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09-24-2021, 01:45 PM | #1 |
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Inflation Strategies
Been thinking about inflation for several reasons, and then wondering what strategies you all have in mind as investors or as consumers.
Why am I thinking inflation? Because we’re well past the end of the usual 20ish year cycle of interest rates falling and have been at bottom about 10 years. The cycle should, absent Fed intervention, be on the rise now. And with rising interest rates we usually see rising inflation. There are other reasons to expect rising inflation from a macro perspective. And of course this year we have had a pretty big jump in wholesale and retail prices. The Fed originally called these temporary but more recently suggests the temporary period may be extended. So for the purpose of this thread, let’s assume inflation is back and will run for at least a decade. Say averaging 5-6% but could be higher. What would you do as a consumer, what would you invest in, and what would you divest? |
09-24-2021, 07:34 PM | #2 | |
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So let's talk inflation. Some got damn microchips got us all in a bind here.. Long lead on HVAC and controls electronics. Prices still going up. |
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09-24-2021, 07:46 PM | #3 |
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09-24-2021, 08:05 PM | #4 | |
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Is so buzzed |
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09-24-2021, 09:23 PM | #5 |
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No reason to change anything. You can't move money into bonds or anything else as there's still no interest there. The best thing you can do is to continue contributing to your retirement fund/IRA/stock portfolio as much as you can. Then, let it ride until you get close enough to retirement to move everything to less risky investments. If what you've been doing has been working, keep it up.
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09-24-2021, 09:34 PM | #6 |
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whats everyones thoughts on salaries and inflation ?
should salary increase in accordance every year ? i'm thinking of asking for a raise
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09-24-2021, 10:05 PM | #7 |
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Inflation is moderating. Spend time on the FRED data warehouse. 5%-6% for a decade is overly pessimistic. The US is headed for a Japan-like future with interest rates and inflation.
The antidote for inflation is to invest heavily in equities. 100% equities, excluding cash. Bonds are dead for the foreseeable future. Live below your means, as usual. Increase your comfort with volatility, it will help you live with your 100% equity allocation. |
09-25-2021, 07:57 AM | #8 | |
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Same for social security these days. It is indexed to inflation but the SS increase comes in the next calendar year. |
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09-25-2021, 08:00 AM | #9 | |
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Which equities/sectors are better positioned to do well in an inflationary environment (fixed costs, pricing ability for example)? What about real estate, like apartments or rental properties? Gold? I’m not looking for financial planner advice on this forum, just spitballing a bit. |
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09-25-2021, 08:04 AM | #10 |
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Any and all equities.
Please answer a question: what is your risk tolerance? Please tell me your portfolio's standard deviation (volatility) today. This is easily calculated by using portfoliovisulizer's Efficient Frontier tool: https://www.portfoliovisualizer.com/...nalysisResults I'm not a financial advisor. More information is needed from you to answer your most recent question. |
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09-25-2021, 08:06 AM | #11 | |
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09-25-2021, 08:20 AM | #12 | |
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Would you shift from autos (limited pricing power) to REITs (fixed asset cost and ability to raise rents) for example? On the consumption side (business consumer or personal), would you build inventories, buy ahead or try to contract for long-term fixed prices? How about hedging (financial instead of physical protection)? Not asking for personal advice, just what people are thinking and general themes. |
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09-25-2021, 08:35 AM | #13 |
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Motherducking thread got me going back to look at my portfolio emails I've ignored.
Distributions and junk. I don't know. I'm stupid with money, just shove in bank like squirrels burying nuts in the yard. Guess I'd better read this thread and start asking some questions .. |
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09-25-2021, 08:39 AM | #14 |
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With the current economic situation, it has caused me to start thinking a little differently. Especially around taxes. I see all of this intertwined with each other as much of the inflation we're seeing is being affected by monetary policy. Which in turn will affect taxes as you can't keep dumping/printing money without eventually paying the piper. While I made some decent financial decisions, the two things I regret not doing more of was putting more money into non qualified investments and funding my Roth. I was fixing the non qualified situation as I had a substantial amount put away but the divorce screwed that up. The Roth situation I couldn't fix at all. By the time I realized I should have funded my Roth more, I make too much to qualify. I know about doing a Roth conversion but the up front tax bill would just kill me.
So right now, I'm looking to fund my non qualified account as best I can and looking to now start focusing on paying off my houses. My target is to control what my fixed yearly expenses will be in retirement so I can position which tax bracket I would fall under. Not having to pay into a mortgage will go a long ways towards getting myself into a lower tax bracket as I wouldn't have to draw out as much out of my accounts as taxable income. |
09-25-2021, 08:58 AM | #15 |
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I have been worried about inflation for several years.
Precautionary actions: 1. Pay down mortgage. 2. Have more than one car that will last long. 3. Build inventories of tools, equipment that you need or will need in the future. 4. Diversify investment: stocks, commodities, gold, even a little bitcoin. 5. Hedging is great idea. However, you can do it with your own business, I don't see how you can do it effectively with personal wealth. |
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09-25-2021, 09:05 AM | #16 | |
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09-25-2021, 09:08 AM | #17 | |
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Curious why you want to pay off houses if you have fixed rate mortgages. Understand completely if they are variable rate (those rates will rise, driving payments up). |
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09-25-2021, 09:10 AM | #18 | |
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If you still have a long ways from retirement, paying down (aggressively)/paying off your mortgage is the last thing I would do. Especially if you have a low fixed rate interest on your mortgage. It's going to be the cheapest money you can ever get your hands on with the ability to write off interest payments on your taxes. Not to mention the liquidity situation if you need to get access to money you've locked away into your home. If you're young, have a good mortgage on your home, I'd take the extra money you'd put into aggressively paying down your mortgage into the stock market. |
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09-25-2021, 09:15 AM | #19 | |
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Hopefully, what I said makes sense. |
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09-25-2021, 09:19 AM | #20 | |
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BTW I’m retired. I don’t think the analysis changes because of that, it would if I planned to die soon but I could go another 30-40 years. |
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09-25-2021, 09:26 AM | #21 | |
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The mortgage is amortized for 25 years and the term is renew every 5 years. Off course, there are variants of amortization years, variable rate, 1 to 5 years fixed rate. |
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09-25-2021, 10:12 AM | #22 | |
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I enjoy sharing ideas on trading strategy, portfolio construction and management, market functioning and macroeconomic topics. When it comes to which investments to hold or to sell, I point to the people who are proven to know what they are doing: Buffett, Lynch, Dalio and many others. The stock market always goes up in the long term. It is always a bumpy ride to get there. No one knows with certainty when a bump is coming. I think volatility is treated like the boogeyman, especially for articles written for retirees. It is used as a red flag warning that retirees might "run out of money"; this is rubbish. Volatility is generally associated with stronger returning investments. If you are comfortable with volatility, chances are you can earn above market returns. If volatility gives you an upset stomach, buy index funds and forget trying to be an active investor. On the opposite end of the volatility discussion is cash. I see cash as a useful portfolio volatility-reducing position that also happens to be liquid. Cash is not trash, as Dalio puts it, if it is used strategically. Surplus cash is trash. Each investor defines the meaning of "surplus" for him/herself. I use stock screeners on the Fidelity and finviz sites, with criteria I have developed over the years. I buy what I know, or that I can understand. If the investment theory doesn't make sense, it doesn't make sense. Last edited by chassis; 09-25-2021 at 10:18 AM.. |
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