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Inflation Plays

6,320 Views | 37 Replies | Last: 2 yr ago by Diggity
harge57
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Ay ideas on an inflation play?

We can argue whether the money printing will continue/create inflation here if we want, but I am under the belief that the money printing will only continue and will create inflationary pressure on the economy.

So my question is how do I play that? I am concerned about the amount of cash I am holding. (roughly 30%)

Any stock suggestions?

Should I buy a rental property? (I hate the property tax effect inflation has though.)

Frisco86
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harge57 said:

Ay ideas on an inflation play?

We can argue whether the money printing will continue/create inflation here if we want, but I am under the belief that the money printing will only continue and will create inflationary pressure on the economy.

So my question is how do I play that? I am concerned about te amount of cash I am holding. (roughly 30%)

Any stock suggestions?

Should I buy a rental property? (I hate the property tax effect inflation has though.)


Banks for inflation is a simple answer. Will they let the 10yr run? US debt is so large I dont know if they can. I had those same feelings in 2008/09 when we were printing money. Inflation had to occur, right? Wrong! Rates were artificially controlled. Likely this continues to some extent.

Rental properties - I want some. But am very very leery of the price of real estate. It has been energized by low rates and thus prices grew way to fast as demand exceeded supply and low rates allowed buyers to bid up prices, which them become the comparables. So I am waiting till rates, hopefully, do increase and would expect home prices to come down a bit. But if you can find the right deal, I wouldn't wait as there is no guarantee that rates will increase. I continue to passively look for properties.

I am retired and have a bit of cash too. 17%. I did put 1% of wealth into GBTC. Wont kill me if it tanks, but could be huge if it gets anywhere near the projection in 2024/25.

Looking at trends - 5G, Cybersecurity. Just need to pic your spots.

Best of luck.
Stive
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Traditional inflation plays are stock market and real estate (preferably with debt or at least fixed rate notes). Their values will assumably inflate with everything else.

Cash is your enemy here.
Carlo4
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See Cryptocurrency thread.

Bitcoin is up $30,000 a coin in 3 months.
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K_P
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Following
It feels like stocks are overvalued similarly to RE. Financial sector maybe less so?

I bonds are something to look into as well
FlowCtlr
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Gold and gold stocks. Amazon and tech stocks. QE money just goes into the stock market...
GE
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jayelbee said:

I think inflation concerns are overstated. We're closer to deflation being an issue than wild out of control inflation and crazy interest rates.
I'm curious as to why you think that? Is it based on things you have observed or economic theory?

For some reason I have it stuck in my head that inflation basically occurs when refers to the number of dollars available to be spent changes as a ratio of the amount of goods and services available for purchase (production). Probably far too simplified but am curious to know how your conception of it is different.
Stive
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GE said:

jayelbee said:

I think inflation concerns are overstated. We're closer to deflation being an issue than wild out of control inflation and crazy interest rates.
I'm curious as to why you think that? Is it based on things you have observed or economic theory?

For some reason I have it stuck in my head that inflation basically occurs when refers to the number of dollars available to be spent changes as a ratio of the amount of goods and services available for purchase (production). Probably far too simplified but am curious to know how your conception of it is different.
As long as the US dollar is the most demanded currency worldwide it's really not too much of an issue. If a viable alternative begins to cut into that (people start demanding Yen, Euro's, Crypto, etc more than dollars) then you run the risk of major problems. As it stands today, people were still gobbling up any dollar they could get their hands on no matter how many trillions Washington dumped into the markets last spring.

Casey TableTennis
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GE said:

jayelbee said:

I think inflation concerns are overstated. We're closer to deflation being an issue than wild out of control inflation and crazy interest rates.
I'm curious as to why you think that? Is it based on things you have observed or economic theory?

For some reason I have it stuck in my head that inflation basically occurs when refers to the number of dollars available to be spent changes as a ratio of the amount of goods and services available for purchase (production). Probably far too simplified but am curious to know how your conception of it is different.
Many conflate inflation with lifestyle creep. Compared to a decade ago, I dine-out more (pre-covid), live in a nicer house, travel more often, etc... It would be easy to say I can't live on the same amount as I did a decade ago, but my lifestyle choices have more to do with it than actual inflation.

More to your point, we simply need to look at the decade+ following great recession ('07 -'09). There were at record levels of stimulus yet broad inflation did not come.

We could all use Moore's law equivalents to our advantage and buy TVs and other technology that is slightly dated and actually save money relative to prior... few do that, again a lifestyle choice, not inflation.

If we can begin approaching full employment again, see oil over-supply worked through as economic activity picks up and see relatively modest economic collateral damage from covid, we could see a pick up in inflation soon, but hyper inflation seems like a very low risk.

The biggest argument to me for inflation being weak in the near-term is that the Fed explicitly stated in August they will favor a strong labor market over trying to manage inflation to 2%. If they were worried about inflation getting out of control, that likely wouldn't be their stance given their dual mandate.

I am positioning more for inflation within fixed income given the ugly tradeoff between yield and duration. Thus, tilting to higher usage of high yield and floating rate instruments (favoring credit risk over duration risk) and tilting ever so slightly to equities for those with liquidity needs for next 3 years fully squared away.
mazag08
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Modern monetary policy is literally targeted directly at inflation. And inflation reporting excludes a ton of categories that are artificially propped up by consistent government stimulus like agriculture, housing, etc.

Take away government backed loans, government housing vouchers, HUD, government tax credits to developers, and agricultural price and commodity controls, and what do you think would happen to the supply, demand, and pricing of those things?

We have been fooled into thinking we can beat inflation. Instead, we have piled up endless debt while stifling our own economy with over bearing regulations and limitations. The end result is someone WILL have to pay for it. They will pay with inflation AND unemployment (because to actively fight against inflation with monetary policy you have to be ok with rising unemployment.. but we've been stupidly fooling ourselves into thinking we can successfully fight both), and massively increased taxes.

That someone might be us in 10 years. It might be our kids in 20. It might be our grandkids in 40. But it will happen. The laws of economics don't just disappear because we claim we are unbeatable.
harge57
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Bringing this discussion back. At the time I just decided to go from 30% cash to about 10% and put into the market (Amazon, Google, Camping World, LVS, FANG etc.)

What are some good bets for the current inflationary environment?

Housing through the roof
Vehicles prices are through the roof
Lumber is crazy
Gas prices have increased 50% in the last year.

I am thinking Tech and Banks will largely be insulated from cost of goods increases? Real estate irks me due to property taxes and I have enough exposure with my personal home.

Any other ideas?
Outdoorag011
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Gold and Silver.
Decay
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But things with your money now. Don't sell investments. Use future money on things and investments.

And buy ammo.
12thMan9
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I invested $150K in 3 different MF deals last Fall. Initial distributions are between 7-9%, tax free. Have another $100K in MLP(Enterprise Products, EPD) paying over 7%. I'm sure I could play the market & do better, but the MF investments are looking to return capital investment w/in 2-5 years, so I'll be able to do it all again while still maintaining equity & cash flow from original investment. Still have $100K in a high yield MM(4%) that is liquid.

So far, as I personally try to get back into medical sales, or any sales at this point, it has allowed me to develop a passive stream of income w/o touching my 7 figure 401K, which had a great year last year.

I'm a big believer in passive income & RE is a great tool for that. I'm smart enough to know that I'm not smart enough to do it on my own, yet. But it is an option.

Younger generation, like my 2 Aggie daughters, like to mess w/the crypto, buy penny stocks, and other stuff. And there are people making money doing that, great for them. It just not something I want to spend time with, I'd rather watch Aggie sports & enjoy life.

You have several things mentioned here. Some will agree w/some, some w/others. But that vast majority of wealthy people have RE in their portolios.
Ronnie '88
SMM48
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the entire energy complex is sitting a perfect supply demand crossroads.

example. until recently Valero energy has started firing up units that have been at rest for 12-18 months.

and if they are firing up units.....so is xom, cvx, Phillips, marathon etc etc.

Two plays. XLE of course...and OIH.
SMM48
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12thMan9 said:

I invested $150K in 3 different MF deals last Fall. Initial distributions are between 7-9%, tax free. Have another $100K in MLP(Enterprise Products, EPD) paying over 7%. I'm sure I could play the market & do better, but the MF investments are looking to return capital investment w/in 2-5 years, so I'll be able to do it all again while still maintaining equity & cash flow from original investment. Still have $100K in a high yield MM(4%) that is liquid.

So far, as I personally try to get back into medical sales, or any sales at this point, it has allowed me to develop a passive stream of income w/o touching my 7 figure 401K, which had a great year last year.

I'm a big believer in passive income & RE is a great tool for that. I'm smart enough to know that I'm not smart enough to do it on my own, yet. But it is an option.

Younger generation, like my 2 Aggie daughters, like to mess w/the crypto, buy penny stocks, and other stuff. And there are people making money doing that, great for them. It just not something I want to spend time with, I'd rather watch Aggie sports & enjoy life.

You have several things mentioned here. Some will agree w/some, some w/others. But that vast majority of wealthy people have RE in their portolios.
Aggie sports and enjoy life is right on!
deadbq03
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Honest question: why are so many folks suggesting banks? My (probably dumb) thought was that the finance sector would suffer as existing loans become less valuable.
Cyp0111
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most paper they hold floats.
Decay
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Cyp0111 said:

most paper they hold floats.
Also if anyone knows how to play around with other people's money to stay alive, it's the banks.
evan_aggie
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https://www.marketwatch.com/story/u-s-inflation-climbs-in-april-to-the-highest-level-in-13-years-cpi-shows-11620823628

Wait, printing trillions of dollars and paying people more to not work vs work is causing a problem?

Hmmm.....I'm pretty sure this has nothing to do with inflation. Biden's Fed: everything is fine.
mwp02ag
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You and I are aligned in our thinking mazag. I am curious what you think will happen to rents and occupancy in Texas metros should the inflation and unemployment follow? More specifically to my situation, how will short term rentals fair in that environment?

One of my favorite RE guys, Jason Hartman, says it best imo. Buy cash flow positive real estate with 30 year debt at todays rates and pay your mortgage back with cheaper and cheaper dollars and your wealth will grow. I believe that 100%, however, I can't escape the feeling that the middle class is about to take a major hit over the next few years. Who will be able to afford rents in 5 years? Who will be able to travel?

I am at a huge crossroads and indecision is killing me. We owner occupy our triplex and have two short term rentals upstairs that are on pace for $60k gross, we can move out of the first floor apartment and rent it long term for an additional $1800 positive cashflow easy. Our current mortgage is about 55% of what we would appraise at today. So we can refi and pull out some cash for another property and still be cashflow positive....if things stay relative to today.

That has always been the plan, I never thought I might sell this home. It has been a home run deal for us, but with my growing concern for the economy and the high market I am considering it. I don't mind missing out on some upside to sell now, I am LOATHE to walk away from this cashflow and start over but my concern on who the hell is going to pay the rents going forward. We do have more than enough cash reserves but those are about to go POOF due to inflation if we're right.
YouBet
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Yeah, I'm sitting on a lot of cash right now primarily because we might be taking an upcoming exit from the corporate highway. I left my corporate gig last year and my wife is now contemplating it. Going to need some level of liquidity to float through some cash flow uncertainty that could last a year or two. However, it's really bothering me to sit on that kind of cash with this inflation ramping up.

You also have the added FOMO pressure of RE prices blowing up and not wanting to miss that window if we do make a move. I think most are predicting that not to wane for a while, but you never know. In the meantime, I'm sitting on huge cash reserve and throwing some of it at crypto as time goes on.
Sully Dog
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deadbq03 said:

Honest question: why are so many folks suggesting banks? My (probably dumb) thought was that the finance sector would suffer as existing loans become less valuable.
  • banks resale lots of their loans
  • they have access to the fed window for more loans
  • they have higher margins in a higher rate environment
Deplorable Neanderthal Clinger
Sully Dog
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Serious question. Do your really need all of it to be in cash? A year or two seems like a long enough horizon that you could have it in a mix of cash, debt, and assets.
Deplorable Neanderthal Clinger
YouBet
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Sully Dog said:

Serious question. Do your really need all of it to be in cash? A year or two seems like a long enough horizon that you could have it in a mix of cash, debt, and assets.


No, that's why I'm bothered by it. Going to correct that. Our path forward has been hazy so I've kept the cash on hand. I think our exit strategy is a little further out now so I'm going to start layering some of it into other vehicles.
fairviewcrew
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INFL - interesting option as a be tool to help protect against inflation. From horizon kinetics- google it, listen to some podcasts from them, I like their philosophy. You want to own streamers (royalty holders for commodities: oil/gas/gold/ag/timber/other metals) as well as the exchanges (benefit from volatility). Holding the underlying commodity is a high carrying cost, owning the producers is ok but in an inflationary environment their margins get squeezed as costs go up (materials or labor).

It's a new ETF but I like the concept
Oldmanriver
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Agree on INFL...jumped in last month...Fed is gonna be way late to get it under control

OMR
Oldmanriver
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Also look at LAND & FPI
$30,000 Millionaire
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Honestly the best inflation play is fixed debt
You don’t trade for money, you trade for freedom.
jimmo
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$TBT
guy I follow on Twitter was using this for inflation hedge
Christian Fromhertz for the record
harge57
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Looks like Michael Burry (big short) made some big bets on inflation.

Biggest position was shorting the 20 yr treasury ETF

3 minute mark shows his positions.

Jabin
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I wish that they'd disclosed more on the exact options he purchased. In particular, expiration dates. Or did they and I missed it?
harge57
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Jabin said:

I wish that they'd disclosed more on the exact options he purchased. In particular, expiration dates. Or did they and I missed it?


Doubt they disclose that.
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