9 ms·

Serious question: inflation seems to only be getting higher (is it 8%+ now?) the Fed's increasing of the interest rate is causing a stock market crash. So if on

by azth 4y ago

Serious question: inflation seems to only be getting higher (is it 8%+ now?) the Fed's increasing of the interest rate is causing a stock market crash. So if one puts their money into assets, those are decreasing in price due to the fed, and if someone is holding cash that's also going down in value due to inflation. What's the solution?

imgabe 4y ago
Monkey jpegs
okaram 4y ago
Yearly inflation seems to be going up mainly due to how it is calculated ... Monthly inflation seems to be going mostly sideways (although it has increased the last 3 months). There's not (yet) been a market crash ... If you look back a month or a year, it's been mostly sideways too. It may be the beginning of a horrible market crash ... But it may not ;). Trying to time the market, you're just as likely to lose as to win. Diversifying is always good; the stock market has usually provided the most growth long term. Unless you need the money soon, close your eyes and keep your money in the market.
01100011 4y ago
The solution is ask a real professional, not HN amateurs like me. If you want my crank opinion though, at this stage in the economic cycle you should be in commodities. Sure, you're late to the party and they're going to make you ill with their volatility, but generally that's where you want to be now. Other options are recession plays like consumer staples. Think about the things people will still have to buy or will downgrade to in a recession. I bought $BUD and $TAP because I think people will drink cheap beer. Cigarette companies are good if you have no conscience and can catch them on a downswing(they're already up). My $KHC bet I made 6 months ago is probably the best thing in my portfolio right now. You have to be prepared for days like last Friday when nearly every stock was down. People are fleeing to dollars, so actually having cash right now isn't a bad thing. Your cash already lost value. We may see a dollar squeeze as people flee to safety and the fed drains liquidity from the financial system before the dollar continues its downward slide(late this year?). Everything depends on the threat of war right now. Not enough people are talking about the supply disruptions happening. 20% of the world's container ships are currently in traffic jams thanks to Chinese COVID paranoia. Russia, a major commodity supplier, is cut out of the Western financial system. Fertilizer and energy are spiking. Recession may have peaked but it will settle into a steady 5+% rate unless the fed grinds the economy to a halt. War may already be happening behind the scenes. The FBI is now warning(https://www.ic3.gov/Media/News/2022/220420-2.pdf https://www.ic3.gov/Media/News/2022/220420-2.pdf) of attacks on our food infrastructure, possibly connected to the rash of fires occurring at food processing plants(stuxnet being fed back to us?). Indonesia just suspended palm oil exports. They make something like 60% of the global supply. Countries are becoming protectionist. We are reverting in some ways to a pre-globalist world. Sweden and Finland are likely joining NATO. The tensions with Russia aren't going away anytime soon. Even though Putin looks to be in poor health, the Russian aggression is not purely a product of Putin but baked into the national identity of Russia's elites. Maybe a good play, despite already taking off, is defense industry stocks(Lockheed, Raytheon, etc). The world is entering a very unstable period. One thing you should consider doing as well: buy things you'll need over the next year. They're only going to get harder to buy and they're going up in price. Like a certain brand of shampoo? Why not buy a year's worth. Stockpiling is horrible on a national level, but as an individual it will help you cope with some of the price increases while your dollars would otherwise be stagnating or decaying. Lets hope the bond market is currently wrong, because they seem to be pricing in many more hikes than the fed thinks will need to happen. There is a risk that inflation becomes unhinged and spirals for a while. The West isn't prepared for that sort of financial doom scenario.
_ink_ 4y ago
If you live in America and just want to protect your buying power against inflation: buy I-bonds. You cannot sell them for a year and can only buy 10k per year. But they pay interest roughly the same than inflation. For us plebs from the rest of the world without access to I-bonds I have no idea.
adam_arthur 4y ago
Common misconception is to avoid cash in an inflationary environment. When inflation hits hard, discount rate for assets increases commensurately which pushes down asset pricing. Better to hold cash up until the point that the discount rate has mostly priced it in, then buy assets
justincormack 4y ago
There isn't one, there is a market and prices are adjusting, the price of temporal work transfer.
flatiron 4y ago
Based on the market a lot of people believe “buy some real estate” is the solution. But that bubble IMHO is about to pop. Maybe look into interest protected bonds? https://www.treasurydirect.gov/indiv/products/prod_ibonds_glance.htm https://www.treasurydirect.gov/indiv/products/prod_ibonds_gl... Personally I have been just spending what I make assuming saving is moot right now (besides 401k and espp)
- tppiotrowski 4y ago
  I think rising interest rates should depress the value of housing. With a higher interest rate you can't afford as much principal so you start bidding on cheaper houses.
  - crate_barre 4y ago
    The monthly payment of 28%-38% of gross monthly pay is harder to get to with the rising interest rate and rising home prices. You’d be looking at over 50% of your net take home pay per month (yes, over half your months paycheck, especially in high cost of living areas). They are fucking pricing everyone out other than investors or existing home owners that can tap into home equity. And rent is nearing 1900 nationwide. How is that even reality? If people just started killing landlords and investors I personally wouldn’t give a fuck (I’m kidding, not advocating this, but that’s how bad actors these animals are).
    - bezospen15 4y ago
      Can't keep at this pace for much longer. We'll know more in 12 months, stay liquid for now
  - lijogdfljk 4y ago
    I had this debate last night. Where i'm undecided is if this works when a housing market is propped up by cash. Eg both houses and land purchases (something i'm trying to do) are quite a difficult market due to cash offers being consistently present. Ie a new family won't have 500k in cash and their loan offer isn't as good as a cash offer. It happened to me several times when i was buying my home ~6 years ago, 250k cash offers, 300k cash offers, etc. And ironically it just happened to me 2 weeks ago on a land offer. A 310k land offer (loan) beaten out by a higher value and pure cash offer. So my question is if prices will really dip that much when seemingly so much of the house and land market are propped up by cash rich buyers. Hypothetically they don't care about high interest rates right? Perhaps high interest rates will mean the cash rich people can offer less due to less competition, but if cash rich people are also competing against other cash rich people then.. i'm not so sure. Thoughts?
jeffbee 4y ago
Consensus opinion seems to be that peak annual inflation already is behind us and mostly it was spectacular because of low March 2021. If inflation increases in the remainder of 2022, all the economic forecasts, and the federal reserve policy, are totally wrong.
- 01100011 4y ago
  That should read "Publicly stated consensus at the federal reserve, who massively screwed up by misreading inflation in the first place, is that peak annual inflation is behind us." The bond market doesn't seem to believe it. The managing director of the IMF just publicly stated that the central banks screwed up and act like "8 year olds playing soccer" who don't anticipate the 2nd order effects of their actions. 20% of shipping is tied up in traffic jams. We're in a economic war with a major commodity producer. It is daft to believe inflation is peaking. Even if that assumption is right, we will end up with inflation well above the fed target rate, so instead of 8%(CP 'lie' bullshit inflation) we get 5% persistent inflation.
- HPsquared 4y ago
  Inflation continuing to increase doesn't necessarily mean the policy is wrong. You need to consider the counterfactual: how much would it have increased without these measures?
- bezospen15 4y ago
  Powell was placed by Trump to feed the rich. It worked and now middle class will suffer
PheonixPharts 4y ago
> Fed's increasing of the interest rate is causing a stock market crash. Citation needed. Rate hikes were announced mid-march and I don't think you can even find that info on this chart https://finance.yahoo.com/quote/%5EDJI/ https://finance.yahoo.com/quote/%5EDJI/ If we do see a crash soon I think it will likely be more related to major tech stocks failing to perform as expected. Of the original FAANG, F and N have both had days where there value dropped ~30% in a single day in the last six months, and that has nothing to do with interest rate hikes.
- jimbob45 4y ago
  Even if that were true, you necessarily have to hike the interest rate intermittently to ensure you have room to lower it when the crash inevitably happens.
- darth_avocado 4y ago
  Well fed increased rates in March but they announced it long ago and the market corrected accordingly. It is common knowledge by now. The market is expecting 7-8 25 point increases in 2022 which has been priced in the declines so far. Any deviation to that will move the markets further.
  - cudgy 4y ago
    How do you know this? My inclination is to think investors are underestimating the effects of inflation and overestimating the Feds ability to counter it without major rate hikes (like above 7-8% or higher). The Fed has created a major problem by keeping rates so low for so long. Who is going to buy the bonds they are going to have to sell in order to back off quantitative easing. Plus now there is the threat to the US dollar remaining the preferred currency with the Biden administration seizing almost a trillion dollars worth of Russian dollar denominated assets. Other countries are likely taking notice of this.
  - 01100011 4y ago
    What the bond market has priced in and what equities have priced in are two completely different scenarios. If the bond market is right, equities are about to get slaughtered. Remember, the fed folks can't insider trade like they used to, so they have no reason to prop up equities anymore. They made their money.
kobalsky 4y ago
Bumping because I'm really interested in this answer. For me the obvious answer is, if the fed actions means it's more expensive to borrow now, then lend your money. The question is how and where. Bonds? Which bonds? TIPS don't seem to have a rate that would protect me from inflation. Gold? There's enough volatility there to lose more than 2 years worth of inflation with a badly timed entry, and I if I have to time my entry I'm trading, and I'm not a trader so I don't like it. I know mentioning cryptos is sometimes taboo on HN, but if I lived in the US/EU I would convert a some portion of my savings into stablecoins and spread them out into some interest accounts to try to minimize counterparty risk. Their APY is running along inflation for the time being. At least until the dust settles and it's clear where to put your money.
- Raidion 4y ago
  Aren't stable coins pegged to USD subject to the same inflationary concerns as USD and counterparty risk? You're getting a few extra % return, but aren't the risk adjusted returns the same? I honestly have the same questions as you though, I feel like if I was 100% sure of big inflation coming, all I'd know I want to do is get out of cash, but I don't know where to put my money. Part of me says Walmart, Dollar stores, and other inelastic merchants, but idk. Physical gold seems ok, but you're right in that if you overpay, you're overpaying for an asset that doesn't return anything.
- JumpCrisscross 4y ago
  > TIPS don't seem to have a rate that would protect me from inflation The TIP yield is a real yield. It's indexed to CPI-U, same as Series I bonds. (TIPs adjust monthly; Series I bonds semiannually.) > would convert a some portion of my savings into stablecoins This is probably the worst choice one can make. It's accepting a 0% nominal yield against an unregulated counterparty. A Bank of America savings account is literally a better choice.
  - wallacoloo 4y ago
    > > would convert a some portion of my savings into stablecoins > This is probably the worst choice one can make. It's accepting a 0% nominal yield against an unregulated counterparty. A Bank of America savings account is literally a better choice. you clipped out half the sentence: > I would convert a some portion of my savings into stablecoins and spread them out into some interest accounts to try to minimize counterparty risk. interest accounts. i.e. non-0% nominal yields.
throw0101a 4y ago
Have a diversified portfolio. Rational Reminder went over the data in "The Ultimate Inflation Hedge": > Is it possible to hedge your investments against different levels of inflation? This is the question we ask in today's episode, as we run through a variety of different investment approaches and commodities. While the answer may not come as a huge surprise, it is definitely worth the walk-through and getting to grips with what the literature can tell us in each scenario. After rounding up some news and a few reviews relevant to our usual subject matter, we dive straight into this topic, tackling the performance of stocks and bonds, gold, international stocks, value stocks, and more! We also share some general thoughts and questions to ask during periods where inflation is high, before positing our view that there is no single successful hedge against inflation, but rather our usual position of an adjusted and diversified portfolio will serve you as well in this regard as in others. We finish off this episode with a few of our usual quick cards, and this week's disturbing bad advice! So tune in to hear all about what you should know about expected and unexpected inflation and a whole lot more! * https://rationalreminder.ca/podcast/150 https://rationalreminder.ca/podcast/150 Stocks generally bounce back, them going down isn't a big deal given the idea of 'buying low'.
- busterarm 4y ago
  Also invest where you know/have an edge. I've made judicious purchases in sealed Magic: The Gathering product. In just under 3 years, my initial 6-digit investment is up over 200%. Some purchases are wildly up and nothing so far has been a losing bet. Other areas in collectibles I am also doing really well, like statues, classic cars, etc. Obviously a limiting factor is storage space. I've lucked out due to some black swan type events but I can't see anywhere else where my investments are performing nearly as well.
  - MisterMower 4y ago
    I think this is the manifestation of the current inflationary environment. Anything fungible and easily transferable is gaining value because no one wants to hold dollars right now.
- coderaptor 4y ago
pdog 4y ago
If you have inflation, something is going up in dollar terms. The answer is "real" assets: physical assets that have an intrinsic worth due to their substance and properties. Real estate, infrastructure, and commodities are all examples.
sb057 4y ago
If the cause of inflation is the same amount of dollars bidding up a lesser quantity of goods, the only way to resolve the situation is to increase the number of goods or decrease demand for them.
- MisterMower 4y ago
  No, the correct way to do it is to reduce the size of the money supply, or at least slow its growth. Inflation is always and everywhere a monetary phenomenon.
  - sb057 4y ago
    All other factors being equal, that would be tantamount to reducing demand. Nominal prices would fall, yes (deflation), but a failure to increase supply would result in shortages. Shrinking the money supply would have quite a similar effect to price ceilings in this scenario.
keewee7 4y ago
>So if one puts their money into assets, those are decreasing in price due to the fed Unless you are a day trader (or r/WallStreetBets trader) this should not be a long-term concern. >Time in the market beats timing the market. I have my assets in an S&P500 ETF and some Danish funds and stocks. Owning a good home in a first-world country is also a good long-term investment.
dehrmann 4y ago
> the Fed's increasing of the interest rate is causing a stock market crash You think this is a crash?!
- 01100011 4y ago
  It will be. It isn't yet. Friday was a correction but it's nothing like what is coming. The Nasdaq isn't even below the lows set back in March. Yet.
_wldu 4y ago
Consider buying stock in companies that produce real products that everyone needs. Food, cleaning supplies, toilet paper, hygiene, etc. It's hard to go wrong doing that.
- chii 4y ago
  But everyone already knows of this fact - and so the price of those stocks would already reflect the value under an (expected) inflationary environment. The value would only grow _if_ the inflationary environment is worse than expectations, and people sacrifice even more discretionary spending to buy consumer staples. if the inflationary environment isn't as bad as expectations, then these companies would be out-performed by other, higher growth, discretionary goods companies. There's no such thing as a risk free investment.
- astura 4y ago
  These are called consumer staples. https://www.investopedia.com/terms/c/consumerstaples.asp https://www.investopedia.com/terms/c/consumerstaples.asp
dragonwriter 4y ago
> ...stock market crash. So if one puts their money into assets... “Assets” is much broader than, and other categories don't consistently follow, the stock market.
poof131 4y ago
If able, perhaps focus on your earning potential. We’ve had a forty-year run of asset price inflation relative to wage inflation. We may have hit the end of this period and will see a realignment with wages increasing at a faster pace than capital assets, similar to what happened in the 1970s. The Asset Economy is a somewhat dry but interesting book that presents a more academic take on the economic patterns of the last forty years.[1] The increase in unionization efforts, anti-trust, and the inability of the FED to manage inflation seem to point in this direction. Otherwise, monopolies still seem strong for now with pricing power. Areas the government will print money to fund also seem like a decent bet: defense, climate, …? And you can try to maintain purchasing power with gold or crypto or real estate (in non-bubble areas). But we may be entering some challenging times for those with assets. 1. https://www.wiley.com/en-us/The+Asset+Economy-p-9781509543458 https://www.wiley.com/en-us/The+Asset+Economy-p-978150954345...
naruvimama 4y ago
Inflation is high because of supply shortages and lower production, increasing rates would mean increasing the cost of setting up new supplies or production lines. Manipulating interest rates works when under otherwise normal condition the government wants to prevent overheating economy or to provide stimulus during a down cycle. It is not immediately clear if the rate increases is going to help increase production or stabilise supply chains, perhaps just the contrary.
- chii 4y ago
  > Manipulating interest rates works when under otherwise normal condition back in the oil crisis of the 70's, the inflation was high because oil embargo made everything that need oil (which was everything) more expensive. Couldn't you make the same argument back then, that increasing interest rates isn't going to end the embargo and lower inflation? And yet, the then Fed chair did increase interest rate to combat inflation (granted, the inflation back then was much worse than now). So perhaps this time, it's different - covid supply shocks playing out is not going to get resolved by interest increases. By increasing rates, the only result is to reduce demand, which is just another way of saying those who can't afford it will have to sacrifice, and lower their quality of life.
  - naruvimama 4y ago

by azth 4y ago

imgabe 4y ago

Monkey jpegs

okaram 4y ago

Yearly inflation seems to be going up mainly due to how it is calculated ... Monthly inflation seems to be going mostly sideways (although it has increased the last 3 months). There's not (yet) been a market crash ... If you look back a month or a year, it's been mostly sideways too. It may be the beginning of a horrible market crash ... But it may not ;). Trying to time the market, you're just as likely to lose as to win. Diversifying is always good; the stock market has usually provided the most growth long term. Unless you need the money soon, close your eyes and keep your money in the market.

01100011 4y ago

The solution is ask a real professional, not HN amateurs like me. If you want my crank opinion though, at this stage in the economic cycle you should be in commodities. Sure, you're late to the party and they're going to make you ill with their volatility, but generally that's where you want to be now. Other options are recession plays like consumer staples. Think about the things people will still have to buy or will downgrade to in a recession. I bought $BUD and $TAP because I think people will drink cheap beer. Cigarette companies are good if you have no conscience and can catch them on a downswing(they're already up). My $KHC bet I made 6 months ago is probably the best thing in my portfolio right now. You have to be prepared for days like last Friday when nearly every stock was down. People are fleeing to dollars, so actually having cash right now isn't a bad thing. Your cash already lost value. We may see a dollar squeeze as people flee to safety and the fed drains liquidity from the financial system before the dollar continues its downward slide(late this year?). Everything depends on the threat of war right now. Not enough people are talking about the supply disruptions happening. 20% of the world's container ships are currently in traffic jams thanks to Chinese COVID paranoia. Russia, a major commodity supplier, is cut out of the Western financial system. Fertilizer and energy are spiking. Recession may have peaked but it will settle into a steady 5+% rate unless the fed grinds the economy to a halt. War may already be happening behind the scenes. The FBI is now warning(https://www.ic3.gov/Media/News/2022/220420-2.pdf https://www.ic3.gov/Media/News/2022/220420-2.pdf) of attacks on our food infrastructure, possibly connected to the rash of fires occurring at food processing plants(stuxnet being fed back to us?). Indonesia just suspended palm oil exports. They make something like 60% of the global supply. Countries are becoming protectionist. We are reverting in some ways to a pre-globalist world. Sweden and Finland are likely joining NATO. The tensions with Russia aren't going away anytime soon. Even though Putin looks to be in poor health, the Russian aggression is not purely a product of Putin but baked into the national identity of Russia's elites. Maybe a good play, despite already taking off, is defense industry stocks(Lockheed, Raytheon, etc). The world is entering a very unstable period. One thing you should consider doing as well: buy things you'll need over the next year. They're only going to get harder to buy and they're going up in price. Like a certain brand of shampoo? Why not buy a year's worth. Stockpiling is horrible on a national level, but as an individual it will help you cope with some of the price increases while your dollars would otherwise be stagnating or decaying. Lets hope the bond market is currently wrong, because they seem to be pricing in many more hikes than the fed thinks will need to happen. There is a risk that inflation becomes unhinged and spirals for a while. The West isn't prepared for that sort of financial doom scenario.

_ink_ 4y ago

If you live in America and just want to protect your buying power against inflation: buy I-bonds. You cannot sell them for a year and can only buy 10k per year. But they pay interest roughly the same than inflation. For us plebs from the rest of the world without access to I-bonds I have no idea.

adam_arthur 4y ago

Common misconception is to avoid cash in an inflationary environment. When inflation hits hard, discount rate for assets increases commensurately which pushes down asset pricing. Better to hold cash up until the point that the discount rate has mostly priced it in, then buy assets

justincormack 4y ago

There isn't one, there is a market and prices are adjusting, the price of temporal work transfer.

flatiron 4y ago

Based on the market a lot of people believe “buy some real estate” is the solution. But that bubble IMHO is about to pop. Maybe look into interest protected bonds? https://www.treasurydirect.gov/indiv/products/prod_ibonds_glance.htm https://www.treasurydirect.gov/indiv/products/prod_ibonds_gl... Personally I have been just spending what I make assuming saving is moot right now (besides 401k and espp)

tppiotrowski 4y ago
I think rising interest rates should depress the value of housing. With a higher interest rate you can't afford as much principal so you start bidding on cheaper houses.
- crate_barre 4y ago
  The monthly payment of 28%-38% of gross monthly pay is harder to get to with the rising interest rate and rising home prices. You’d be looking at over 50% of your net take home pay per month (yes, over half your months paycheck, especially in high cost of living areas). They are fucking pricing everyone out other than investors or existing home owners that can tap into home equity. And rent is nearing 1900 nationwide. How is that even reality? If people just started killing landlords and investors I personally wouldn’t give a fuck (I’m kidding, not advocating this, but that’s how bad actors these animals are).
  - bezospen15 4y ago
    Can't keep at this pace for much longer. We'll know more in 12 months, stay liquid for now
- lijogdfljk 4y ago
  I had this debate last night. Where i'm undecided is if this works when a housing market is propped up by cash. Eg both houses and land purchases (something i'm trying to do) are quite a difficult market due to cash offers being consistently present. Ie a new family won't have 500k in cash and their loan offer isn't as good as a cash offer. It happened to me several times when i was buying my home ~6 years ago, 250k cash offers, 300k cash offers, etc. And ironically it just happened to me 2 weeks ago on a land offer. A 310k land offer (loan) beaten out by a higher value and pure cash offer. So my question is if prices will really dip that much when seemingly so much of the house and land market are propped up by cash rich buyers. Hypothetically they don't care about high interest rates right? Perhaps high interest rates will mean the cash rich people can offer less due to less competition, but if cash rich people are also competing against other cash rich people then.. i'm not so sure. Thoughts?

jeffbee 4y ago

Consensus opinion seems to be that peak annual inflation already is behind us and mostly it was spectacular because of low March 2021. If inflation increases in the remainder of 2022, all the economic forecasts, and the federal reserve policy, are totally wrong.

01100011 4y ago
That should read "Publicly stated consensus at the federal reserve, who massively screwed up by misreading inflation in the first place, is that peak annual inflation is behind us." The bond market doesn't seem to believe it. The managing director of the IMF just publicly stated that the central banks screwed up and act like "8 year olds playing soccer" who don't anticipate the 2nd order effects of their actions. 20% of shipping is tied up in traffic jams. We're in a economic war with a major commodity producer. It is daft to believe inflation is peaking. Even if that assumption is right, we will end up with inflation well above the fed target rate, so instead of 8%(CP 'lie' bullshit inflation) we get 5% persistent inflation.
HPsquared 4y ago
Inflation continuing to increase doesn't necessarily mean the policy is wrong. You need to consider the counterfactual: how much would it have increased without these measures?
bezospen15 4y ago
Powell was placed by Trump to feed the rich. It worked and now middle class will suffer

PheonixPharts 4y ago

> Fed's increasing of the interest rate is causing a stock market crash. Citation needed. Rate hikes were announced mid-march and I don't think you can even find that info on this chart https://finance.yahoo.com/quote/%5EDJI/ https://finance.yahoo.com/quote/%5EDJI/ If we do see a crash soon I think it will likely be more related to major tech stocks failing to perform as expected. Of the original FAANG, F and N have both had days where there value dropped ~30% in a single day in the last six months, and that has nothing to do with interest rate hikes.

jimbob45 4y ago
Even if that were true, you necessarily have to hike the interest rate intermittently to ensure you have room to lower it when the crash inevitably happens.
darth_avocado 4y ago
Well fed increased rates in March but they announced it long ago and the market corrected accordingly. It is common knowledge by now. The market is expecting 7-8 25 point increases in 2022 which has been priced in the declines so far. Any deviation to that will move the markets further.
- cudgy 4y ago
  How do you know this? My inclination is to think investors are underestimating the effects of inflation and overestimating the Feds ability to counter it without major rate hikes (like above 7-8% or higher). The Fed has created a major problem by keeping rates so low for so long. Who is going to buy the bonds they are going to have to sell in order to back off quantitative easing. Plus now there is the threat to the US dollar remaining the preferred currency with the Biden administration seizing almost a trillion dollars worth of Russian dollar denominated assets. Other countries are likely taking notice of this.
- 01100011 4y ago
  What the bond market has priced in and what equities have priced in are two completely different scenarios. If the bond market is right, equities are about to get slaughtered. Remember, the fed folks can't insider trade like they used to, so they have no reason to prop up equities anymore. They made their money.

kobalsky 4y ago

Bumping because I'm really interested in this answer. For me the obvious answer is, if the fed actions means it's more expensive to borrow now, then lend your money. The question is how and where. Bonds? Which bonds? TIPS don't seem to have a rate that would protect me from inflation. Gold? There's enough volatility there to lose more than 2 years worth of inflation with a badly timed entry, and I if I have to time my entry I'm trading, and I'm not a trader so I don't like it. I know mentioning cryptos is sometimes taboo on HN, but if I lived in the US/EU I would convert a some portion of my savings into stablecoins and spread them out into some interest accounts to try to minimize counterparty risk. Their APY is running along inflation for the time being. At least until the dust settles and it's clear where to put your money.

Raidion 4y ago
Aren't stable coins pegged to USD subject to the same inflationary concerns as USD and counterparty risk? You're getting a few extra % return, but aren't the risk adjusted returns the same? I honestly have the same questions as you though, I feel like if I was 100% sure of big inflation coming, all I'd know I want to do is get out of cash, but I don't know where to put my money. Part of me says Walmart, Dollar stores, and other inelastic merchants, but idk. Physical gold seems ok, but you're right in that if you overpay, you're overpaying for an asset that doesn't return anything.
JumpCrisscross 4y ago
> TIPS don't seem to have a rate that would protect me from inflation The TIP yield is a real yield. It's indexed to CPI-U, same as Series I bonds. (TIPs adjust monthly; Series I bonds semiannually.) > would convert a some portion of my savings into stablecoins This is probably the worst choice one can make. It's accepting a 0% nominal yield against an unregulated counterparty. A Bank of America savings account is literally a better choice.
- wallacoloo 4y ago
  > > would convert a some portion of my savings into stablecoins > This is probably the worst choice one can make. It's accepting a 0% nominal yield against an unregulated counterparty. A Bank of America savings account is literally a better choice. you clipped out half the sentence: > I would convert a some portion of my savings into stablecoins and spread them out into some interest accounts to try to minimize counterparty risk. interest accounts. i.e. non-0% nominal yields.

throw0101a 4y ago

Have a diversified portfolio. Rational Reminder went over the data in "The Ultimate Inflation Hedge": > Is it possible to hedge your investments against different levels of inflation? This is the question we ask in today's episode, as we run through a variety of different investment approaches and commodities. While the answer may not come as a huge surprise, it is definitely worth the walk-through and getting to grips with what the literature can tell us in each scenario. After rounding up some news and a few reviews relevant to our usual subject matter, we dive straight into this topic, tackling the performance of stocks and bonds, gold, international stocks, value stocks, and more! We also share some general thoughts and questions to ask during periods where inflation is high, before positing our view that there is no single successful hedge against inflation, but rather our usual position of an adjusted and diversified portfolio will serve you as well in this regard as in others. We finish off this episode with a few of our usual quick cards, and this week's disturbing bad advice! So tune in to hear all about what you should know about expected and unexpected inflation and a whole lot more! * https://rationalreminder.ca/podcast/150 https://rationalreminder.ca/podcast/150 Stocks generally bounce back, them going down isn't a big deal given the idea of 'buying low'.

busterarm 4y ago
Also invest where you know/have an edge. I've made judicious purchases in sealed Magic: The Gathering product. In just under 3 years, my initial 6-digit investment is up over 200%. Some purchases are wildly up and nothing so far has been a losing bet. Other areas in collectibles I am also doing really well, like statues, classic cars, etc. Obviously a limiting factor is storage space. I've lucked out due to some black swan type events but I can't see anywhere else where my investments are performing nearly as well.
- MisterMower 4y ago
  I think this is the manifestation of the current inflationary environment. Anything fungible and easily transferable is gaining value because no one wants to hold dollars right now.
coderaptor 4y ago

pdog 4y ago

If you have inflation, something is going up in dollar terms. The answer is "real" assets: physical assets that have an intrinsic worth due to their substance and properties. Real estate, infrastructure, and commodities are all examples.

sb057 4y ago

If the cause of inflation is the same amount of dollars bidding up a lesser quantity of goods, the only way to resolve the situation is to increase the number of goods or decrease demand for them.

MisterMower 4y ago
No, the correct way to do it is to reduce the size of the money supply, or at least slow its growth. Inflation is always and everywhere a monetary phenomenon.
- sb057 4y ago
  All other factors being equal, that would be tantamount to reducing demand. Nominal prices would fall, yes (deflation), but a failure to increase supply would result in shortages. Shrinking the money supply would have quite a similar effect to price ceilings in this scenario.

keewee7 4y ago

>So if one puts their money into assets, those are decreasing in price due to the fed Unless you are a day trader (or r/WallStreetBets trader) this should not be a long-term concern. >Time in the market beats timing the market. I have my assets in an S&P500 ETF and some Danish funds and stocks. Owning a good home in a first-world country is also a good long-term investment.

dehrmann 4y ago

> the Fed's increasing of the interest rate is causing a stock market crash You think this is a crash?!

01100011 4y ago
It will be. It isn't yet. Friday was a correction but it's nothing like what is coming. The Nasdaq isn't even below the lows set back in March. Yet.

_wldu 4y ago

Consider buying stock in companies that produce real products that everyone needs. Food, cleaning supplies, toilet paper, hygiene, etc. It's hard to go wrong doing that.

chii 4y ago
But everyone already knows of this fact - and so the price of those stocks would already reflect the value under an (expected) inflationary environment. The value would only grow _if_ the inflationary environment is worse than expectations, and people sacrifice even more discretionary spending to buy consumer staples. if the inflationary environment isn't as bad as expectations, then these companies would be out-performed by other, higher growth, discretionary goods companies. There's no such thing as a risk free investment.
astura 4y ago
These are called consumer staples. https://www.investopedia.com/terms/c/consumerstaples.asp https://www.investopedia.com/terms/c/consumerstaples.asp

dragonwriter 4y ago

> ...stock market crash. So if one puts their money into assets... “Assets” is much broader than, and other categories don't consistently follow, the stock market.

poof131 4y ago

If able, perhaps focus on your earning potential. We’ve had a forty-year run of asset price inflation relative to wage inflation. We may have hit the end of this period and will see a realignment with wages increasing at a faster pace than capital assets, similar to what happened in the 1970s. The Asset Economy is a somewhat dry but interesting book that presents a more academic take on the economic patterns of the last forty years.[1] The increase in unionization efforts, anti-trust, and the inability of the FED to manage inflation seem to point in this direction. Otherwise, monopolies still seem strong for now with pricing power. Areas the government will print money to fund also seem like a decent bet: defense, climate, …? And you can try to maintain purchasing power with gold or crypto or real estate (in non-bubble areas). But we may be entering some challenging times for those with assets. 1. https://www.wiley.com/en-us/The+Asset+Economy-p-9781509543458 https://www.wiley.com/en-us/The+Asset+Economy-p-978150954345...

naruvimama 4y ago

Inflation is high because of supply shortages and lower production, increasing rates would mean increasing the cost of setting up new supplies or production lines. Manipulating interest rates works when under otherwise normal condition the government wants to prevent overheating economy or to provide stimulus during a down cycle. It is not immediately clear if the rate increases is going to help increase production or stabilise supply chains, perhaps just the contrary.

chii 4y ago
> Manipulating interest rates works when under otherwise normal condition back in the oil crisis of the 70's, the inflation was high because oil embargo made everything that need oil (which was everything) more expensive. Couldn't you make the same argument back then, that increasing interest rates isn't going to end the embargo and lower inflation? And yet, the then Fed chair did increase interest rate to combat inflation (granted, the inflation back then was much worse than now). So perhaps this time, it's different - covid supply shocks playing out is not going to get resolved by interest increases. By increasing rates, the only result is to reduce demand, which is just another way of saying those who can't afford it will have to sacrifice, and lower their quality of life.
- naruvimama 4y ago