This statement does suggest a question: if inflation is easy to navigate, can you suggest an investment strategy that is "guaranteed" to beat inflation? For example, if I suggest a period -- 7 years -- can you precisely describe a strategy that will beat inflation with a very high chance of success?
What was inflation during the 1970s? Did residential real estate outperform? What was the dividend yield on equities?
All things considered, both asset classes did well during 70s. Yes, i know the DOW was at 1000 in 1968 and still 1000 in 1982, but not every stock was a Nifty Fifty and when combined with dividends many stocks performed incrediblly well.
Although I don't have though numbers in front of me, I guess that there are many 7 year intervals between roughly 1968 and 1980 when most broad baskets of equities failed to keep up with inflation, even including reinvesting of dividends.
I chose 7 years as being long enough that inflation can do some real damage, but short enough that it is hard to be confident that equities (or other strategies) will beat inflation. Over a rather long period, like 20 years, I'm pretty confident that you can beat inflation with equities, barring some geo-political catastrophe. A super talented 30 year old probably shouldn't be worrying much about inflation. In any case, they should not be looking for defensive strategies; rather, they might want to view inflation as an opportunity. Most people at or near retirement need to be quite nervous about inflation.
Rambling on and getting back to my original assertion that beating inflation with a high degree of certainty is hard: I don't think you can find any investment manager, insurer, etc, willing to provide a fund with a return that is indexed to inflation. If you can, let me know! There are of course a few inflation indexed annuities out there, but as far as I'm aware, they all have some sort of cap, and typically are life annuities (ie, they have no liquidity). You could also buy TIPS, though the tax treatment is pretty ugly.
I do think that for someone with expertise and time to travel, there are still opportunities in residential real estate. But, I think it's a hard class to take advantage of for a typical middle class investor. Possibly works for a very healthy, ambitious, upper middle class "retiree". In quotes because a lot of work will be required!
I think there are many investment managers that will exceed inflation just as there will be many that do not. I dont see this as a huge negative as those with assets to invest have grossly outperformed inflation for several decades.
The bigger threat is the wealth gap that could widen explosively. Has there ever been high inflation in a country as heavily armed as the US?
@cohodk said: “ those with assets to invest have grossly outperformed inflation for several decades.”
That’s true, though it’s been a pretty easy investment environment. Probably the only people who have underperformed relative to inflation are those who bailed out near the bottom of the Y2K and financial crisis corrections.
My own return has far exceeded inflation over the past 30 years, but I think it will take a lot of effort or luck to beat inflation over the next ten.
@Higashiyama said:
My own return has far exceeded inflation over the past 30 years, but I think it will take a lot of effort or luck to beat inflation over the next ten.
And there is nothing wrong with that. We are not entitled to 10% annual returns. Managing expectations is just as important as managing money. You are a knowledgeable person with years of experience and i believe you know ways/strategies to enhance returns, protect capital, and exploit opportunity when presented.
Our dollar is absolute garbage. What a waste of a country, too. Maybe it's better that this is the end. People working 3 jobs can't even rent an apartment.
2019 was an absolute disaster and I just pity anyone at this point who wants to "go back to normal". Yeah, there's no normal anymore, not for awhile anyway. The financial sector was prepping for a 2021 collapse before covid.
In a worst case scenario, I just go back to being poor, and nothing really changes.
If the rich lose everything, they'll absolutely lose their minds. Like imagine living such a privileged life that you never once needed food or energy support.
Just let it collapse. It's sad watching it roll around on the ground, dying. I mean come on the world is watching what is this BS. As if people didnt laugh at us enough already. Its embarrassing hearing the things the world has to say about us, our markets and our country.
Now our dollar is dead and the entirety of the US financial markets have been shown to be completely fraudulent.
Wouldn't it be a safer bet to let it die and just rebuild, than dragging it out for years while the American population gets lied to and gas lit as the rich take more from us? Yeah... I'm totally ok with being poor again.
"_Just let it collapse. It's sad watching it roll around on the ground, dying. I mean come on the world is watching what is this BS. As if people didnt laugh at us enough already. Its embarrassing hearing the things the world has to say about us, our markets and our country.
Now our dollar is dead and the entirety of the US financial markets have been shown to be completely fraudulent.
Wouldn't it be a safer bet to let it die and just rebuild, than dragging it out for years while the American population gets lied to and gas lit as the rich take more from us? Yeah... I'm totally ok with being poor again._"
It's going to go on for some time. Those in power are focused on extracting as much money and assets as they can to put in their own pockets, rather than restoring the country to any state of stability and growth and safety for the citizens. And of course... our current situation has been caused by these same individuals.
Comments
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What was inflation during the 1970s? Did residential real estate outperform? What was the dividend yield on equities?
All things considered, both asset classes did well during 70s. Yes, i know the DOW was at 1000 in 1968 and still 1000 in 1982, but not every stock was a Nifty Fifty and when combined with dividends many stocks performed incrediblly well.
Knowledge is the enemy of fear
@cohodk:
Although I don't have though numbers in front of me, I guess that there are many 7 year intervals between roughly 1968 and 1980 when most broad baskets of equities failed to keep up with inflation, even including reinvesting of dividends.
I chose 7 years as being long enough that inflation can do some real damage, but short enough that it is hard to be confident that equities (or other strategies) will beat inflation. Over a rather long period, like 20 years, I'm pretty confident that you can beat inflation with equities, barring some geo-political catastrophe. A super talented 30 year old probably shouldn't be worrying much about inflation. In any case, they should not be looking for defensive strategies; rather, they might want to view inflation as an opportunity. Most people at or near retirement need to be quite nervous about inflation.
Rambling on and getting back to my original assertion that beating inflation with a high degree of certainty is hard: I don't think you can find any investment manager, insurer, etc, willing to provide a fund with a return that is indexed to inflation. If you can, let me know! There are of course a few inflation indexed annuities out there, but as far as I'm aware, they all have some sort of cap, and typically are life annuities (ie, they have no liquidity). You could also buy TIPS, though the tax treatment is pretty ugly.
I do think that for someone with expertise and time to travel, there are still opportunities in residential real estate. But, I think it's a hard class to take advantage of for a typical middle class investor. Possibly works for a very healthy, ambitious, upper middle class "retiree". In quotes because a lot of work will be required!
House flipping? US mint product flipping is more lucrative.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
I think there are many investment managers that will exceed inflation just as there will be many that do not. I dont see this as a huge negative as those with assets to invest have grossly outperformed inflation for several decades.
The bigger threat is the wealth gap that could widen explosively. Has there ever been high inflation in a country as heavily armed as the US?
Knowledge is the enemy of fear
@cohodk said: “ those with assets to invest have grossly outperformed inflation for several decades.”
That’s true, though it’s been a pretty easy investment environment. Probably the only people who have underperformed relative to inflation are those who bailed out near the bottom of the Y2K and financial crisis corrections.
My own return has far exceeded inflation over the past 30 years, but I think it will take a lot of effort or luck to beat inflation over the next ten.
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And there is nothing wrong with that. We are not entitled to 10% annual returns. Managing expectations is just as important as managing money. You are a knowledgeable person with years of experience and i believe you know ways/strategies to enhance returns, protect capital, and exploit opportunity when presented.
Know what you know and dont fret what you dont.
Knowledge is the enemy of fear
Inflation? Deflation?
a third possibility few seem to consider: increasingly chaotic volatility will be the new normal, as wild swings between inflation and deflation will increase in amplitude and ferocity as the system destabilizes.
The government is incapable of ever managing the economy. That is why communism collapsed. It is now socialism’s turn - Martin Armstrong
Our dollar is absolute garbage. What a waste of a country, too. Maybe it's better that this is the end. People working 3 jobs can't even rent an apartment.
2019 was an absolute disaster and I just pity anyone at this point who wants to "go back to normal". Yeah, there's no normal anymore, not for awhile anyway. The financial sector was prepping for a 2021 collapse before covid.
In a worst case scenario, I just go back to being poor, and nothing really changes.
If the rich lose everything, they'll absolutely lose their minds. Like imagine living such a privileged life that you never once needed food or energy support.
Just let it collapse. It's sad watching it roll around on the ground, dying. I mean come on the world is watching what is this BS. As if people didnt laugh at us enough already. Its embarrassing hearing the things the world has to say about us, our markets and our country.
Now our dollar is dead and the entirety of the US financial markets have been shown to be completely fraudulent.
Wouldn't it be a safer bet to let it die and just rebuild, than dragging it out for years while the American population gets lied to and gas lit as the rich take more from us? Yeah... I'm totally ok with being poor again.
"_Just let it collapse. It's sad watching it roll around on the ground, dying. I mean come on the world is watching what is this BS. As if people didnt laugh at us enough already. Its embarrassing hearing the things the world has to say about us, our markets and our country.
Now our dollar is dead and the entirety of the US financial markets have been shown to be completely fraudulent.
Wouldn't it be a safer bet to let it die and just rebuild, than dragging it out for years while the American population gets lied to and gas lit as the rich take more from us? Yeah... I'm totally ok with being poor again._"
It's going to go on for some time. Those in power are focused on extracting as much money and assets as they can to put in their own pockets, rather than restoring the country to any state of stability and growth and safety for the citizens. And of course... our current situation has been caused by these same individuals.