Buying stuff is how you beat inflation

“As rich as an Argentine” - how we in Europe saw things fifty or sixty years ago:

Now it’s prices changing weekly, something that is happening all over The West. Usual reason:

But many economists believe Argentina’s inflation is also self-inflicted. In short, the country spends far more than it takes in to fund free or deeply subsidized health care, universities, energy and public transportation. To make up for the shortfall, it prints more pesos.

https://archive.ph/33Jyu

I’m still buying precious metals as we are now told that the RTI here in the UK will be about 18% by 2023:

The rate of inflation will reach “astronomical” levels in the next year according to a leading think tank, with the retail price index, the cost-of-living measure often used by trade unions in pay bargaining, climbing to 17.7%.

The National Institute of Economic and Social Research (NIESR) has said that around seven million households would be living “pay cheque to pay cheque” as high inflation forces the Bank of England to further increase interest rates.

https://www.personneltoday.com/hr/rpi-inflation-forecast-cos…

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The ‘stuff’ to buy are shares of companies that are growing faster than inflation.

The Captain

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The ‘stuff’ to buy are shares of companies that are growing faster than inflation.

The Captain

I’ve pleanty of these as well!

However:

In October of 1929, the stock market crashed, wiping out billions of dollars of wealth and heralding the Great Depression.

Known as Black Thursday, the crash was preceded by a period of phenomenal growth and speculative expansion.

A glut of supply and dissipating demand helped lead to the economic downturn as producers could no longer readily sell their products.

https://www.investopedia.com/ask/answers/042115/what-caused-…

I think that I have all bases covered. If I’m right then I shall be fine, if I’m wrong then I can afford to be wrong.

However:

In October of 1929, the stock market crashed, wiping out billions of dollars of wealth and heralding the Great Depression.

You just moved the goal posts. I replied only to the subject: “Buying stuff is how you beat inflation.” If you want a reply to “How to crash proof your portfolio,” that’s a different topic. My answer would be “enough cash to outlast the crash.” At the start of this bear market I had about two years worth. Now thinking of topping up the kitty.

The Captain

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You just moved the goal posts

Not really, just posting that nothing is for certain

Now thinking of topping up the kitty.

I’ve just done the opposite and invested quite a bit in three worldwide funds as cash is heading down the pan IMHO. Probably 20%+ inflation here in the UK in 2023 as I don’t see anyone who has the nerve to do a ‘Volcker’ to tackle inflation.

Not really, just posting that nothing is for certain

That’s news? LOL

The Captain

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I’m interested in why you are stacking cash, could you explain please?

A simple inflation calculator (based on the rule of 72) will show that at 15% inflation will halve the real purchasing power of money in about 5 years.

Here in the UK we have The National Institute of Economic and Social Research (NIESR), an independant and highly respected think tank has predicted inflation of around 18% in 2023. I see cash as high risk at the moment.

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I’m interested in why you are stacking cash, could you explain please?

Good question!

I can buy things with cash. I can pay bills with cash.

A simple inflation calculator (based on the rule of 72) will show that at 15% inflation will halve the real purchasing power of money in about 5 years.

Everything in the Universe is perishable which does not mean it does not have its use – cash included.

But to give a comprehensive reply, it’s about asset management. Every asset we own has a job to do, clothes to keep you warm, a house to live in, a car to get around, cash to pay for things. Depending on your condition and station in life you’ll have a set of assets to manage. If I were still working and generating income I would not need a large cash reserve. I stopped earning income some 15 years ago and I do not have a source of income like Social Security or a pension. My only source of income is my portfolio. During certain stages the market will not generate income so I have to depend on my cash reserves, like bears depend on their fat during the winter and people have backup batteries for black and brown outs.

I have found that by assigning specific jobs to the various assets in my portfolio I have better asset management. Some stocks for growth, some stocks for covered calls, no bonds which I have no use for, cash to weather bear markets and crashes.

Cash itself has a more detailed management process. I have a credit card that I use regularly and pay off in full most of the time. It gives me an interest free 30 day loan and a huge credit limit (five figures) which I very seldom need to use – over 30 years being a good CC customer. If I were to have a large emergency the CC would likely take care of it. It would give a 15 to 30 day term to get organized. The loan would likely be paid off with the portfolio’s margin with a much lower interest rate than CC’s charge. Now that gives me at least 60 days to get organized – no panic sales, no rash decisions – cool and collected management!

Asset management and cash management should be part of every investor’s lifestyle.

The Captain

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I looked to the cash reserves that I have as a store of wealth and to make money as interest rates rise (yes, I can remember when that happened!).

I wasn’t prepared for the world’s central banks frenzied money printing which is now heading for ever higher inflation. I’m reducing my cash reserves and getting into gold/silver. I’ve also ‘invested’ in a few Rolex watches which have been going up in value. Anything but cash at the moment.

I’m interested in why you are stacking cash, could you explain please?

Good question. IF inflation turns into hyperinflation:

Hyperinflation in the Weimar Republic:
https://en.wikipedia.org/wiki/Hyperinflation_in_the_Weimar_R…

Hyperinflation in Venezuela:
https://en.wikipedia.org/wiki/Hyperinflation_in_Venezuela

In either of the above cases you would want stacks of food vs. wads of cash.
(and/or a stash of gold(Krugerrands) or US pre 1965 silver (dimes and/or quarters) coins.)

ON THE OTHER HAND:

IF inflation turns into deflation you might want cash and lots of it.

Fiat tinder vs Fire tender
One’s an unbacked paper currency/ the other’s something you use to start a campfire. (fun fact fiat tinder can be used as fire tender;-)

In any case commercial (metal) canned foods (Campbell’s soup, Spam, StarKist tuna, etc. stored in a cool dry place will be good for 10+ years.

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Good question. IF inflation turns into hyperinflation:

Then the next question is, which currency is least likely to go into hyperinflation?

1- The currency of a tin-pot dictator?
2- The world’s reserve currency?
3- A strong economy’s currency?

In any case commercial (metal) canned foods (Campbell’s soup, Spam, StarKist tuna, etc. stored in a cool dry place will be good for 10+ years.

Assuming you stay put, but what if you have to escape to Portugal? Can you take all the tin cans with you on the plane? Dollar bills are lighter and easier to carry and more accepted than tinned SPAM.

The Captain
documents and cash
documents and cash
documents and cash
documents and cash
documents and cash
documents and cash
documents and cash
documents and cash

all the way down!
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