Great post, Simplegift, always appreciate your long-term view on things. Low inflation is indeed a plausible scenario that's obviously now the expectation of many.
KlangFool wrote: ↑Thu Apr 30, 2020 4:38 pm
Broken Man 1999 wrote: ↑Thu Apr 30, 2020 4:24 pm
KlangFool wrote: ↑Thu Apr 30, 2020 3:51 pm
SimpleGift wrote: ↑Thu Apr 30, 2020 3:03 pm
KlangFool wrote: ↑Thu Apr 30, 2020 2:01 pm
I disagreed. We are heading towards hyperinflation after the short-term deflation.
Seriously, what changes to your investment portfolio have you been making in light of your expectations for the hyperinflation to come? Or are you just trolling this thread?
I am buying Gold and Silver as my hedge against hyper-inflation.
What form are you buying? The only thing I would trust so far as having gold or silver would be physical coins/bars.
Me, I like 1 oz silver rounds. Gold seems as though it would be difficult to actually use. Gold rounds are available, but if you wanted smaller portions of gold, the price is quite a premium compared to the one oz pieces. Not sure how practical an oz of gold would be.
I will not be buying ETFs for gold or silver. I just don't trust anyone to hold my gold or silver for me. Physical only for all my current stash. Small, but growing with occasional buys.
Broken Man 1999
Broken Man 1999,
1) I am buying gold and silver coins.
<<if you wanted smaller portions of gold, the price is quite a premium compared to the one oz pieces. >>
2) It is not a problem if you believe gold price is going up 10X to 30X in hyperinflation.
3) Keeping 1% of your portfolio in Gold/Silver as an hyperinflation insurance.
KlangFool, I also always appreciate your pragmatism.
Having recently read "The Great Depression: A Diary", it was interesting to read and also a bit amusing with hindsight how the author Benjamin Roth kept on writhing throughout the depression the equivalent of "all this money printing will lead to high inflation", and your stubborn position of "we'll have hyperinflation" reminds me of this.
Benjamin Roth was eventually right, there was some inflation in the 1940s, and then of course in the 1970s. So it's really hard to predict something because you also need to have the timing right for it to make sense.
I guess the most rational approach is like this (and I'm interpreting your stance also to be derived from it) - the future is an infinite branching of possible scenarios.
The tricky part is assigning probabilities. If you were 100% sure on a hyperinflation, starting tomorrow, you'd be all gold, and maybe more exotic hedges. That doesn't seem to be the case as you advocate for a 1% gold/precious metal holding.
Of all the possible scenarios, you'll never know which one it will be, because things can also change abruptly. There's some where you don't survive (well, all of them, eventually, but you're usually planning for a reasonable life expectancy), so you don't need to plan for these. Then there's the others (arbitrary categorization):
: Innovation continues, society finds ways to deal with its many self-made issues, a golden age perhaps. Star Trek. No great need to prepare for this.
: things work out, there's no-so-good times interspersed with bouts of advance. A reasonable boglehead-ish portfolio with a good mix of stocks and bonds will be ok, maybe even very ok. The US has been there for a long time now. I would position the mid/long-term deflation thing of this thread also in this category.
: hyperinflation would be one of these, Wikipedia
defines it as 50% monthly inflation. In my view simple QE/money printing won't bring this about, you need to have a government completely out of control of things (which is entirely possible). It also has severe social implications, like the rise of authoritarianism like post-depression in Europe. Investment-wise, a normal portfolio would greatly suffer. This is the one for which you can probably prepare. A helping of precious metals would compensate, but I guess it would not fully make up for other losses. Global diversification would help to avoid bad scenarios that hit individual countries.
: breakdown of society over a long term. Your own survival is at stake. On a global scale, maybe WW3 or ecological devastation. Syria over the last few years. You know it when you see it. It's the preppers category, but that might or might not help, having a bunker full of food won't help if you're forced out of the country. Investment-wise, a classical portfolio is nearly worthless (confiscated, institutions broken down), physical previous metals might help, but only so far. Really unknowable how this would affect one personally.
Note that this doesn't have to be the same everywhere on the planet. Venezuela is your's to decide whether it falls in the bad or the ugly stage, Switzerland and the Nordic countries seem to be borderline good - but still waiting for public replicators to be put up in Stockholm
If it's prolonged moderate deflation with low economic growth, and investment portfolios producing very muted returns but not suffering greatly ... I'll take that any day. The Japanese haven't very much died of it, either.