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      09-26-2021, 09:00 AM   #26
2000cs
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Originally Posted by chassis View Post
You are asking questions that devolve into, "which stock should I buy?" discussions.

Always have equity exposure, as much as your stomach allows, plus a little more.

Yes, growth stocks will outperform. They always do, that's why they are called growth stocks.

Dividends across the market have been declining over the past several decades, I see no reason for the trend to reverse. In its place, stock buybacks have become more popular as a way of returning capital to investors. Retirees in the 1970s and 1980s use the "bonds and dividend stocks" formula with some degree of success. I don't see this as today's reality. Today's interest rates have driven bond yields to the floor, and with expectations of rising interest rates, bond fund price risk is a reality. Dividends have already been discussed, they are becoming less important than they were in the past.

The sector questions you ask (mining, REITs) are close to "what stock should I buy?" questions. Those aren't macro questions. If you like mining, and have special knowledge about it, buy mining stocks. Same comment for REITs and any other sector or stock.

2000cs what sector or industry are you most familiar with, for example from your working career? That is a basis for special knowledge.

I have an industrial and financial background. I am comfortable assessing these types of companies; I know what good looks like, and what it doesn't look like. Recently I was asked my opinion of a mining company in another country, ran it through my investing criteria, combined it with whatever special knowledge I have, and said, "No." Another person with more special knowledge than I have may have said, "Yes."
I am really not trying to ask for personal investing advice, but obviously Iím not communicating what I am asking very clearly. So let me try againÖ

Iím interested in what makes sense (investing, divesting, purchasing as a consumer and purchasing as a business, etc) if we are about to begin an extended period of persistent inflation. Big picture, not specifics.

By way of example and preliminary thoughts, I was a young adult through the 1970s in which we had inflation and then economic stagnation (low/no growth), referred to as stagflation. This persisted into the mid-1980s - about a decade. It was triggered in large part by two OPEC oil crises (huge price increases for the time), and characterized by rising interest rates and inflation in goods and wages.

Again, I was a young adult so my experience of this period is more limited than older folks, but I recall people investing in houses and flipping them very quickly (SoCal) and making very good money - but not doing a lot of remodel as we see in todayís flips. I knew people who had rental properties (multiple rental houses, duplexes and triplexes, apartments via partnerships) but I donít recall there being many if any REIT investments available. Those with rentals at the start of the inflation period did very well as they were able to raise rents and their properties appreciated. On the other hand, bonds sucked as rising yields depressed their prices forcing hold-to-maturity if you wanted your principal back. Commodities were good, especially oil and gas reserves. Collectibles and art were big and also good for shielding taxes. And so forth.

Whatís different now? Well, we have REITs, fossil is under political pressure because of carbon, lots more funds available, etc. Classic cars have really emerged. There are even some art syndicates. And international markets are much more accessible. Brokerage costs have nearly disappeared for stocks, but real estate, art etc are very expensive to transact still.

So the investment/divestment question is would we expect the same classes and general themes to perform like in the 1970s or are there differences that make for better approaches? What are the characteristics of a good investment and a bad investment in inflationary times?

On the consumption side, before Costco and Sams in the 1970s it was common to buy ahead ďstaplesĒ that you knew youíd use (canned goods, non-perishables, clothing, etc). Businesses held inventory in the same way because the inflation risk exceeded the carrying cost. Thatís all changed as we have instant availability and JIT sourcing. Will businesses and consumers return to this behavior?

What else bears thinking about? Maybe wages (some jobs track inflation better than others?).

This is what Iím after. More of an academic curiosity; not looking for specific advice for my personal circumstances.

Clearer?
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