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      09-26-2021, 09:25 AM   #27
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Originally Posted by 2000cs View Post
I am really not trying to ask for personal investing advice, but obviously I’m not communicating what I am asking very clearly. So let me try again…

I’m 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 today’s flips. I knew people who had rental properties (multiple rental houses, duplexes and triplexes, apartments via partnerships) but I don’t 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.

What’s 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 “staples” that you knew you’d use (canned goods, non-perishables, clothing, etc). Businesses held inventory in the same way because the inflation risk exceeded the carrying cost. That’s 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 I’m after. More of an academic curiosity; not looking for specific advice for my personal circumstances.

2000cs It's clear and has been from the first post.

Invest heavily in equities. That's the reply to your question.

You have a penchant for real estate, or at least to invest in real estate, is that correct? You have mentioned real estate and REITS several times in several posts. You are looking for someone to say, "Dive in to REITs!" Right?

I say dive in to equities.

You also haven't explained your volatility tolerance. My guess is that you are less risk tolerant than either you have disclosed, or than you realize. REITs are fairly low vol and low returning, compared to broader equities.

Here is some background and historical context for you: read about the Bretton Woods currency system exit, and the impact on the dollar and inflation. Then look for a parallel to the Bretton Woods exit in today's environment. Please report your findings back to this thread.

If you like, bury cash in the back yard, buy physical gold, silver and lead, horde gasoline, diesel fuel and kerosene, and load up your chest freezers with meat. I am not doing any of these things.

What is your volatility tolerance? What is the volatility (standard deviation) of your current portfolio?
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