What’s your strategy?
Spend everything! Ok, seriously, I suspect that most people here aren’t doing much to hedge inflation. If you’re young like most AF people, you are probably not thinking about locking your money in TIPS or foreign currency deposits. Some people probably have money in commodities, which have returns that are positively correlated with inflation.
Gold seems to be a good hedge.
Leave USA.
Also, consider commodity ETFs like GLD. These are probably more accessible to people who already have equity trading accounts.
Ohai, the problem with the foreign currencies are most of the ones I would want are not accessible to US citizens. AUD and NZD are nice but I would also want some Ruan (not gonna happen), possibly some Real.
technology stocks kiddo
New Zealand and Australia Government Bonds for me.
thommo77 Wrote: ------------------------------------------------------- > New Zealand and Australia Government Bonds for me. I like that.
Buy a farm. No joke, a family wealth management firm I know of bought a farm. They are protecting themselves against the devaluation of the dollar and they are returning 1-3% a year on crop yields.
QuantJock_MBA Wrote: ------------------------------------------------------- > Buy a farm. No joke, a family wealth management > firm I know of bought a farm. They are protecting > themselves against the devaluation of the dollar > and they are returning 1-3% a year on crop yields. They are more likey preparing for the apocalypse.
Agreed!
Ruan = China? You can’t trade these currencies, but some FX platforms will quote markets in Non-Deliverable Forwards (NDFs), which settle in USD. Citi might quote CNY, and many providers make markets in BRL forwards. I’m not sure how their service will be for retail investors though. You might also be interested in currency/money market ETFs and ETNs. CNY and CYB track money markets in China. BZF is for Brazil. Keep in mind that the exchange rates are based on futures, so there will be some tracking error vs. spot. Also, there will be some fund administration expenses.
Gold is the most common rush to protect dollar valuation. One should also consider a basket of commodities such as the GSCI or DJ-UBS. I’ve used DJP and CRSOX in the past. The DJ-UBS is a equally weighted basket containing energy, metals, and crops. CRSOX is a mutual fund pushing a ~6% yield as well. It helps to get some yield instead buying gold which pays nothing and is subject to special income taxes.
It’s pretty easy, even for retail investors. As others have said, gold and silver help. Buy the physical metal if you can. GLD or SLV work fine unless the shait really hits the fan. A good unhedged international bond fund is probably the easiest way to get non-dollar exposure. Again, for retail clients that aren’t going to go out and buy AUD debt. Problem with currencies is they’re graded on a curve. You may think USD is in bad shape, but it has to be in worse shape than whatever you’re buying for the hedge to work. Ask anyone that bought Euros this year how that turned out.
AAPL / NFLX / AKAM
Short rates also protect against inflation, but offer no yield. But then, neither does gold. Stock indexes will be good under inflation, but only once it’s started. The first inflation uptick will send stocks lower, but then they will start to keep up.
bchadwick Wrote: ------------------------------------------------------- > Short rates also protect against inflation, but > offer no yield. But then, neither does gold. > > Stock indexes will be good under inflation, but > only once it’s started. The first inflation > uptick will send stocks lower, but then they will > start to keep up. If the USD becomes worthless, there is no change the index keeps up with that.
ManMythLegend Wrote: ------------------------------------------------------- > bchadwick Wrote: > -------------------------------------------------- > ----- > > Short rates also protect against inflation, but > > offer no yield. But then, neither does gold. > > > > Stock indexes will be good under inflation, but > > only once it’s started. The first inflation > > uptick will send stocks lower, but then they > will > > start to keep up. > > > If the USD becomes worthless, there is no change > the index keeps up with that. What??? If the USD becomes worthless, then real assets will have value. Companies own real assets, and many companies still have earnings power if they sell a key good or service. Meanwhile their dollar-denominated debts will disappear (unless they are floating rate). So yes, stocks will keep up with inflation in the long term, but they will take a big hit in the beginning because 1) the discount rate for future earnings will rise, 2) earnings uncertainty will increase, 3) certain industries will have their costs rise faster than their sales and die (but others will have the reverse, and do well). Once that adjustment has taken place, they will deliver higher expected returns to compensate. Secondly, the dollar may well devalue, but it won’t become worthless anytime soon. There is simply no market in the world that is as deep as the US Treasury market, by an order of magnitude. There’s just nowhere else to reallocate that much money… not Euroland, not Canada, not Australia, not even China (even if you could access the market and could stomach giving your money to an authoritarian regime with a history of zenophobia).
bchadwick Wrote: ------------------------------------------------------- > ManMythLegend Wrote: > -------------------------------------------------- > ----- > > bchadwick Wrote: > > > -------------------------------------------------- > > > ----- > > > Short rates also protect against inflation, > but > > > offer no yield. But then, neither does gold. > > > > > > Stock indexes will be good under inflation, > but > > > only once it’s started. The first inflation > > > uptick will send stocks lower, but then they > > will > > > start to keep up. > > > > > > If the USD becomes worthless, there is no > change > > the index keeps up with that. > > > > What??? If the USD becomes worthless, then real > assets will have value. Companies own real > assets, and many companies still have earnings > power if they sell a key good or service. > Meanwhile their dollar-denominated debts will > disappear (unless they are floating rate). So > yes, stocks will keep up with inflation in the > long term, but they will take a big hit in the > beginning because 1) the discount rate for future > earnings will rise, 2) earnings uncertainty will > increase, 3) certain industries will have their > costs rise faster than their sales and die (but > others will have the reverse, and do well). Once > that adjustment has taken place, they will deliver > higher expected returns to compensate. > > Secondly, the dollar may well devalue, but it > won’t become worthless anytime soon. There is > simply no market in the world that is as deep as > the US Treasury market, by an order of magnitude. > There’s just nowhere else to reallocate that much > money… not Euroland, not Canada, not Australia, > not even China (even if you could access the > market and could stomach giving your money to an > authoritarian regime with a history of > zenophobia). US stock indexes will not keep if the USD goes to 0. I’m sorry that just will not happen. SPY would have to go up to about 100,000. LOL not happening.