Inflation concerns

[TUK020]

FT article:
Asset managers rush to shore up portfolios against inflation

https://www.ft.com/content/afc414f9-c6a ... 6d98973a09

What are folks doing to protect against potential inflation?

[dealtn]

What are folks doing to protect against potential inflation?

Nothing. I view it as noise, and am likely to benefit as much as be negatively affected by it I would imagine.

[Arborbridge]

What are folks doing to protect against potential inflation?

Nothing. I view it as noise, and am likely to benefit as much as be negatively affected by it I would imagine.

Invest in equities. In general, the price of products will increase with inflation and so will dividends. Naturally, it isn't exact - there will be a lack of sychronisation and serious inflation will burn off everything.

[UncleEbenezer]

Buy real assets, of course. Assets that can't just be printed.

Trouble is, of course, if you're buying with pounds, their price is already high. 'Cos the devaluation of the currency is nothing new. Same considerations - though different extents and timescales - apply to dollar, euro, etc.

I expect that's why bitcoin has shot up so far. The end may be in sight for fiat currencies. In a sense since the demise of the Gold Standard, and it's been turbocharged since QE.

[Aminatidi]

Buy real assets, of course. Assets that can't just be printed.

Trouble is, of course, if you're buying with pounds, their price is already high. 'Cos the devaluation of the currency is nothing new. Same considerations - though different extents and timescales - apply to dollar, euro, etc.

I expect that's why bitcoin has shot up so far. The end may be in sight for fiat currencies. In a sense since the demise of the Gold Standard, and it's been turbocharged since QE.

I hold Personal Assets and Ruffer and Capital Gearing all three of which have a fair bit in various inflation linked bonds especially US TIPS.

Interested on the view of those especially as the pound strengthens.

[airbus330]

https://www.pehalnews.in/asset-managers ... on/565958/

if you don't have access through the ft paywall

[Parky]

I hold Personal Assets and Ruffer and Capital Gearing all three of which have a fair bit in various inflation linked bonds especially US TIPS.

Interested on the view of those especially as the pound strengthens.

I also hold these three Trusts. I assumed that index-linked government bonds would be a safe hedge against inflation, which indeed they are, but looking into it, the snag is that the real yields are apparently negative, so I'm a bit mystified how they can "preserve wealth", which is what those three Investment Trusts are supposed to do. More like a guaranteed slow draining away of wealth it seems to me, albeit perhaps a steadying influence on the volatility of the equities and other investments they hold.
Maybe someone with a better understanding than I have of these bonds, and the history of these Trusts dealings in them can explain how they justify holding them?

[Aminatidi]

I hold Personal Assets and Ruffer and Capital Gearing all three of which have a fair bit in various inflation linked bonds especially US TIPS.

Interested on the view of those especially as the pound strengthens.

I also hold these three Trusts. I assumed that index-linked government bonds would be a safe hedge against inflation, which indeed they are, but looking into it, the snag is that the real yields are apparently negative, so I'm a bit mystified how they can "preserve wealth", which is what those three Investment Trusts are supposed to do. More like a guaranteed slow draining away of wealth it seems to me, albeit perhaps a steadying influence on the volatility of the equities and other investments they hold.
Maybe someone with a better understanding than I have of these bonds, and the history of these Trusts dealings in them can explain how they justify holding them?

I assume the equities and other assets act (or should) as a counterbalance?

So yes today you (we!) may be losing money on holding TIPS but are hopefully making it on the equities and other risk-on holdings.

If the environment changes (similar to last year?) the equities may take a beating but hopefully once liquidity type kinks are ironed out the other assets do their thing?

At least I think that's the theory..

[Parky]

Interesting article on the effect of inflation on different asset classes here -

https://moneyweek.com/economy/inflation ... newsletter

[richfool]

An IC article on PNL, CGT, RICA and RIT here. Some interesting facts and figures, but no real conclusions:

https://www.investorschronicle.co.uk/ne ... elling-us/

[Wuffle]

Not the answer that anybody is looking for but I am planning to stay at work.
The investing equivalent of equities I suppose.
That is kind of the point of the low returns - demographics and wealth distribution. It is the workers turn to 'catch a break' as I think the Americans call it.

W.

[dealtn]

Interesting article on the effect of inflation on different asset classes here -

https://moneyweek.com/economy/inflation ... newsletter

Why go to a journalist reporting on a report when you can go to the report itself?

The original is here

https://www.schroders.com/en/uk/private ... -consumer/

It's in the main focussed on the US, but some might find it interesting.

[1nvest]

Interesting article on the effect of inflation on different asset classes here -

https://moneyweek.com/economy/inflation ... newsletter

Thanks. From that article ...

Now, clearly the paper only goes back to 1973 .... Also, it’s hard to measure gold properly before this point because it was pegged to a specific US dollar value ($35 an ounce).

Hmm! It's not so 'hard' - as when gold and money were convertible at a fixed/pegged rate the obvious answer was to hold cash, deposited earning interest, such that could be swapped into gold at a fixed rate at any time.

If $35 was deposited and earned 5% for a year, then at the year end that could be swapped back into gold and you'd own 5% more gold than a year earlier.

So pre-1970's use cash (Treasury Bill) yields as the 'value' of gold rather than the constant (pegged/static) $35/ounce figure.

[Bubblesofearth]

Hmm! It's not so 'hard' - as when gold and money were convertible at a fixed/pegged rate the obvious answer was to hold cash, deposited earning interest, such that could be swapped into gold at a fixed rate at any time.

If $35 was deposited and earned 5% for a year, then at the year end that could be swapped back into gold and you'd own 5% more gold than a year earlier.

So pre-1970's use cash (Treasury Bill) yields as the 'value' of gold rather than the constant (pegged/static) $35/ounce figure.

If you had thought that in the early 1930's then you would have been in for a rude awakening by 1935 after gold had jumped from its long-run at $20 to $35.

BoE

[TUK020]

The original is here

https://www.schroders.com/en/uk/private ... -consumer/

It's in the main focussed on the US, but some might find it interesting.

It would seem to imply that one should skew one's portfolio towards low PE stocks............

[stevensfo]

Interesting article on the effect of inflation on different asset classes here -

https://moneyweek.com/economy/inflation ... newsletter

Thanks. From that article ...

Now, clearly the paper only goes back to 1973 .... Also, it’s hard to measure gold properly before this point because it was pegged to a specific US dollar value ($35 an ounce).

Hmm! It's not so 'hard' - as when gold and money were convertible at a fixed/pegged rate the obvious answer was to hold cash, deposited earning interest, such that could be swapped into gold at a fixed rate at any time.

If $35 was deposited and earned 5% for a year, then at the year end that could be swapped back into gold and you'd own 5% more gold than a year earlier.

So pre-1970's use cash (Treasury Bill) yields as the 'value' of gold rather than the constant (pegged/static) $35/ounce figure.

Please don't get me wrong, and this is no criticism of your post, but I feel that times have moved on. The power of people and countries these days are governed by what they can offer, whether safety of deposits, purchasing power, military power, their economy, stability, strength of industry, talents, education, skills, contacts, administration, business history, ability to change direction fast, their useable resources such as metals and other commodities needed in construction, energy, even non-tangible qualities such as respect and history.

Today, I can't see gold as any different from a 100 euro note. Both depend on someone accepting it and knowing that it can be used. As time moves on, why on earth should anyone regard gold as worth something? It just needs a few countries to laugh and ask what they can do with this metal apart from make jewellery with it. I know this is all hypothetical, but it made me lower my allocation to gold considerably.

Being a coin collector many years ago, I love gold and silver coins, but I never understood how gold could possibly be considered with so much respect. Once the Emperor's new clothes has been revealed for what they are, there may be a danger that gold becomes just another metal.

Steve

PS with the greatest respect, can replies not include references to suits of armour, the Romans or anything more than 100 years old?

[scrumpyjack]

I know you said not to mention anything more than 100 years old, but gold has been very highly valued by humans for tens of thousands of years and that attitude is deeply embedded in the psyche in many areas of the world, eg India. Beautiful objects can be made from it and it is 'tactile'. There are things it can do better than any other metal (eg electrical contacts). Gordon Brown felt it's time was over and sold most of gold reserves at a fraction of what they would be worth now.

Anything is only worth what others think it is worth but I suspect gold will still be highly valued centuries after Bitcoin or GBP are but distant memories.

[stevensfo]

I know you said not to mention anything more than 100 years old, but gold has been very highly valued by humans for tens of thousands of years and that attitude is deeply embedded in the psyche in many areas of the world, eg India. Beautiful objects can be made from it and it is 'tactile'. There are things it can do better than any other metal (eg electrical contacts). Gordon Brown felt it's time was over and sold most of gold reserves at a fraction of what they would be worth now.

Anything is only worth what others think it is worth but I suspect gold will still be highly valued centuries after Bitcoin or GBP are but distant memories.

I cannot disagree with you, and it makes it even more irritating. As a scientist, for me, the greatest use of gold is in electrical circuits designed to last for eternity, such as long distance probes to other systems. It's a very inert metal and will not react with other elements.

But anything else, apart from jewellery is just, well, silly. Yes, it can look gorgeous and beautiful. But to actually affect the economics of a country is just plain loony! As Bill Oddie would say.

Steve

PS I haven't a clue what Bitcoin really is, so can't comment. But GBP will be based on the power that the country has, its economy, ability to honour agreements etc. Personally, I prefer euros, but have some pensions in UK, so I have to take an interest.

Steve

[1nvest]

Hmm! It's not so 'hard' - as when gold and money were convertible at a fixed/pegged rate the obvious answer was to hold cash, deposited earning interest, such that could be swapped into gold at a fixed rate at any time.

If $35 was deposited and earned 5% for a year, then at the year end that could be swapped back into gold and you'd own 5% more gold than a year earlier.

So pre-1970's use cash (Treasury Bill) yields as the 'value' of gold rather than the constant (pegged/static) $35/ounce figure.

If you had thought that in the early 1930's then you would have been in for a rude awakening by 1935 after gold had jumped from its long-run at $20 to $35.

BoE

In the US holding investment grade gold was banned, bought up by the state IIRC at around $24/ounce in the years leading up to re-pegging gold to the higher $35/ounce price. Early 1930's was also seeing significant deflation, of the order -10%/year for 1930/31/32.

[1nvest]

I feel that times have moved on. The power of people and countries these days are governed by what they can offer, whether safety of deposits, purchasing power, military power, their economy, stability, strength of industry, talents, education, skills, contacts, administration, business history, ability to change direction fast, their useable resources such as metals and other commodities needed in construction, energy, even non-tangible qualities such as respect and history.

Today, I can't see gold as any different from a 100 euro note. Both depend on someone accepting it and knowing that it can be used. As time moves on, why on earth should anyone regard gold as worth something? It just needs a few countries to laugh and ask what they can do with this metal apart from make jewellery with it. I know this is all hypothetical, but it made me lower my allocation to gold considerably.

Tangible and finite.

Asia, in particular India, still highly favour gold over domestic currency - because of events that have historically occurred with such currencies.

The Roman aureus gold coin once accepted as a currency still has value as gold today, even if the currency is no longer recognised. Enduring.

When the UK was the primary reserve currency investors received a real return for lending to the state, since the US$ has taken over that role increasingly lending to the state now costs investors. Faith in that could turn. Fiat currencies backed by nothing tangible is for many the questionable faith. Billions around the world dislike the 300 million US being able to simply print/spend as many dollars as they so chooses (export inflation). The US did pledge not to abuse that position when ending the gold standard, a broken promise that sooner or later could bite back. More a case IMO that some countries might laugh and no longer accept the infinite intangible US$ as the primary reserve currency in favour of something more tangible and finite. Similarly in India getting the 1.4 billion population to swap gold over to currency is most unlikely to occur. Gold has a long history of being a currency that has outlived other currencies and more likely will continue to be considered as such.