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We're not in normal economic times. I "retired" at 33 (still doing other things, but without steady cash paycheck). Lived cheaply, worked hard, saved up a ton

We're not in normal economic times. I "retired" at 33 (still doing other things, but without steady cash paycheck). Lived cheaply, worked hard, saved up a ton of money. I went back to work in 2020, right after interest rates were dropped to zero and the pandemic stimulus went out, because I figured that every single retiree, no matter how old, was about to get reamed by inflation. Have been right so far, and IMHO it's only going to get worse. Living cheaply works when the basic necessities of life are cheap. The basic necessities of life are about to get very expensive, if they haven't already.

robocat 5y ago
Can you give a broad outline of your investment strategy in a high inflation environment? I am older than you, but one issue that I need to contend with is being in a demographic that will contain a lot of other retirees, so I believe I need to financially be better off than other retirees of my age to have a reasonable lifestyle (and I am unsure how to avoid thundering crowd effects for my generation). Reasonable = comfortable (e.g. could choose to have a small fizzboat, but not a megayacht).
- nostrademons 5y ago
  For steady inflation that's not already priced into rates/prices/etc, the solution is pretty simple. Borrow a lot of money at low, fixed rates. Invest in hard assets like real estate. To the extent that you invest in equities, invest in businesses with a lot of pricing power and little competition. Their profits will tend to go up more than the rate of inflation, and then stock prices tend to track profits. Problem is that inflation is rarely steady. Typically you get stops and starts. Inflation will rise, and the Fed will try to contain it by raising rates. Then the raised rates create a recession, all asset prices fall, the Fed flinches and drops rates. Inflation takes off again. Repeat for a decade or more. In an environment like this, you can't lever up too heavily, and you need to actively manage. Otherwise you'll get reamed by the busts. Optimal strategy is to buy surviving high-growth stocks right as the recession gets to its peak, as everyone feels like everything's going bankrupt, and then hold them as rates drop and the economy recovers. Then sell right as the Fed signals it's going to get tough on inflation again. Optimal strategy is pretty hard to execute. Failing that, it's often best just to buy & hold profitable, low-competition businesses. The demographic time-bomb of everybody retiring at once and trying to cash out of the market at the same time is another issue. There's no real fix for this: living standards are going to have to drop, for retirees or workers or both (and more likely retirees). The way to profit from it is to look for companies that are successfully automating parts of elder care, and then invest hard in them.

robocat 5y ago

Can you give a broad outline of your investment strategy in a high inflation environment? I am older than you, but one issue that I need to contend with is being in a demographic that will contain a lot of other retirees, so I believe I need to financially be better off than other retirees of my age to have a reasonable lifestyle (and I am unsure how to avoid thundering crowd effects for my generation). Reasonable = comfortable (e.g. could choose to have a small fizzboat, but not a megayacht).

nostrademons 5y ago
For steady inflation that's not already priced into rates/prices/etc, the solution is pretty simple. Borrow a lot of money at low, fixed rates. Invest in hard assets like real estate. To the extent that you invest in equities, invest in businesses with a lot of pricing power and little competition. Their profits will tend to go up more than the rate of inflation, and then stock prices tend to track profits. Problem is that inflation is rarely steady. Typically you get stops and starts. Inflation will rise, and the Fed will try to contain it by raising rates. Then the raised rates create a recession, all asset prices fall, the Fed flinches and drops rates. Inflation takes off again. Repeat for a decade or more. In an environment like this, you can't lever up too heavily, and you need to actively manage. Otherwise you'll get reamed by the busts. Optimal strategy is to buy surviving high-growth stocks right as the recession gets to its peak, as everyone feels like everything's going bankrupt, and then hold them as rates drop and the economy recovers. Then sell right as the Fed signals it's going to get tough on inflation again. Optimal strategy is pretty hard to execute. Failing that, it's often best just to buy & hold profitable, low-competition businesses. The demographic time-bomb of everybody retiring at once and trying to cash out of the market at the same time is another issue. There's no real fix for this: living standards are going to have to drop, for retirees or workers or both (and more likely retirees). The way to profit from it is to look for companies that are successfully automating parts of elder care, and then invest hard in them.