Sun Oct 24, 2021 6:57 pm My suggestion is to stop reading sensationalism click bait
Re: hyperinflation strategy?
Continue investing at my current asset allocation. Is the real question here "I believe the stock market is overvalued. What should I do?" If it is, adjust your asset allocation accordingly. Remember this dictum: be fearful when others are greedy.
50% VTSAX | 25% VTIAX | 25% VBTLX (retirement), 25% VTEAX (taxable)
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Re: hyperinflation strategy?
If the USA experienced actual hyperinflation it would mean that the dollar was no longer the reserve currency and that treasury bonds were considered to be risky assets. Equities would almost certainly plummet and bond default risk would increase greatly. AA would probably be the least of my worries in this scenario.
Yes it would ... and this mother of all Minsky moments would result in more efficient equity markets which would be a great opportunity for young Bogleheads.Second, worldwide hyperinflation would be a wealth equalizer for the vast majority.
Re: hyperinflation strategy? [Should hyperinflation affect my investment strategy?]
I retitled the thread for clarity. Please stay on-topic, which is:
Re: hyperinflation strategy? [Should hyperinflation affect my investment strategy?]
inflation (not hyperinflation) is probably a net-neutral for almost everyone on this board. if you own assets you will be fine (unless you own like 60% bonds or something).
quantitative easing is actually probably a net positive for almost everyone on this board. CPI doesn't go up so cost of living remains the same, but your assets go up (we saw this after 08). we all get richer. nothing better than getting paid by the government
quantitative easing is actually probably a net positive for almost everyone on this board. CPI doesn't go up so cost of living remains the same, but your assets go up (we saw this after 08). we all get richer. nothing better than getting paid by the government
S&P 500 + Bitcoin