Best inflation hedge besides gold, real estate, stocks, and crypto

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tomsense76
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by tomsense76 »

OP I think this is a really good question.

A thread underpinning a lot of this discussion on this topic is the inflation of the past is useful for understanding inflation in the future. There is probably some truth to that.

However there can be a risk to overfitting to the past. The oil supply shocks of the 70s seem unlikely to repeat. The US is much better at producing oil locally particularly in recent years. The US is also one of the largest food producers/exporters in the world. While the US has its strengths in mining, the reality is other countries are better positioned here.

Additionally a lot of the issues that we are seeing in the economy today are a consequence of a very globalized economy that was shutdown and is getting rebooted (the process is not fast unsurprisingly). As a result we are learning that shipping capacity itself is a major hinderance. Similarly chips have been in high demand for a range of applications including cars, which have felt inflation pressure. Finally people are feeling a bit restless and trading out homes or taking trips for the first time in a while. So appliances, furniture, moving services, and travel have seen prices go up.

The answer in the past would have been short TIPS & cash. These probably would have done ok except for how negative rates are on these. I Bonds have done a bit better.

Commodity indexes focus a lot more on things like agriculture (which has seen modest inflation ~2%), materials have seen some inflation (though this is mostly due to shipping bottlenecks as opposed to lack of materials themselves), oil has risen some (though its price is now comparable to what was seen in 2018 and not as high as was seen early in the 2010s). Only one of these has some correlation to the issues we've seen and not really directly.

That said, shipping companies, chip manufacturers, etc. are not captured and those likely would have been good choices here. However it's kind of too late to chase those. The market has already realized their value and priced that in. Not to mention the next crisis that causes an inflation scare is likely to be different as well.

So what to do? Keep working as salaries tend to keep up with inflation. Maybe shop around for a new job to see if you can get a bit more income. Keep saving as the money already saved now may be less valuable in the future so more will need to be added to it. Given the demand in used cars, maybe trade out your used car for a new one (may wind up saving money on an upgrade). If you are finding your housing usage is larger than your needs, consider downsizing to cutdown expenses and benefit from the run-up in prices. Consider buying some I Bonds.

Guessing you were hoping for more investment tips?
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by 123 »

I always buy USPS Forever stamps.
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by unclescrooge »

AlwaysLearningMore wrote: Wed Jul 21, 2021 7:59 pm
unclescrooge wrote: Mon Jul 19, 2021 11:32 pm Nothing beats inflation like stocks. Except maybe real estate.
UpperNwGuy wrote: Tue Jul 20, 2021 6:17 am Stocks are the best inflation hedge. I hold total US market and an international stock fund.
"It is no longer a secret that stocks, like bonds, do poorly in an inflationary environment."

" For many years, the conventional wisdom insisted that stocks were a hedge against inflation. The proposition was rooted in the fact that stocks are not claims against dollars, as bonds are, but represent ownership of companies with productive facilities. These, investors believed, would retain their Value in real terms, let the politicians print money as they might."

"Stocks... are perpetual. They have a maturity date of infinity. Investors in stocks are stuck with whatever return corporate America happens to earn."

"Which brings us to the crucial question – the inflation rate. No one knows the answer on this one – including the politicians, economists, and Establishment pundits, who felt, a few years back, that with slight nudges here and there unemployment and inflation rates would respond like trained seals."

Warren Buffett How Inflation Swindles the Equity Investor https://tinyurl.com/yedukq8j
Looks like that article was written in 1977. Fast forward a decade and it seems stocks were doing quite well. As another decade and you would have seen nearly 18 years of almost 18% compounded returns.
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by Valuethinker »

tomsense76 wrote: Thu Jul 22, 2021 12:06 am OP I think this is a really good question.

A thread underpinning a lot of this discussion on this topic is the inflation of the past is useful for understanding inflation in the future. There is probably some truth to that.

However there can be a risk to overfitting to the past. The oil supply shocks of the 70s seem unlikely to repeat. The US is much better at producing oil locally particularly in recent years. The US is also one of the largest food producers/exporters in the world. While the US has its strengths in mining, the reality is other countries are better positioned here.
These may not explain why large commodity price movements may not repeat.

- an oil supply shock is exactly that. And it's usually geopolitical in nature. If, for whatever reason, a major oil producer drops off producing (Saudi embargo, Iranian oil workers strike in '79 etc) then the world will be in an unholy scramble for oil. US frackers will get busier, but they will sell at that new, much higher price. And their additional production won't quick in quickly enough to stop a price spike.

The main reason is the developed countries consume less oil per $1 of GDP. What we have just done, in terms of office workers not commuting, would have be nearly impossible 10 years ago only. We don't *need* to drive as much as we do. However developing economies have taken up the slack, largely (oil consumption is steadily higher every year).

So if we had a huge world oil price spike (say more than $50/bl) it could cause a global recession. It seems to be the case that a demand-led spike (eg 2008) has less of an impact than a negative supply shock (1973, 1979).

- US is a large food exporter. But only one severe drought, or series of extreme rainfall events, from not being so. Plenty of evidence there is more of that around, these days. Main advantage is geographic dispersion.

It was the Soviet Union's wheat harvest failure that sent food prices spiraling 1973-75.

- mining. Yes. US is not the world's major mining producer in the way it was in the 19th century. It's easy to see why metals prices might be going up, it's hard to see a crisis arising out of it.

The real point is that one can see supply & demand side reactions from any one of these. Consumption will shift to substitutes, new sources of supply, currently marginal, will come in.

The 1970s story was not just one of commodity prices rising. Because that happened in the 2000s without having the same effect. There is also:

- end of the Bretton Woods monetary system (arguably exposed the world to USD inflation)
- wage-price spirals around strong trade union movements in most developed countries
- Baby Boom entering the workforce (thus triggering demand rises)
- fiscal conditions around the end of the Vietnam War
- systematic mistakes by monetary policy authorities who failed to crush inflationary expectations
Additionally a lot of the issues that we are seeing in the economy today are a consequence of a very globalized economy that was shutdown and is getting rebooted (the process is not fast unsurprisingly). As a result we are learning that shipping capacity itself is a major hinderance. Similarly chips have been in high demand for a range of applications including cars, which have felt inflation pressure. Finally people are feeling a bit restless and trading out homes or taking trips for the first time in a while. So appliances, furniture, moving services, and travel have seen prices go up.

The answer in the past would have been short TIPS & cash. These probably would have done ok except for how negative rates are on these. I Bonds have done a bit better.

Commodity indexes focus a lot more on things like agriculture (which has seen modest inflation ~2%), materials have seen some inflation (though this is mostly due to shipping bottlenecks as opposed to lack of materials themselves), oil has risen some (though its price is now comparable to what was seen in 2018 and not as high as was seen early in the 2010s). Only one of these has some correlation to the issues we've seen and not really directly.

That said, shipping companies, chip manufacturers, etc. are not captured and those likely would have been good choices here. However it's kind of too late to chase those. The market has already realized their value and priced that in. Not to mention the next crisis that causes an inflation scare is likely to be different as well.

So what to do? Keep working as salaries tend to keep up with inflation. Maybe shop around for a new job to see if you can get a bit more income. Keep saving as the money already saved now may be less valuable in the future so more will need to be added to it. Given the demand in used cars, maybe trade out your used car for a new one (may wind up saving money on an upgrade). If you are finding your housing usage is larger than your needs, consider downsizing to cutdown expenses and benefit from the run-up in prices. Consider buying some I Bonds.

Guessing you were hoping for more investment tips?
- a fixed rate mortgage is an inflation hedge (and fixed rate long term consumer credit)
- TIPS and ibonds are inflation indexed
- US inflation higher than world inflation is hedged by non USD paying instruments like bonds
- real estate tends to be an inflation hedge because rents tend to rise with inflation over time
Last edited by Valuethinker on Thu Jul 22, 2021 7:39 am, edited 1 time in total.
Da5id
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by Da5id »

123 wrote: Thu Jul 22, 2021 12:34 am I always buy USPS Forever stamps.
Funny. But I used to do this when the stamp price was set to rise. Given how few stamps I use these days other than holiday and birthday cards a minimal win against inflation alas.
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by corn18 »

Da5id wrote: Thu Jul 22, 2021 7:36 am
123 wrote: Thu Jul 22, 2021 12:34 am I always buy USPS Forever stamps.
Funny. But I used to do this when the stamp price was set to rise. Given how few stamps I use these days other than holiday and birthday cards a minimal win against inflation alas.
I just bought a roll of 100 forever stamps. Figure they should last the rest of my life.
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

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A post attempting to discuss crypto as an inflation hedge was removed. As a reminder, cryptocurrency as an investment is off-topic. See: Greater Fool Investing Strategies
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AlwaysLearningMore
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by AlwaysLearningMore »

unclescrooge wrote: Thu Jul 22, 2021 12:42 am
AlwaysLearningMore wrote: Wed Jul 21, 2021 7:59 pm
unclescrooge wrote: Mon Jul 19, 2021 11:32 pm Nothing beats inflation like stocks. Except maybe real estate.
UpperNwGuy wrote: Tue Jul 20, 2021 6:17 am Stocks are the best inflation hedge. I hold total US market and an international stock fund.
"It is no longer a secret that stocks, like bonds, do poorly in an inflationary environment."

" For many years, the conventional wisdom insisted that stocks were a hedge against inflation. The proposition was rooted in the fact that stocks are not claims against dollars, as bonds are, but represent ownership of companies with productive facilities. These, investors believed, would retain their Value in real terms, let the politicians print money as they might."

"Stocks... are perpetual. They have a maturity date of infinity. Investors in stocks are stuck with whatever return corporate America happens to earn."

"Which brings us to the crucial question – the inflation rate. No one knows the answer on this one – including the politicians, economists, and Establishment pundits, who felt, a few years back, that with slight nudges here and there unemployment and inflation rates would respond like trained seals."

Warren Buffett How Inflation Swindles the Equity Investor https://tinyurl.com/yedukq8j
Looks like that article was written in 1977. Fast forward a decade and it seems stocks were doing quite well. As another decade and you would have seen nearly 18 years of almost 18% compounded returns.


Image
https://tinyurl.com/yghqkzwy

Image

Image


Not sure I see where equities are a reliable "hedge" when inflation rises. While US stock prices have risen, they didn't rise when inflation was highest and that "hedge" was most needed.
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by MiddleOfTheRoad »

finite_difference wrote: Tue Jul 20, 2021 10:41 pm
teelainen wrote: Mon Jul 19, 2021 10:51 pm What are you currently holding besides gold, real estate, stocks, and crypto?

I have heard of some people buying small private businesses to act as a hedge against inflation and for extra diversification, but this doesn't seem passive.

Would love to hear what others are doing.
A job. A nominal fixed-rate 30-year mortgage. Intl stocks.
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by Slacker »

Since others already covered beans, bullets, whiskey, and a low interest mortgage:
I'll add solar panels, ground source heat pump, electric vehicle (with great battery management system). That should cover the price of electricity, natural gas, and gasoline inflation. Maybe add some backyard egg laying hens, they also serve as insect control.
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by unclescrooge »

[quote=AlwaysLearningMore post_id=6133054 time=1626964594
Not sure I see where equities are a reliable "hedge" when inflation rises. While US stock prices have risen, they didn't rise when inflation was highest and that "hedge" was most needed.
[/quote]

They don't move lock-step with inflation but they eventually catch up.
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by tomsense76 »

AlwaysLearningMore wrote: Thu Jul 22, 2021 9:36 am
unclescrooge wrote: Thu Jul 22, 2021 12:42 am
AlwaysLearningMore wrote: Wed Jul 21, 2021 7:59 pm
unclescrooge wrote: Mon Jul 19, 2021 11:32 pm Nothing beats inflation like stocks. Except maybe real estate.
UpperNwGuy wrote: Tue Jul 20, 2021 6:17 am Stocks are the best inflation hedge. I hold total US market and an international stock fund.
"It is no longer a secret that stocks, like bonds, do poorly in an inflationary environment."

" For many years, the conventional wisdom insisted that stocks were a hedge against inflation. The proposition was rooted in the fact that stocks are not claims against dollars, as bonds are, but represent ownership of companies with productive facilities. These, investors believed, would retain their Value in real terms, let the politicians print money as they might."

"Stocks... are perpetual. They have a maturity date of infinity. Investors in stocks are stuck with whatever return corporate America happens to earn."

"Which brings us to the crucial question – the inflation rate. No one knows the answer on this one – including the politicians, economists, and Establishment pundits, who felt, a few years back, that with slight nudges here and there unemployment and inflation rates would respond like trained seals."

Warren Buffett How Inflation Swindles the Equity Investor https://tinyurl.com/yedukq8j
Looks like that article was written in 1977. Fast forward a decade and it seems stocks were doing quite well. As another decade and you would have seen nearly 18 years of almost 18% compounded returns.


Image
https://tinyurl.com/yghqkzwy

Image

Image


Not sure I see where equities are a reliable "hedge" when inflation rises. While US stock prices have risen, they didn't rise when inflation was highest and that "hedge" was most needed.
I don't think anyone debates that stocks do poorly in an inflationary environment. The usual argument for stocks as an inflation hedge is that in the long run income streams of the underlying business will adjust to inflation.

AFAICT everyone here is saying the same thing in this regard (including Buffet).
He uses one of his own investments as an example: “If you own the Coca-Cola company, you will get a given portion of people’s labor 20 years from now and 50 years from now for your product and it doesn’t make any difference what’s happened to the price level,” because people will still pay for the products they like.
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by AerialWombat »

tomsense76 wrote: Thu Jul 22, 2021 4:12 pm I don't think anyone debates that stocks do poorly in an inflationary environment. The usual argument for stocks as an inflation hedge is that in the long run income streams of the underlying business will adjust to inflation.
Whereas most Bogleheads own stocks as the primary driver of return in their portfolios, my small allocation to equities exists *only* to help keep up with inflation. If inflation didn’t exist, I would likely own zero publicly traded equities.
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by Vulcan »

Education
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by Da5id »

Vulcan wrote: Thu Jul 22, 2021 4:30 pmEducation
I have a Ph.D. but am early retired. How is that education helping me hedge against inflation? Education is good for lifetime earnings in general I guess.
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by Vulcan »

Da5id wrote: Thu Jul 22, 2021 4:42 pm
Vulcan wrote: Thu Jul 22, 2021 4:30 pmEducation
I have a Ph.D. but am early retired. How is that education helping me hedge against inflation? Education is good for lifetime earnings in general I guess.
That. And kids' education.
If you torture the data long enough, it will confess to anything. ~Ronald Coase
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by unclescrooge »

AlwaysLearningMore wrote: Thu Jul 22, 2021 9:36 am Not sure I see where equities are a reliable "hedge" when inflation rises. While US stock prices have risen, they didn't rise when inflation was highest and that "hedge" was most needed.
Apparently CPI was a different metric in the 70s and thus isn't really comparable.

From Barrons:
Joseph Carson, former chief economist at AllianceBernstein, points out that the CPI of the 1970s included house prices, while the current index doesn’t. “Here’s a simple illustration of how significant including and not including house price inflation can be. In 1979, the CPI rose 11.3%, and that included a 14% increase in the price of existing homes. In the past 12 months, the CPI has increased 5.4%, and the 23% increase in existing-home prices isn’t part of that. Government statisticians have created an arbitrary owner rent index (up 2.3% in the past year) to replace house prices,” he writes in his Carson Report blog.
https://www.barrons.com/articles/us-eco ... 1626456922
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by fyre4ce »

teelainen wrote: Mon Jul 19, 2021 10:51 pm What are you currently holding besides gold, real estate, stocks, and crypto?

I have heard of some people buying small private businesses to act as a hedge against inflation and for extra diversification, but this doesn't seem passive.

Would love to hear what others are doing.
TIPS and I-bonds.
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by dknightd »

corn18 wrote: Thu Jul 22, 2021 7:47 am
Da5id wrote: Thu Jul 22, 2021 7:36 am
123 wrote: Thu Jul 22, 2021 12:34 am I always buy USPS Forever stamps.
Funny. But I used to do this when the stamp price was set to rise. Given how few stamps I use these days other than holiday and birthday cards a minimal win against inflation alas.
I just bought a roll of 100 forever stamps. Figure they should last the rest of my life.
You could buy 1000 rolls of 100 forever stamps. Sell the ones you do not need. It would still be a small hedge against inflation. Probably not worth the bother.
Edit: If I was serious about having to combat inflation, I'd probably consider starting a "victory" garden that would supply all my food. And fibers, and fuel, and anything else I might need. Just not practical for me to start that now. So I just go diversified. Stocks, Bonds, Cash. Perhaps most important, the willingness and ability to cut back expense as needed.
Last edited by dknightd on Fri Jul 23, 2021 7:58 am, edited 1 time in total.
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by Valuethinker »

unclescrooge wrote: Thu Jul 22, 2021 6:54 pm
AlwaysLearningMore wrote: Thu Jul 22, 2021 9:36 am Not sure I see where equities are a reliable "hedge" when inflation rises. While US stock prices have risen, they didn't rise when inflation was highest and that "hedge" was most needed.
Apparently CPI was a different metric in the 70s and thus isn't really comparable.

From Barrons:
Joseph Carson, former chief economist at AllianceBernstein, points out that the CPI of the 1970s included house prices, while the current index doesn’t. “Here’s a simple illustration of how significant including and not including house price inflation can be. In 1979, the CPI rose 11.3%, and that included a 14% increase in the price of existing homes. In the past 12 months, the CPI has increased 5.4%, and the 23% increase in existing-home prices isn’t part of that. Government statisticians have created an arbitrary owner rent index (up 2.3% in the past year) to replace house prices,” he writes in his Carson Report blog.
https://www.barrons.com/articles/us-eco ... 1626456922
He's data mining to some extent.

The 40% fall in US housing prices 2008-10 would have shown up as a big impact on CPI in the other direction. Rents were much more stable.

Similarly the fall in mortgage costs over the past 3 decades has a big impact on the personal inflation rate of the 60% of Americans who already own their own homes.

What you'd probably come to is similar sorts of numbers in terms of change in consumer prices since that time, but by different routes.

Housing costs in Consumer Price Indices is a huge area of international research and it is widely recognised that there's not a single correct answer.
Last edited by Valuethinker on Fri Jul 23, 2021 7:46 am, edited 1 time in total.
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by Valuethinker »

Vulcan wrote: Thu Jul 22, 2021 4:53 pm
Da5id wrote: Thu Jul 22, 2021 4:42 pm
Vulcan wrote: Thu Jul 22, 2021 4:30 pmEducation
I have a Ph.D. but am early retired. How is that education helping me hedge against inflation? Education is good for lifetime earnings in general I guess.
That. And kids' education.
The return to higher education has been falling pretty steadily since the 1950s, I believe.

This is natural. As the percentage of the population with university degrees increases, there has not necessarily been a cocommitant increase in the number of jobs that require a university education. However there are many jobs that in the 1950s you could have gotten with only a HS diploma, that now require a college degree.

You are seeing a real inversion of the situation of the 1950s for college graduates, say, where a lot of "trades" like plumber or arborist probably pay better than a lot of jobs that you are "qualified" for with only a BA)

(Note though that the gap between men in full time employment with post HS education and those without has grown by quite a lot since 1980. Probably as a result of the decline of the unionized blue collar job market. That is not entirely consistent with what I have just written, and I am not familiar enough with the evidence and literature on incomes & wages to explain why).
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by Vulcan »

Valuethinker wrote: Fri Jul 23, 2021 7:46 am The return to higher education has been falling pretty steadily since the 1950s, I believe.
Hence the reason to take past studies like Dale and Krueger with a grain of salt.

https://www.nber.org/digest/dec99/payof ... te-college

The thinking on this board often goes: don't overpay for kids college, think about how much all this money would be worth if invested. But what is all this money is worth nothing? In that case, the best education money could buy would have been a good hedge.
If you torture the data long enough, it will confess to anything. ~Ronald Coase
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by Portfolio7 »

About two years ago we got rid of our new car and purchased 3 used cars, one of them for cash, the other two are paid off now. Those things are better than gold on wheels! We're going to be rich! :moneybag :moneybag :moneybag
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by quantAndHold »

IBonds, TIPS, and Social Security.

Conventional wisdom is that commodities are useful against “surprise” inflation, but commodities are so awful the rest of the time that I’m not sure that’s even a useful idea.

Any fixed rate debt where the interest rate is lower than the inflation rate. A 30 year mortgage would fit here. The biggest financial advantage of home ownership is the hedge against housing inflation.
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by EnjoyIt »

For those who buy things like TIPS and ibonds, how much of your portfolio are you allocating to those funds?
If it is something less than 10%, I just don't see how such a small allocation will accomplish any real value when the high inflation poop hits the fan.
A time to EVALUATE your jitters: | viewtopic.php?p=1139732#p1139732
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by EnjoyIt »

SemiRetire wrote: Mon Jul 19, 2021 11:25 pm You have hit all the main ones.

Bullets, Whiskey, and other similar type commodities besides gold.

I mean in say Argentina Venezuela people reportedly buy cars to store wealth in really high inflation areas.

I am not doing any of those. You cant even buy ammo now probably lol.
If there is anything I learned during this recent recession is that I don't have enough ammo or ammo making capability. If/when things get back to normal, I am stock piling primers, powder and bullets.
A time to EVALUATE your jitters: | viewtopic.php?p=1139732#p1139732
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by av111 »

AerialWombat wrote: Thu Jul 22, 2021 4:28 pm
tomsense76 wrote: Thu Jul 22, 2021 4:12 pm I don't think anyone debates that stocks do poorly in an inflationary environment. The usual argument for stocks as an inflation hedge is that in the long run income streams of the underlying business will adjust to inflation.
Whereas most Bogleheads own stocks as the primary driver of return in their portfolios, my small allocation to equities exists *only* to help keep up with inflation. If inflation didn’t exist, I would likely own zero publicly traded equities.
Same. Real estate owners appear to be best positioned for inflation. But it seems hard to believe that rates could rise with the national debt being what it is. So options are

A. Economy rises with strong inflation. As prices rise faster than incomes, main street suffers and elects political party that promises control over the rising prices. New government raises rates to control inflation and taxes are raised to pay higher interest outlay on the national debt. Economy goes down the tube quickly leading to a period of deflation, unemployment and pain for main Street until something breaks the cycle like outsourcing and internet led to reduction in costs of living in 80 onwards

B. Economy treads water with Fed playing carefully with monetary policy in a global economy or softens gradually giving rise to slight deflation and lower rates until the trigger of next major cost cutting boom

Since optimistically (B) should happen so I would be in no hurry to refi free and clear property just to chase benefits of mortgage during the inflation. Just in case (A) happens, I would not pay off the existing mortgage faster or add to stocks

So what do you do with the leftover money you are spinning off every other week (employed right) ? Consume as much as you can and send the rest to the most recently banned asset class on this board (Name starts with cryp)
AV111
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by halfnine »

EnjoyIt wrote: Fri Jul 23, 2021 10:08 am
SemiRetire wrote: Mon Jul 19, 2021 11:25 pm You have hit all the main ones.

Bullets, Whiskey, and other similar type commodities besides gold.

I mean in say Argentina Venezuela people reportedly buy cars to store wealth in really high inflation areas.

I am not doing any of those. You cant even buy ammo now probably lol.
If there is anything I learned during this recent recession is that I don't have enough ammo or ammo making capability. If/when things get back to normal, I am stock piling primers, powder and bullets.
I am not going to discount a base amount of ammo. But I've always been curious with people's plans to have magnitudes of it. What exactly is it going to do? If you have enough for mini-army, you will likely need a mini-army to keep it. I've read many accounts of what has happened to various people around the world, but fighting off looter after looter after looter doesn't really pop up. Normally half a dozen to a dozen guys show up at 3 AM and all the ammo in the world isn't going to stop them. And using it as a store of value and trading it off just gives away that you have plenty.
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by halfnine »

SemiRetire wrote: Mon Jul 19, 2021 11:25 pm ...I mean in say Argentina Venezuela people reportedly buy cars to store wealth in really high inflation areas..
I don't believe people are buying multiple cars. They are just as likely to see them stolen. Now, if they could trade up to a more expensive car and get it on a fixed loan they would likely not only benefit from inflation on the car itself but the reduced payments relative to inflation. Obviously the risk of having it stolen still persists. And the higher the inflation the greater the risk including from carjacking which wasn't so uncommon.
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by phxjcc »

Toyota Tacoma
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by EnjoyIt »

halfnine wrote: Fri Jul 23, 2021 3:10 pm
EnjoyIt wrote: Fri Jul 23, 2021 10:08 am
SemiRetire wrote: Mon Jul 19, 2021 11:25 pm You have hit all the main ones.

Bullets, Whiskey, and other similar type commodities besides gold.

I mean in say Argentina Venezuela people reportedly buy cars to store wealth in really high inflation areas.

I am not doing any of those. You cant even buy ammo now probably lol.
If there is anything I learned during this recent recession is that I don't have enough ammo or ammo making capability. If/when things get back to normal, I am stock piling primers, powder and bullets.
I am not going to discount a base amount of ammo. But I've always been curious with people's plans to have magnitudes of it. What exactly is it going to do? If you have enough for mini-army, you will likely need a mini-army to keep it. I've read many accounts of what has happened to various people around the world, but fighting off looter after looter after looter doesn't really pop up. Normally half a dozen to a dozen guys show up at 3 AM and all the ammo in the world isn't going to stop them. And using it as a store of value and trading it off just gives away that you have plenty.
Glad to answer. Some of us enjoy shooting our guns and train those skills. I easily go through 50-150 bullets a session. When prices per bullet increase from just a few cents to 80 cents each, that hobby starts to become prohibitive. I ran very close to running out of ammo this year. I have some friends who have sold guns and ammo to others for a nice profit over the last year. Lastly, in the very very very unlikely event that the world turns into needing to defend yourself as well as hunt for food, it is nice to have plenty of ammo to be prepared.

Plenty of people here talk about 2% or lower withdrawal rates in retirement. To need such a rate, returns have to be far far worse than the great depression. If that really does occur, ammo, a desirable skill, as well as items to barter will be far more valuable than a worthless portfolio of stocks and bonds. But that is a whole other topic of discussion.
A time to EVALUATE your jitters: | viewtopic.php?p=1139732#p1139732
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by AerialWombat »

av111 wrote: Fri Jul 23, 2021 10:40 am
AerialWombat wrote: Thu Jul 22, 2021 4:28 pm
tomsense76 wrote: Thu Jul 22, 2021 4:12 pm I don't think anyone debates that stocks do poorly in an inflationary environment. The usual argument for stocks as an inflation hedge is that in the long run income streams of the underlying business will adjust to inflation.
Whereas most Bogleheads own stocks as the primary driver of return in their portfolios, my small allocation to equities exists *only* to help keep up with inflation. If inflation didn’t exist, I would likely own zero publicly traded equities.
So what do you do with the leftover money you are spinning off every other week (employed right) ? Consume as much as you can and send the rest to the most recently banned asset class on this board (Name starts with cryp)
This thread is clearly steering into lock territory, so let's steer it back. I do not attempt to predict what the economy will do, what politicians will do, etc. That's all just market timing of a different name, and history proves over and over that market timing is a fool's errand.

So to answer your question, I continue doing the exact same thing I've been doing. Every month, I put 1X into accelerated mortgage payoff on my rentals. I put 3X into my 401k, every dime of which goes into Wellesley Income Fund. 10X goes into cash. Etc., etc.

COVID didn't change it. Interest rates don't change it. Inflation doesn't change it. This is what I do every month. This time is not different.
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by Financologist »

teelainen wrote: Mon Jul 19, 2021 10:51 pm What are you currently holding besides gold, real estate, stocks, and crypto?

I have heard of some people buying small private businesses to act as a hedge against inflation and for extra diversification, but this doesn't seem passive.

Would love to hear what others are doing.
Answering a question with a question:

Is hedging inflation an important pursuit in America?

Yes, there are periods of inflation, but over time is hedging it accretive or dilutive to long term portfolio returns and/or "risk-adjusted" returns?
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by HanSolo »

teelainen wrote: Mon Jul 19, 2021 10:51 pm What are you currently holding besides gold, real estate, stocks, and crypto?
One thing I'm holding that's not covered in your list is a commodities fund (VCMDX).
unclescrooge wrote: Thu Jul 22, 2021 12:42 am
AlwaysLearningMore wrote: Wed Jul 21, 2021 7:59 pm Warren Buffett How Inflation Swindles the Equity Investor https://tinyurl.com/yedukq8j
Looks like that article was written in 1977. Fast forward a decade and it seems stocks were doing quite well. As another decade and you would have seen nearly 18 years of almost 18% compounded returns.
Then it looks like Buffett was right to stay in stocks at the time. From the article:
And why does a man who is gloomy about stocks own so much stock? "Partly, it's habit," he admits. "Partly, it's just that stocks mean business, and owning businesses is much more interesting than owning gold or farmland. Besides, stocks are probably still the best of all the poor alternatives in an era of inflation - at least they are if you buy in at appropriate prices."
The following is interesting:
AerialWombat wrote: Thu Jul 22, 2021 4:28 pm Whereas most Bogleheads own stocks as the primary driver of return in their portfolios, my small allocation to equities exists *only* to help keep up with inflation. If inflation didn’t exist, I would likely own zero publicly traded equities.
That's pretty much why I got into equities. My thinking about money was to make it by working and to keep it by saving. When I found out that savings accounts produce negative real returns, I had to look to equities just to keep what I had (in real terms). In other words, my investment objective wasn't to make money, just to not lose it.
Financologist wrote: Fri Jul 23, 2021 9:35 pm Answering a question with a question:

Is hedging inflation an important pursuit in America?

Yes, there are periods of inflation, but over time is hedging it accretive or dilutive to long term portfolio returns and/or "risk-adjusted" returns?
The above is an interesting question. I held VGPMX under its various names, and eventually gave it up after many years, as I finally realized it was nothing more than a long-term drag on my portfolio.

I think this means one has to accept that using inflation hedges involves accepting the risk that the hedge might have an overall negative effect (by performing badly when inflation doesn't happen, and/or by not actually hedging inflation when it does happen).
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by bluegill »

Some people have mentioned buying a home with 30 year mortgage as an inflation hedge. The inflation of a home value doesn't do me any good since I plan to always live in a home. My heirs would benefit, but it would not help me personally at all.
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by namajones »

teelainen wrote: Mon Jul 19, 2021 10:51 pm What are you currently holding besides gold, real estate, stocks, and crypto?

Crypto?

I can't believe people think this is an investment. It's more like a scam. I feel sorry for all of these suckers buying into this nonsense. Seems like every generation needs to learn the lessons that their elders could have taught them--and probably tried. Humans are a strange species, thinking they come into the world with knowledge that makes irrelevant that of the previous generation. It's a wonder humans haven't destroyed themselves--yet.

A fool and his money...
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by namajones »

bobcat2 wrote: Tue Jul 20, 2021 10:42 am Inflation hedges my wife and I use are Social Security, CPI indexed pension, TIPS (bonds and etfs), I-bonds, and a small holding in the TSP G Fund.

Stocks are not an inflation hedge. The correlation between stocks and inflation is approximately zero. You cannot hedge inflation with an asset that has zero correlation to inflation. (You can't hedge anything with an asset that has zero correlation to the thing you are trying to hedge.) While stocks don't perform as poorly as nominal bonds during periods of high inflation, stocks typically don't perform well when inflation is high. The two decades of very high inflation in the 20th century (1910-19 & 1970-79) were both decades when the real return on US stocks was negative.

BobK
Well said.
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by namajones »

engineeronfire wrote: Tue Jul 20, 2021 12:31 pm The vanguard paper clearly shows that the asset classes that are valid inflation hedges only works in short term, probably because inflation tend to be short term. Remember 10 year is pretty short for investing purposes. And equities is still the best long term investment.
So I like Christine Benz's bucket approach. For retirees or near retirees, instead of % of total assets for inflation hedge, I just have some TIPS, cash and short term investment grade for ~3 year worth of expenses, then simple BND and BNDX for the next 5 years expenses. The rest goes to US and ex-US equities.
Anything short term supposed to be the ballast that are stable, the few effective short term inflation hedges are volatile, so I see no point of holding them in my portfolio.
This is a good strategy.
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by namajones »

Aged Maduro wrote: Tue Jul 20, 2021 12:49 pm In an apocolyptic scenario it would also be quite dangerous once it becomes known that you have any.

This is an excellent point that I have not heard before.
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by namajones »

invest4 wrote: Tue Jul 20, 2021 11:25 pm
Real-estate, crypto, and gold hold no interest for me for various reasons which are regularly discussed (additional complexity, speculation, etc.).

I-Bonds are a distraction and perceived hassle for me which requires a long term commitment to build up a significant amount.
Agree.
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by namajones »

JBTX wrote: Wed Jul 21, 2021 1:12 am
My $1000 fun money crypto account has gone from $1000 to $582 over the last few months. How is that for an inflation hedge?
I have a 40-something-year-old friend who, against my stern and sound advice, bought into that nonsense at the top of the bubble. Yesterday her "investment" decreased by over 20 percent, and each day it swings up and down by 10 to 20 percent. Nuts. Just nuts.
Last edited by namajones on Sat Jul 24, 2021 5:11 am, edited 1 time in total.
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by namajones »

Whakamole wrote: Wed Jul 21, 2021 10:30 am Housing prices are sky high around here, so it's a bit difficult to bite into the 30 year mortgage bullet when townhomes with long commute times are going for $700k+.
Yeah. I do not think it's wise to go chasing after a bubble for fear that the bubble will only get bigger. How many times have we seen that movie already?
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by namajones »

Da5id wrote: Thu Jul 22, 2021 7:36 am
123 wrote: Thu Jul 22, 2021 12:34 am I always buy USPS Forever stamps.
Funny. But I used to do this when the stamp price was set to rise. Given how few stamps I use these days other than holiday and birthday cards a minimal win against inflation alas.
Same here. I probably have so many Forever stamps now that I will have to include them in my will.
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by namajones »

Da5id wrote: Thu Jul 22, 2021 4:42 pm
Vulcan wrote: Thu Jul 22, 2021 4:30 pmEducation
I have a Ph.D. but am early retired. How is that education helping me hedge against inflation? Education is good for lifetime earnings in general I guess.
Both good points.

Education is often an essential ingredient, but it's not the only one.
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by namajones »

Valuethinker wrote: Fri Jul 23, 2021 7:46 am The return to higher education has been falling pretty steadily since the 1950s, I believe.

This is natural. As the percentage of the population with university degrees increases, there has not necessarily been a cocommitant increase in the number of jobs that require a university education. However there are many jobs that in the 1950s you could have gotten with only a HS diploma, that now require a college degree.

You are seeing a real inversion of the situation of the 1950s for college graduates, say, where a lot of "trades" like plumber or arborist probably pay better than a lot of jobs that you are "qualified" for with only a BA)

(Note though that the gap between men in full time employment with post HS education and those without has grown by quite a lot since 1980. Probably as a result of the decline of the unionized blue collar job market. That is not entirely consistent with what I have just written, and I am not familiar enough with the evidence and literature on incomes & wages to explain why).
Excellent point. In the 50s and even 60s, a master's degree could land someone a professorship and even tenure in many universities. Now a Ph.D. often lands academics the same job as those with an M.A.: adjunct faculty work, with no benefits and poverty-level wages.

https://www.jamesgmartin.center/2010/12 ... d-my-ph-d/
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by corn18 »

bluegill wrote: Sat Jul 24, 2021 3:55 am Some people have mentioned buying a home with 30 year mortgage as an inflation hedge. The inflation of a home value doesn't do me any good since I plan to always live in a home. My heirs would benefit, but it would not help me personally at all.
It's the mortgage that hedges inflation, not the house. A 30 year fixed rate mortgage @ 2.25% when inflation is at 5% has a net present value that is a lot less than the balance due on the mortgage. You are making 2.75% a year on your mortgage.
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by GoneOnTilt »

Cash.
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by Da5id »

GoneOnTilt wrote: Sat Jul 24, 2021 7:38 amCash.
Cash loses value by the amount of inflation, guaranteed. In what way is it possibly good?
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by Financologist »

bluegill wrote: Sat Jul 24, 2021 3:55 am Some people have mentioned buying a home with 30 year mortgage as an inflation hedge. The inflation of a home value doesn't do me any good since I plan to always live in a home. My heirs would benefit, but it would not help me personally at all.
Rising home value usually means access to a rising home equity loan amount. Could be helpful in a pinch..
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Re: Best inflation hedge besides gold, real estate, stocks, and crypto

Post by Da5id »

bluegill wrote: Sat Jul 24, 2021 3:55 am Some people have mentioned buying a home with 30 year mortgage as an inflation hedge. The inflation of a home value doesn't do me any good since I plan to always live in a home. My heirs would benefit, but it would not help me personally at all.
Yes, but your mortgage payments are fixed and fall as a percentage of your income. That assumes your income rises at least somewhat with inflation, and that you have a fixed rate mortgage of course.
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