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Investing in an inflationary environment

Question for the board...where would you invest in an inflationary environment?

I'm of a certain age where I remember investing my earnings from pumping gas and changing oil at the local Texaco in CDs that were paying over 12% in the early 80s...very tough environment, lot of inflation, high unemployment, attorney's driving taxi cabs...no job was beneath anyone...

fast forward to about 10 years ago when still attending a corporate torture chamber on a daily basis when during a water cooler stop I asked one of the gray beards what was it really like during the late 70's early 80's with the high inflation, I was to young to really understand it...he told me that "there was absolutely no where to hide pertaining to your investments"...you got chewed up no matter what you did

What is the thinking now? You could argue that there will be reduced demand for goods and labor so how can we have inflation but with all the money being put into the system by the gov't, I anticipate we will have a situation where we switch between severe deflation and severe inflation...where would you invest?

I wouldn't touch any Gold ETF...I can see that going poof as what do you really own there..can't get bullion at a decent price without large mark up...real estate...too many folks unable to pay rent....

Ideas/thoughts?

Everyone stay healthy!

Baseball Fan

Comments

  • I think the inflation is in asset prices. So far.

    I miss baseball too.
  • Howdy,

    I won't talk about the metals as you've covered it. One of the oldest and most important (to me) quotes I've ever read was from the Elder Baron Rothschild. He said to guard against economic downturns, one should have 1/3 of their wealth in securities, 1/3 in real estate and 1/3 in rare art. Note that he's talking Wealth, not your asset allocation for your 401K. Also, you can substitute many things for Rare Art but in ain't Beanie Babies.

    Take a few minutes and run your own numbers. Now wipe off your computer screen. Most people will be something like 80/15/5 . . . or worse.

    I've been working at it for years now and still have never gotten to 33/33/33. That said, I'm better today than when I first looked at it.

    I know it doesn't answer your question but it may serve as some strategic guidance.

    Good luck,

    rono

  • "you got chewed up no matter what you did"

    Not if you bought decent tax-free munis yielding 12-14%. That worked great, until they called them after Volker had driven inflation down.
  • edited April 2020
    I see just as much chatter now about deflation as I do for inflation. But as far as inflation, the general go to places are TIPs, gold which you don't want, commodities or real estate.

    I'm still holding gold, IAU, and I have since late 2018, though I did trim some over the last couple weeks. Every time I've tried TIPs I seem to get burnt. So, unless we see strong indication and a starting trend, I'm not sure it's worth adjusting for right now. I do think deflation-recession might be a more probable outcome.
  • Inflation... Hmmm... the dollar is ALWAYS smaller, where I live. Things are much more expensive, ALWAYS. People are getting "weeks to the gallon" through this crisis, and they're happy about it, both here and on the Mainland. Gas is down to just above $3 here. I just called the Canadian Pharmacy. Wanna talk about "inflation?" If I ordered my prescription at the local drugstore, my co-pay would be $132. Via the Canadian outfit? (Pay by credit card, of course) it's $26. Is that "inflation" or EXTORTION?

    Several incomes in our household, so prices never really cause pain. Where to invest? I'm thinking TECH. All the things the younger generation is already "into," but guys like me always shun. Dunno about single stocks. I leave it to the fund managers. Remote conferencing, the "cloud," every new gadget has a consumer-base ready and willing and anxious to buy it. I don't have to look any farther than my own kitchen table. And the little shaver? Already SO addicted to "getting lost in that hopeless little screen." (Leonard Cohen.) He's all of 3 years old. Around the table, each person who might happen to be there is on their own little hand-held device. Sometimes 4 of them. Conversation? Connection?

    The lesson here? The manufactured preoccupation with what that little screen is showing you is more important than the PEOPLE around you.

    "As a marginalized member of a spectator democracy, you choose your own dependencies.... Don't think of it as manufactured consent. Think of it as the Candy Everybody Wants."



  • Yes, it's really hard to predict if we're in for inflation, what with all of the "money" being printed, or deflation, what with the oil situation and lord knows how many businesses failing due to the general shutdown. FWIW, I'm guessing deflation, followed by general inflation creeping up as business and jobs recover.

    With respect to the oil- all I can say is that bunch of quarrelsome trouble-making Mideastern oil producers are getting exactly what they so richly deserve. A pox on all of them!
  • A pox on all of them! Took the words outa my mouth.
  • @Crash,

    10,000 Management Consultants

    (one of my kids does that for work)
  • @davidmoran OMG. Then surely, you understand. OMG.
  • Crash said:

    Inflation... Hmmm... the dollar is ALWAYS smaller, where I live. Things are much more expensive, ALWAYS. People are getting "weeks to the gallon" through this crisis, and they're happy about it, both here and on the Mainland. Gas is down to just above $3 here. I just called the Canadian Pharmacy. Wanna talk about "inflation?" If I ordered my prescription at the local drugstore, my co-pay would be $132. Via the Canadian outfit? (Pay by credit card, of course) it's $26. Is that "inflation" or EXTORTION?

    Noooooo, it's not extortion! It's just special interest lobbying by Big Pharma to have 'rich' Americans pay for all their insane drug marketing.....
  • edited April 2020
    Inflation? My starting point, from decent definition: Inflation is a measure of the rate of rising prices of goods and services in an economy. Inflation can occur when prices rise due to increases in production costs, such as raw materials and wages. A surge in demand for products and services can cause inflation as consumers are willing to pay more for the product.
    Obviously, there are several common areas that may cause broad inflation. Broad inflation, however; may be impacted more from some select sectors and how these sectors affect an individual household, IMHO. Example: While both personal healthcare needs (insurance, meds, etc.) and technology (computers, smart phones) are of great benefit for a household; their inflation paths likely have a bigger bang for the buck, over time. We have supplemental health insurance through United Health....it's expensive, well; until you need it. So, the offset, to pay for the insurance could be to buy United stock or a healthcare fund that has United stock as part of the portfolio. We may think the insurance cost is way out of line, but if this is the case; then holding the stock/fund should be of benefit and effectively the profit will pay for the premiums over time. As for technology and the consumer side, is that one has been able to upgrade, if desired; the ability of the product.......computers, smart phones, flat screen televisions, etc. If one has been investing in technology over the years, the likely profits have more than paid for the tech. upgrades one desires.
    Investing in growth should provide, over time; enough to overcome broad inflation. Though a S&P 500 investment product should provide for growth too, as a reflection of the economy; for us, there remain sectors in the S&P 500 which we do not choose to invest, although this investment offers diversification. There are numerous quality growth funds, etf's or sectors within the growth area, to choose. Healthcare and tech. are ,of course; subject to their own problems with performance over time periods.......as in legislation that may affect profits, etc.; or too expensive and the big money takes profits and runs to another sector. Such, is the nature of all investing, eh?

    OPPS, ADD: CPI (gov't. only data) 1971- April 10, 2020 = 537.3% AND Jan., 1999 - April 10, 2020 = 54.5%

    NOTE: Our investment portfolio is fully tax deferred (IRA's), so we do not have to be concerned with buys/sells or capital gains when moving our investments. Taxable accounts will have other considerations; although long term investing in growth should not be set aside for this reason, IMHO.

    My 2 cents worth.

    The below chart is a line graph, for an easier view of returns; click the lime green/red icon at the bottom left of the chart screen for a bar graph. You may return to the line graph when clicking the icon adjacent.

    This CHART starts at Jan. 4, 1999 comparing FSPHX, FSPTX and the S&P500.

    Take care of you and yours,
    Catch

  • Crash said:

    @davidmoran OMG. Then surely, you understand. OMG.

    :)

    I try and learn with every step. It is utterly fascinating (Tuck, LEK, now McKinsey), but as a tech writer I am fascinated by any number of arcane wack things.
  • You made me giggle.
  • har, and good

    my kids are more mature than I was then, and indeed than I am now in many ways; so I learn from them as I can

    and their children, one of whom is studying 'social thinking', which I sure coulda stood at his young age, and am thinking of asking how I can sign up now :)
  • Social thinking.... Huh? As in (maybe) Group Psychology?
  • oh, ok. thanks for the link.
  • I took a four year course in that when I was 18. It was called the United States Coast Guard. :)
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