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Michael

Shares As A Hedge Against Inflation?

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it's plainly obvious the hidden agenda of the B of E is to inflate away the huge government, consumer and mortgage debt ........

and their mandate isnt just to keep inflation under 2% but also to maintain economic stability.......which could of course conflict with the inflation target....

giving them an excuse to let inflation rip.......

At the end of the 2nd World War government debt reached 250% of GDP but this had fallen to 100% within 15 years with almost all of the fall due to inflation and the bond markets in the 1950s never demanded high yields despite 6 or 7% average inflation through this period....

Eroding government debt through inflation as well as the huge consumer and motgage debt we've taken on would suit the B of E and government big time.....

Can i protect my savings by investing in shares?.....

My logic is simple ...If wages and prices and everything else double over the next 10 to 15 years through general inflation then surely so will company profits which directly affect share prices

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Problem is when it goes hyper everybody dumps their cash for hard tangible assets like beans gold and guns. Therefore people will simply cash out and change money/shares for beans gold and guns.

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it's plainly obvious the hidden agenda of the B of E is to inflate away the huge government, consumer and mortgage debt ........

and their mandate isnt just to keep inflation under 2% but also to maintain economic stability.......which could of course conflict with the inflation target....

giving them an excuse to let inflation rip.......

At the end of the 2nd World War government debt reached 250% of GDP but this had fallen to 100% within 15 years with almost all of the fall due to inflation and the bond markets in the 1950s never demanded high yields despite 6 or 7% average inflation through this period....

Eroding government debt through inflation as well as the huge consumer and motgage debt we've taken on would suit the B of E and government big time.....

Can i protect my savings by investing in shares?.....

My logic is simple ...If wages and prices and everything else double over the next 10 to 15 years through general inflation then surely so will company profits which directly affect share prices

Well during the extended inflationary environment in the US from 1966 to 1982 stocks fell in real terms over 60%. So the glib answer is no. However, shares were quite expensive in 1966 and the FTSE and many other markets outside the US currently are not.

I suppose you've heard that gold is a good hedge against unexpected levels of inflation?

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it's plainly obvious the hidden agenda of the B of E is to inflate away the huge government, consumer and mortgage debt ........

and their mandate isnt just to keep inflation under 2% but also to maintain economic stability.......which could of course conflict with the inflation target....

giving them an excuse to let inflation rip.......

At the end of the 2nd World War government debt reached 250% of GDP but this had fallen to 100% within 15 years with almost all of the fall due to inflation and the bond markets in the 1950s never demanded high yields despite 6 or 7% average inflation through this period....

Eroding government debt through inflation as well as the huge consumer and motgage debt we've taken on would suit the B of E and government big time.....

Can i protect my savings by investing in shares?.....

My logic is simple ...If wages and prices and everything else double over the next 10 to 15 years through general inflation then surely so will company profits which directly affect share prices

it is not that straightforward as ever, the 50s were actually probably the strongest period of real after inflation economic growth last century, things are very different now, yes the govt has massive debts but so does the consumer unlike the 50s or 70s so there is not much to create real economic growth via spending.

Ultimately inflation or not, if interest rates are forced up the stock market will tank, you also need to consider high inflation without interest rates will likely result in capital flight from the uk again tanking the market. The one time that it might be worth buying shares are if capital controls are introduced, in that case there really is nowhere else for the money trapped in the uk to go so it becomes the best of a bad bunch despite the fact youd be bidding up mostly worthless companies, its not a problem if everyone else is doing the same.

Personally i wouldnt touch equities with a bargepole for the next few years other than to trade, in fact id rather buy a house if forced to choose but the possibilities of what actions will be taken over the coming years are endless

Edited by Tamara De Lempicka

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it's plainly obvious the hidden agenda of the B of E is to inflate away the huge government, consumer and mortgage debt ........

and their mandate isnt just to keep inflation under 2% but also to maintain economic stability.......which could of course conflict with the inflation target....

giving them an excuse to let inflation rip.......

At the end of the 2nd World War government debt reached 250% of GDP but this had fallen to 100% within 15 years with almost all of the fall due to inflation and the bond markets in the 1950s never demanded high yields despite 6 or 7% average inflation through this period....

Eroding government debt through inflation as well as the huge consumer and motgage debt we've taken on would suit the B of E and government big time.....

Can i protect my savings by investing in shares?.....

My logic is simple ...If wages and prices and everything else double over the next 10 to 15 years through general inflation then surely so will company profits which directly affect share prices

Personally I don't expect broad stock market index (sp500, Ftse) to beat inflation over 20 years, however, selected quality companies will.

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Personally I don't expect broad stock market index (sp500, Ftse) to beat inflation over 20 years, however, selected quality companies will.

Wow that's a harsh prediction and will likely hasten the demise of the pension industry.

Sounds like you are familiar with Jeremy Grantham's forecasts, but only half believe them. I think his latest prediction for medium term returns, I think 7 years, is for ex-US stocks in developed markets to return over 4% real. With a dividend yield about that in many markets it seems a fair prediction.

The US market, I agree, will struggle.

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thats interesting, im just the opposite.

stock market seems the only place left to make a couple of quid , some of mine are up 7% last two weeks.

did houses do that?

i might be wrong but i dont think the poster was taking a two week view (or 2 month or two year) somehow

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Although I have absolutely nothing to base this belief on other than 'gut' instinct

I feel that the FTSE is going to crash once again in the near future

I just don't feel that a fall from 6000 to 5300 reflects the real state of our economy

A realistic level would be around say 4500

Any other predictions?

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ok i didnt see that but i will still take a bet on stocks over houses in the next 2 years.

well i guess thats what makes a market, differing opinions, like i say id rather have neither but if forced over that time period to choose id go for a house because i think it would fall less. Personally i think by far the best investment that will outperform absolutely everything over that timeframe is the USD but im somewhat lonely in that opinion

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well, no i agree with you same thoughts myself,but are you gonna act on your hunch?

ask yourself this. people will still need boilers, bricks,chickens and eggs yes?

so my thought, invest in companies that make stuff, invest in jobs, dont speculate.

Why not buy gold then? people will always want gold - how could you possibly lose?

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well, no i agree with you same thoughts myself,but are you gonna act on your hunch?

ask yourself this. people will still need boilers, bricks,chickens and eggs yes?

so my thought, invest in companies that make stuff, invest in jobs, dont speculate.

ive been acting on my hunches for the last 13 years so i cant really stop now, i dont want to be a speculator, id much rather be an investor in 1980, just slap my money in the market and wait for inflation to do its job, unfortunately this period in time is forcing me into speculation, im not even interested in progress over the next5t five years, standing still would make me more than happy. The trouble i have investing at this level is even the good real economy stocks that survive have still been infected by 30 years of credit and leverage inflation

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thats interesting, im just the opposite.

stock market seems the only place left to make a couple of quid , some of mine are up 7% last two weeks.

did houses do that?

lol... most short term view of the market ever!

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but i have 75% of my wealth in UK equities.........

where else can i put it?

Well I suppose you are slightly better off than those that put all their money in shares of the company they work for. Or in their house.

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thats interesting, im just the opposite.

stock market seems the only place left to make a couple of quid , some of mine are up 7% last two weeks.

did houses do that?

Your average market gyrations should wipe this out in the next two weeks. Not to mention 45 seconds in flash crash mode.

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ive been acting on my hunches for the last 13 years so i cant really stop now, i dont want to be a speculator, id much rather be an investor in 1980, just slap my money in the market and wait for inflation to do its job, unfortunately this period in time is forcing me into speculation

Do you find that it6 has to be done as a full time job?

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Surely buying shares now , even as a hedge , makes no sense whatsoever.

There is maybe another 5-10% on the upside but there is still that huge -40%-50% on the downside.

I won't be buying another share until we have taken out 4800 then 4500 then 4100. I might start drip feeding back in after we are in the 3000's. Even if it doesn't crash that hard i'm quite happy sitting in cash.

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OP, why not put 25% of your savings into an ETF?

If you would like to learn more, I'd recommend The Intelligent Investor by Ben Graham. It covers concepts such as inflation and investing vs speculating, which have been poorly understood in this thread.

As for "buying things that people need", that kind of misses the point. The value of an investment is a direct function of the price paid. If you pay too much for the stock you cannot expect make much in the future, regardless of how much people need it. Pricing stocks correctly and thereby gaining value requires an understanding of the business and finances of a company.

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Surely buying shares now , even as a hedge , makes no sense whatsoever.

There is maybe another 5-10% on the upside but there is still that huge -40%-50% on the downside.

I won't be buying another share until we have taken out 4800 then 4500 then 4100. I might start drip feeding back in after we are in the 3000's. Even if it doesn't crash that hard i'm quite happy sitting in cash.

I think a better plan would be to do the opposite of what you suggest.

Start drip feeding now and if the FTSE 100 hits 3000s go all in.

I'm not sure if I'm a stocks bull or bear. I'm not fully bull yet because I still half my savings in cash.

However, I believe there are no true bears out there anymore. All the bears are just desperately hoping for another market crash so they can buy in as they are grumpy about missing the bottom. This is why the market probably won't crash.... there are too many wanabe buyers out there still.

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I think a better plan would be to do the opposite of what you suggest.

Start drip feeding now and if the FTSE 100 hits 3000s go all in.

I'm not sure if I'm a stocks bull or bear. I'm not fully bull yet because I still half my savings in cash.

However, I believe there are no true bears out there anymore. All the bears are just desperately hoping for another market crash so they can buy in as they are grumpy about missing the bottom. This is why the market probably won't crash.... there are too many wanabe buyers out there still.

I say this as an all-in stocks person - but the downside risk is inflation, too much money sloshing about nowhere for it to go, real terms deflation, nominal headline stock inflation

Edited by Si1

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I am fairly fully invested in shares at around 50% of my net worth, and around 25% in bonds and the rest in various real estate. Less than 20% of the total is in the UK across all three, ten years ago I was pretty much 100% invested in the UK, I am very comfortable in this position.

In the medium to long run the UK's finances are toast, most of the ftse companies have pensions black holes and are going to be operating in an environment of a weak economy and increasing taxation.

Many other countries have much better fundamentals and are much better run, there also can be tax advantages relative to the UK, so I would advise on sussing out other markets to get involved in which should provide good income and capital growth, its not hard to find stable opportunities to make a real return of 10% a year in stable currencies.

The uk has suffered from creating a situation where there has been a massive tax advantage to investing in residential property together with a structural move lower in interest rates over the past 20 years, this has led to massive price rises and overvaluation these historic events cannot be repeated with rates this low and zero taxes on property ownership and profits pretty much, I do not see housing as a safe place at all but view real estate as basically consumption rather than investment.

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I took the view earlier in the year that staying risk averse was no longer the best option. Given up with cash. Now use isa allowance to accumulate a mix of income funds, (as long as the divi rolls in who cares about what the ftse is doing?), bonds, and emerging markets for growth. I also converted money from a cash ISA at beginning of year into a small collection of shares also in an isa which i trade frequently. I havent made a fortune but its been fun learning and significant improvement on paltry interest and its kept ahead of inflation.

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I took the view earlier in the year that staying risk averse was no longer the best option. Given up with cash. Now use isa allowance to accumulate a mix of income funds, (as long as the divi rolls in who cares about what the ftse is doing?), bonds, and emerging markets for growth. I also converted money from a cash ISA at beginning of year into a small collection of shares also in an isa which i trade frequently. I havent made a fortune but its been fun learning and significant improvement on paltry interest and its kept ahead of inflation.

exactly what i have been up to. And a damn site more intresting and informative than leaving it with those dickheads at the likes of nationwide.

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  • 152 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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