8 ms·
Stocks prices get negatively impacted by rising interest rates. With interest rates at ~0%, there's little money to be made in bonds, savings accounts, or anyt
by devoutsalsa 6y ago
Stocks prices get negatively impacted by rising interest rates. With interest rates at ~0%, there's little money to be made in bonds, savings accounts, or anything that pays interest income, so people put money into stocks w/ the hope the stocks will go up. When interest rates go up to fight inflation, there's more incentive to put money into bond markets, which means there's not as much money going into stocks, which means stock prices don't go up as much. Housing prices also tend to go down as interests go up, as rising borrowing costs mean fewer funds are available for buying a home.
- deanmoriarty 6y agoWhat’s your recommendation for least-worse inflation hedge?
- BenoitEssiambre 6y agoBuy all the non perishables, non obsoletables you're going to need for the next decade. Buy them in discounted bulk for and extra return. Bonus: capital gains tax free!
- dec0dedab0de 6y agoSo invest in toilet paper?
- gus_massa 6y agoTuna cans. The $/volume ratio of toilet paper is horrible, and in case of a real big emergency the other end is more important.
- kijin 6y agoSpam has more calories and lasts just as long. If you want carbs as well, add canned fruits and vegetables. Any kind of dry bulk food will also work as long as you take proper measures to keep mold and insects out. Bonus points if you can also keep oxygen out. (Grains often contain a surprisingly large amount of lipids that can go rancid.) In the kind of emergency where you'd be seriously worried about the "other end", you could very well exchange a bag of rice or sugar for a handgun or a bottle of motor oil.
- BenoitEssiambre 6y agoYup materialize your savings for a 2% a year compounding tax free return. Urban dwellers might be more limited but for people who have unused or underused space, this is a way to get a return on that space. Salt, granulated sugar, powdered sugar, brown sugar, socks, underwear, under-shirts, vinegar, soap bars, toothbrushes, razor blades, feminine products, toilet paper, paper towels, napkins, trash bags, freezer bags, sandwich bags, foil paper, parchment paper, plastic wrap, wax paper, candles, matches, diapers, pet supplies (litter, etc.), gardening supplies, building supplies, repair supplies, medical supplies, fire wood, wood pellets, long lasting appliances and furniture, kitchenware, dinnerware, sheets and pillowcases, blankets,comforter,bedspreads, Maintenance, renovations, Efficiency upgrades. Some liquid soaps and chemicals have a limited shelf life of just a couple of years so it might be better to avoid unless you know the shelf life. Also be careful buying more than you need which can lead to waste. Be careful being wasteful just because you have lots of stuff at home. Buying alcohol ahead of time in bulk works if you have the discipline not to drink more. Also to get a good return you need to use the full life of your stuff before replacing from your stash, not replace early because it's right there. There is also a macroeconomic benefit to this approach. It can get the economy out of keynesian recessions when people save by buying.
- deanmoriarty 6y agoNot very practical if the amount to be preserved is multiple 7 figures, I should have clarified my question better.
- kragen 6y agoUS$5M is a bit under 100 kg of gold or 6 tonnes of silver. Might not be a bad idea to spend a few percent of that on hiring security guards and stocking up on perishables to feed them an their families.
- deanmoriarty 6y agoThis quickly went downhill lol. Thank you for your suggestion, I’ll stick my $5M in VTWAX and hope for the best.
- kragen 6y agoProbably a good idea to maintain a more diverse asset balance than 100% in stocks, in the interest of hedging wealth preservation against both likely and unlikely shocks. The base rate of state collapse, for example, is about 1% per year, and examination of past episodes shows that it's often pretty unexpected. See notes/pandemic-collapse.html in Derctuo for some of the reasoning here. Moreover it's hardly unusual for share markets to dip 10% or 20% and take several years or a decade to recover.
- BenoitEssiambre 6y agoThat is probably your best bet for large amounts. You can also diversify into TIPS (note the negative nominal returns though) and improve your housing situation with renos, upgrades etc.
- elwell 6y agoPotentially high opportunity cost here
- nayuki 6y agoSolar panels, water filtration, and indoor farming!
- dkersten 6y agoInvesting for the zombie apocalypse!
- prewett 6y agoLand is the typical recommendation. A noisy crowd thinks gold is a good hedge. Personally, I think that high quality companies with pricing power should retain their value; Coca-Cola and Apple can probably increase their prices to compensate for inflation, leading to increased earnings, leading to increased stock price (the increase compensating for inflation).
- ivalm 6y agoLand and stock have the issue of being inversely related to interest rates and interest rates do rise with inflation.
- devoutsalsa 6y agoI'm mostly kidding... Buy forever stamps from USPS. As they raise the price of postage, your stamps will go up in value, and then you can sell them for a profit! This is probably a terrible idea, but it makes me giggle. Now I'm imaging some sort of push on r/wallstreetbets to YOLO on stamps, posting insane strategies on how to predict when the price of postage will go up, by how much, and how liquid the market is for millions of stamps.
- powvans 6y agoMy wife is a lawyer and she buys a lot of stamps. Recently she stumbled onto some strange stamp firesale on Ebay and bought forever stamps at below face value. I could only guess that this was an unwinding of the trade you propose.
- ipsin 6y agoThat, or forgeries being laundered... [1] https://www.linns.com/news/us-stamps-postal-history/quality-of-modern-counterfeit-u.s.-stamps-keeps-improving https://www.linns.com/news/us-stamps-postal-history/quality-... For a cash-like instrument, stamps seem to have very little in the way of anti-counterfeiting security.
- toast0 6y agoStamps (forever or not) are often used for Ebay manufactured spend because they're easy to sell (clear value, lightweight and easy to ship). It goes like Ebay says spend $X or sell $X on ebay and they'll give you a rebate. (Or sometimes the rebate comes from a credit card or Bing). If the $X covers ebay fees and shipping, then buy stamps to reach the $X and then sell them when you get them. If the rebate it sufficient, you can sell the stamps for less than cost, because you're already ahead.
- currymj 6y agoBack in the roaring '20s Charles Ponzi came up with a way to theoretically make a profit trading postage stamps, and raised a lot of money from investors, although in fact he never actually bought the stamps, and instead invented the Ponzi scheme.
- ffggvv 6y agoBuy the swiss franc. Or TIPS. or a commodities etf. or emerging markets etf as EM does well when dollar is weak. (their loans are dollar denominated)
- microtherion 6y agoThe Swiss would appreciate if you did NOT buy Swiss francs as an inflation hedge. This kind of speculation hurts our export industry.
- ffggvv 6y agosorry :/ we just trust your government more than ours
- xur17 6y agoIt depends on how much downside risk you are okay with taking. If you want something relatively cash like, ibonds are an interesting option - their rate of return is updated to the latest inflation measurement every 6 months. If you are okay taking on some risk, a mix of stocks and bonds seems sensible to me.
- deanmoriarty 6y agoI totally buy ibonds, but their 10-15k limit a year is unfortunately a joke. I wish I could buy way more.
- alasdair_ 6y agoBuy TIPS instead? https://www.investopedia.com/terms/t/tips.asp https://www.investopedia.com/terms/t/tips.asp
- tootie 6y agoPaper towels never lose value and pretty pegged to inflation. But seriously, look at the past 20 years and your takeaway should be that USD is indestructible and that the Fed can do no wrong. They ran the printing press day and night for years and struggled to hit 2% inflation. "Full Faith and Credit of the US Government" is evidently the best inflation hedge in the world.
- sneak 6y agohttps://en.wikipedia.org/wiki/End-of-history_illusion https://en.wikipedia.org/wiki/End-of-history_illusion
- tootie 6y ago> In the long run, we're all dead If you want to know where to stash your money in 2021, you look at history for lessons. USD will be completely worthless one day just like the sun will eventually burn off the surface of the Earth. I'm thinking back to financial crisis days when there were endless cries of runaway inflation being around the corner and that the Fed couldn't handle a crisis of this magnitude. And I think that looking back they handled it extremely well. They took a nuclear bomb to the chin and stayed standing.
- RC_ITR 6y agoI'd love to see someone try to sell yellowed 20-year old paper towels (with branding from 3 generations ago) after thinking they were hedging inflation.
- ztjio 6y agoThis is not financial advice. This is just a reflection of knowledge that has kept all my long term investments stable or growing through every dip and shift in the last 25 years. - Stable index funds are the best long term hedge. (Date targeted mutual funds have largely been doing very well in the last 15+ years too.) - Then consider LONG TERM materials investments. - Then consider Treasury Inflation Protected Securities. - Then consider property, as in real estate. Actually personally I'd drop the materials at this point. It's easier to screw up materials investments and they're often in stable funds anyway. This is all long term, you'll note. I would argue there are no true short term hedges. There are bets against the market and that's often what you see in "hedge funds" that go relatively short term. But if you're in that space, well, you probably shouldn't even be having this discussion on Hacker News. I'm sure I'll take flack for that reinterpretation but it's important to be honest about these things, and many make money in this space by eschewing that honesty. But, your basic goal of keeping your money valuable long term is not a hard problem, it's literally a solved problem and it's what the S&P 500 & similar indexes and/or TIPS exist for. If you think you need to hedge against the fall of the US or at least the USD? I think you should be hedging outside the financial system entirely, go full prepper, because, that's where that fatalistic logic will take you ultimately anyway. Actually, with less snark, it is always reasonable to keep moderate term survival in mind. An actual major financial meltdown would likely be survivable with minor prepper-like approach to long term food and water stores, especially if you own property. So maybe move property up on your list if you are in a position to own it outright, and bury some water and long term preserves there as a bonus?
- ketamine__ 6y agoThe returns you can make in securities over ten to twenty years is much more impressive than bonds.
- xur17 6y agoKey word being "can". On average securities have a much better return than bonds, but they also have a much higher risk of a large drop in value.
- ketamine__ 6y agoOn an individual basis perhaps but not if you're in an S&P 500 ETF.
- xur17 6y agoGo lookup a graph of the sp500 from 2000 to 2010. There are no guarantees that it will always trend up.
- vkou 6y agoGo look at that same graph from 2007 to 2021. If you bought in at the top of the 2008 bubble, you'd have tripled your money by now. Unless you're planning on retiring in the next 10 years, buy stocks.
- tim333 6y agoThe S&P is unusually pricey at the moment though.
- vkou 6y agoIt's only unusually pricey if you expect to always live in a world of 3-4% interest rates. We're no longer living in that world, though. The thing is, you could say the same thing at nearly any point between 1999 and 2021, and be right, and it would still have been a good idea to invest into the S&P.