Markets pricing in 3.5% rates by February

[Unmoderated]

1 hour ago, Bruce Banner said:

Oh shut up... and you did doctor the quote!

Excuse me!?

Is this how you end up trying to close down a discussion? 

If I did doctor it then it was unintentional. Perhaps you can clip both of the quotes as you seem fairly defensive about this?

Honestly, this level of rudeness coupled with you trying to get me moderated for simply quizzing you around what you're saying is bizarre. Why would you do this?

 

 

[Unmoderated]

6 minutes ago, henry the king said:

I am stating a fact based on market observations in 2022. 

Inflation is more or less a global phenomenon. When bad inflation data comes out, you will see markets dump. So if your idea is to hedge against inflation in stocks then I am telling you that is completely farcical. Because if inflation continues or persists (i.e. commodity prices stay high) then it means central banks will do more and that means stocks will collapse. 

That is why the market has pumped recently. US data showed fading inflation data. And it dumped because of inflation forcing a hawkish fed. That is really all there is to it.

Hence cash is an amazing inflation hedge in the short term. In the long term? Yes it is a bad hedge. But in the short term it is a great hedge. That is why when inflation was on the rise in the US and inflation and central bank expectations were hawkish, then big time investors were holding onto cash as much as possible. MoM inflation was 0.6% in the UK last month. That is meaningless. Investments can drop that in an hour.

 

It's totally the wrong way around I'm afraid. 

If inflation is sustained you want to be invested in companies that have strong pricing power. They will be able to keep prices and profits up with inflation. If rates rise then great, but that is after the fact and bonds would be a nice place to be once rates have peaked. 

Scottbeard is a fellow Economics grad so if you want take it from me, take it from him. 

Or Google...

4 minutes ago, scottbeard said:

You’ve just explained why cash is a good hedge against stockmarket crashes, not against inflation.

Well said. 

[henry the king]

24 minutes ago, Unmoderated said:

It's totally the wrong way around I'm afraid. 

If inflation is sustained you want to be invested in companies that have strong pricing power. They will be able to keep prices and profits up with inflation. If rates rise then great, but that is after the fact and bonds would be a nice place to be once rates have peaked. 

Scottbeard is a fellow Economics grad so if you want take it from me, take it from him. 

Or Google...

Well said. 

So you are denying that the stock market is basically moving opposite to inflation moves globally?

If so there is no point to this conversation. It is like arguing the sea is purple. If you insist it is purple then I guess I just say fair enough. 

[scottbeard]

21 minutes ago, henry the king said:

So you are denying that the stock market is basically moving opposite to inflation moves globally?

If so there is no point to this conversation. It is like arguing the sea is purple. If you insist it is purple then I guess I just say fair enough. 

You’re wrong about an almost everything you post so yes maybe it’s not worth talking to you.

[scottbeard]

23 minutes ago, henry the king said:

So you are denying that the stock market is basically moving opposite to inflation moves globally?

For any sensible people reading this thread … I’m saying that if inflation is +10%, stock markets -10% and cash +5% then cash is NOT acting as an inflation hedge, even though plus 5 is bigger than minus 10

[Bruce Banner]

1 hour ago, Unmoderated said:

Excuse me!?

Is this how you end up trying to close down a discussion? 

If I did doctor it then it was unintentional. Perhaps you can clip both of the quotes as you seem fairly defensive about this?

Honestly, this level of rudeness coupled with you trying to get me moderated for simply quizzing you around what you're saying is bizarre. Why would you do this?

 

 

You have been stalking me for days now arguing with any post that mentions cash, seemingly incensed at the suggestion that anyone would want to be in cash. Well I am in cash and it's where I want to be. Can you please accept that because I really don't have the time nor inclination to engage in an endless circular argument with an investment know all zealot. I want to close down the "discussion" because I am bored with it. As for rudeness, your insistence in knowing things like how I paid for my house and an interrogation of exactly how I made money, was extremely rude. You appear to be trying to catch me out. Please stop it and know this, everything I have posted it true and correct. If you can't understand it then that's your problem.

I'm in my 70s and was probably dealing in shares and running a business while you were still in nappies, at that stage of my life I was happy to take financial risks, but like many in my age group, not now. 

So, for the last time, please do not reply to this or any of my posts because I've had enough of the "Spanish Inquisition".

[Lagarde's Drift]

3 hours ago, scottbeard said:

For any sensible people reading this thread … I’m saying that if inflation is +10%, stock markets -10% and cash +5% then cash is NOT acting as an inflation hedge, even though plus 5 is bigger than minus 10

Yes this. Cash is the answer, plus an ability to pick assets that are rock bottom prices but won't die cos resilient enough to survive. Those that survive will explode. The Amazons that grow out of 2001.

[reginekierkegaard]

36 minutes ago, Lagarde's Drift said:

Yes this. Cash is the answer, plus an ability to pick assets that are rock bottom prices but won't die cos resilient enough to survive. Those that survive will explode. The Amazons that grow out of 2001.

Cash is losing value at the rate of 10 plus percent in real term. However, what are the alternatives? 

? Gold and silver - they have not been rallying of late

? Stocks are relatively cheap, in Europe, Asia and emerging market but we are heading toward a synchronised global depression. 
? Real estate with leverage - global market is softening, isolated countries and China had crashed 

? Bond yield is still no where to match the rate of inflation, except TIPS. As rate hikes, bond price falls. 

Staying in cash is a good idea but the question is when do you deploy the cash? 
When do you call the bottom? Do you drip feed it in as things are getting cheaper now?

[Blobsy]

34 minutes ago, reginekierkegaard said:

Cash is losing value at the rate of 10 plus percent in real term. However, what are the alternatives? 

? Gold and silver - they have not been rallying of late

? Stocks are relatively cheap, in Europe, Asia and emerging market but we are heading toward a synchronised global depression. 
? Real estate with leverage - global market is softening, isolated countries and China had crashed 

? Bond yield is still no where to match the rate of inflation, except TIPS. As rate hikes, bond price falls. 

Staying in cash is a good idea but the question is when do you deploy the cash? 
When do you call the bottom? Do you drip feed it in as things are getting cheaper now?

Yes cash is stressful but the least worst option at the moment.

[Bruce Banner]

17 minutes ago, reginekierkegaard said:

Cash is losing value at the rate of 10 plus percent in real term. However, what are the alternatives? 

? Gold and silver - they have not been rallying of late

? Stocks are relatively cheap, in Europe, Asia and emerging market but we are heading toward a synchronised global depression. 
? Real estate with leverage - global market is softening, isolated countries and China had crashed 

? Bond yield is still no where to match the rate of inflation, except TIPS. As rate hikes, bond price falls. 

Staying in cash is a good idea but the question is when do you deploy the cash? 
When do you call the bottom? Do you drip feed it in as things are getting cheaper now?

Only when you spend it on things that have suffered inflation.

Avoid all forms of debt including loans and overdraft. 

Hold high stocks of things you know you will need and get discounts for buying in bulk.

[Lagarde's Drift]

It's probably closer to 20% pa loss. It's akin to the cost of having an option to buy later at low prices. 

Its the STR equivalent, if you like.

Or the cost of storage of grain (rats, spoilage etc) to sell it next year rather than immediately.

Edited August 19, 2022 by Lagarde's Drift

[Bruce Banner]

4 minutes ago, Lagarde's Drift said:

It's probably closer to 20% pa loss. It's akin to the cost of having an option to buy later at low prices. 

Its the STR equivalent, if you like.

Or the cost of storage of grain (rats, spoilage etc) to sell it next year rather than immediately.

I don't understand that, can you explain further?

Having lived and run a manufacturing business in the 70s and 80s inflationary era, dealing with inflation is second nature.

[Lagarde's Drift]

2 minutes ago, Bruce Banner said:

I don't understand that, can you explain further?

Having lived and run a manufacturing business in the 70s and 80s inflationary era, dealing with inflation is second nature.

IANAFA, but as I see it, my cash is losing 20% pa. That's how much it costs me to hold liquid capital to buy when there's blood on the streets. I don't lock it up for pitiful interest rates, although I may hedge and lock a bit if things evolve.

Akin to, but not the same as, the cost of STR - waiting to buy lower.

Or the dilemma of farmers for several millenia, sell Ur grain now or in several months. Or more likely, sell in a DCA manner to hedge against volatility.

For example rice is having a decent harvest this hence price is lagging behind wheat in terms of % rise. Do you store your rice waiting for future rise or not? Storage incurs losses.

Bit pissed so feel free to slag me off.

[Bruce Banner]

2 minutes ago, Lagarde's Drift said:

IANAFA, but as I see it, my cash is losing 20% pa. That's how much it costs me to hold liquid capital to buy when there's blood on the streets. I don't lock it up for pitiful interest rates, although I may hedge and lock a bit if things evolve.

Akin to, but not the same as, the cost of STR - waiting to buy lower.

Or the dilemma of farmers for several millenia, sell Ur grain now or in several months. Or more likely, sell in a DCA manner to hedge against volatility.

For example rice is having a decent harvest this hence price is lagging behind wheat in terms of % rise. Do you store your rice waiting for future rise or not? Storage incurs losses.

Bit pissed so feel free to slag me off.

I won't argue with you but it doesn't cost me 20% to hold liquid capital.

My average received interest is currently about 2.5% and I'm hoping that will more than double during the next year or two and I always use my cash to buy at the best time and in bulk. We have two spare bedrooms so have plenty of space to store stuff bought at special offer prices. Amazon is good for this, for example I just bought some security cameras I will need soon at over 50% discount.

Many big ticket items are not inflating, for example, the annual marina berthing charges for my boat have averaged about 2% pa increase over the last 5 years, and from memory council tax hasn't gone up much over the last few years. Energy has gone up a lot but I've mitigated that by buying a heat pump. Fish and chips have gone up dramatically, but in the overall scheme of things the extra cost is peanuts.

[scottbeard]

10 hours ago, Bruce Banner said:

Hold high stocks of things you know you will need and get discounts for buying in bulk.

Exactly - in times of high inflation “useful stuff” is a much better hedge than cash, even though cash is still better than assets that are falling in value.

[Bruce Banner]

34 minutes ago, scottbeard said:

Exactly - in times of high inflation “useful stuff” is a much better hedge than cash, even though cash is still better than assets that are falling in value.

Absolutely, but even with two spare bedrooms I'd struggle to store hundreds of thousands of pounds worth of useful household stuff, so the majority remains in cash. But for day to day stuff it works out well. "We've only got a couple of months supply of bog rolls left" ... " Okay, I'll order a few hundred from Amazon when they have a special offer".

It was different when I was in business, easy to order a few hundred grands worth of high value component stock. "We've got too much money in the bank" ... "Okay, I'll order a load of stock". You can write it down too, or at least you could.

[Unmoderated]

1 hour ago, Bruce Banner said:

You have been stalking me for days now arguing with any post that mentions cash, seemingly incensed at the suggestion that anyone would want to be in cash. Well I am in cash and it's where I want to be. Can you please accept that because I really don't have the time nor inclination to engage in an endless circular argument with an investment know all zealot. I want to close down the "discussion" because I am bored with it. As for rudeness, your insistence in knowing things like how I paid for my house and an interrogation of exactly how I made money, was extremely rude. You appear to be trying to catch me out. Please stop it and know this, everything I have posted it true and correct. If you can't understand it then that's your problem.

I'm in my 70s and was probably dealing in shares and running a business while you were still in nappies, at that stage of my life I was happy to take financial risks, but like many in my age group, not now. 

So, for the last time, please do not reply to this or any of my posts because I've had enough of the "Spanish Inquisition".

You interpret the questions as rude but it's simple. If you had more money in the bank than 15 years ago despite buying a house and not holding any other investments I'm just curious as to how you did this?

Love the I was doing X, Y and Z argument when you were a baby argument. Nobody would ever make any breakthroughs if a certain generation held that view. I know better just because I'm older. Having lived for 7 decades and been an adult for 5 of them (at least) you must have first had experience of pretty much everything else outpacing cash as a preserver of wealth and yet here you are. 

You also seem to continually reply despite saying you don't want to discuss it. Fine. Don't.

Bluntly, running off crying to the moderators because you're losing an argument or don't like what you're hearing is childish. Not at all the behaviour I'd expect from someone so much better versed in running businesses when I was a baby and must have so much more life experience than me. 

Did you run your companies the same way too? Shouting down or blocking out any alternative points of view?  

If you don't wish to continue the argument don't reply. It's that simple. 

[Unmoderated]

12 hours ago, Bruce Banner said:

Only when you spend it on things that have suffered inflation.

Avoid all forms of debt including loans and overdraft. 

Hold high stocks of things you know you will need and get discounts for buying in bulk.

In periods of high inflation you can increase wealth by taking out debt on a fixed rate and buying something that keeps pace with inflation. Effectively you're shorting cash. At 10% inflation (or if you prefer the lower rate of wage inflation) debt is losing value at 10% (or around 7%) per annum.

2 hours ago, scottbeard said:

Exactly - in times of high inflation “useful stuff” is a much better hedge than cash, even though cash is still better than assets that are falling in value.

1 hour ago, Bruce Banner said:

Absolutely, but even with two spare bedrooms I'd struggle to store hundreds of thousands of pounds worth of useful household stuff, so the majority remains in cash. But for day to day stuff it works out well. "We've only got a couple of months supply of bog rolls left" ... " Okay, I'll order a few hundred from Amazon when they have a special offer".

It was different when I was in business, easy to order a few hundred grands worth of high value component stock. "We've got too much money in the bank" ... "Okay, I'll order a load of stock". You can write it down too, or at least you could.

This all seems a little doomsday prepper? Do we think things will get to the point where loo roll and tinned foods become currency?

[Lagarde's Drift]

2 hours ago, scottbeard said:

Exactly - in times of high inflation “useful stuff” is a much better hedge than cash, even though cash is still better than assets that are falling in value.

That's a little bit of opportunity cost. You're thinking of using your capital to bring forward your spending at the current price in anticipation of future price rises. I'm thinking of buying assets. Different aims here. But yeah I've got plenty of toilet paper and common stuff. 

[Bruce Banner]

1 minute ago, Lagarde's Drift said:

That's a little bit of opportunity cost. You're thinking of using your capital to bring forward your spending at the current price in anticipation of future price rises. I'm thinking of buying assets. Different aims here. But yeah I've got plenty of toilet paper and common stuff. 

Yeah, but he was replying to me and he knows I don't do "assets" for investment.

[Bruce Banner]

8 minutes ago, Unmoderated said:

You interpret the questions as rude but it's simple. If you had more money in the bank than 15 years ago despite buying a house and not holding any other investments I'm just curious as to how you did this?

Love the I was doing X, Y and Z argument when you were a baby argument. Nobody would ever make any breakthroughs if a certain generation held that view. I know better just because I'm older. Having lived for 7 decades and been an adult for 5 of them (at least) you must have first had experience of pretty much everything else outpacing cash as a preserver of wealth and yet here you are. 

You also seem to continually reply despite saying you don't want to discuss it. Fine. Don't.

Bluntly, running off crying to the moderators because you're losing an argument or don't like what you're hearing is childish. Not at all the behaviour I'd expect from someone so much better versed in running businesses when I was a baby and must have so much more life experience than me. 

Did you run your companies the same way too? Shouting down or blocking out any alternative points of view?  

If you don't wish to continue the argument don't reply. It's that simple. 

[Bruce Banner]

6 minutes ago, Unmoderated said:

In periods of high inflation you can increase wealth by taking out debt on a fixed rate and buying something that keeps pace with inflation. Effectively you're shorting cash. At 10% inflation (or if you prefer the lower rate of wage inflation) debt is losing value at 10% (or around 7%) per annum.

This all seems a little doomsday prepper? Do we think things will get to the point where loo roll and tinned foods become currency?

Will you please stop replying to my posts and giving unwanted investment advice!

[kingofmanlets]

13 hours ago, Lagarde's Drift said:

Yes this. Cash is the answer, plus an ability to pick assets that are rock bottom prices but won't die cos resilient enough to survive. Those that survive will explode. The Amazons that grow out of 2001.

Not picking on your comment in particular, but just to add my 2c... 

The smart money made their move over the last ten years and have secured their safety net through having amassed enormous profits. I don't think there's a good play in any direction now: cash, stocks, commodities, real estate, whatever. I suspect wherever you go you'll get hammered. But if you've been paying attention over the last decade then your hammering is coming off the back of a glorious decade-long summer, so you just diversify and then grin and bear it. Sure, there will probably be a few winners here and there, and yes you will need a solid strategy to avoid getting obliterated, but really all anyone can argue over is what is going to be the 'least bad' option (imo). 

[The Moderators]

39 minutes ago, Unmoderated said:

You interpret the questions as rude but it's simple. If you had more money in the bank than 15 years ago despite buying a house and not holding any other investments I'm just curious as to how you did this?

Love the I was doing X, Y and Z argument when you were a baby argument. Nobody would ever make any breakthroughs if a certain generation held that view. I know better just because I'm older. Having lived for 7 decades and been an adult for 5 of them (at least) you must have first had experience of pretty much everything else outpacing cash as a preserver of wealth and yet here you are. 

You also seem to continually reply despite saying you don't want to discuss it. Fine. Don't.

Bluntly, running off crying to the moderators because you're losing an argument or don't like what you're hearing is childish. Not at all the behaviour I'd expect from someone so much better versed in running businesses when I was a baby and must have so much more life experience than me. 

Did you run your companies the same way too? Shouting down or blocking out any alternative points of view?  

If you don't wish to continue the argument don't reply. It's that simple. 

 

34 minutes ago, Unmoderated said:

In periods of high inflation you can increase wealth by taking out debt on a fixed rate and buying something that keeps pace with inflation. Effectively you're shorting cash. At 10% inflation (or if you prefer the lower rate of wage inflation) debt is losing value at 10% (or around 7%) per annum.

This all seems a little doomsday prepper? Do we think things will get to the point where loo roll and tinned foods become currency?

Enough. Last warning.

[scottbeard]

2 hours ago, Bruce Banner said:

Absolutely, but even with two spare bedrooms I'd struggle to store hundreds of thousands of pounds worth of useful household stuff, so the majority remains in cash. But for day to day stuff it works out well. "We've only got a couple of months supply of bog rolls left" ... " Okay, I'll order a few hundred from Amazon when they have a special offer".

It was different when I was in business, easy to order a few hundred grands worth of high value component stock. "We've got too much money in the bank" ... "Okay, I'll order a load of stock". You can write it down too, or at least you could.

Oh sure - I’m not advising having basements full of tinned beans, but rather things that are expensive, small and prone to inflation are ideal to buy in bulk early.  Stamps, razor blades etc

1 hour ago, Unmoderated said:

This all seems a little doomsday prepper? Do we think things will get to the point where loo roll and tinned foods become currency?

You’ve lost the plot!  I’m not saying you should “invest” in loo roll 🙄 I’m saying that Bruce’s approach of buying things in bulk is a much better short term inflation hedge than cash or investments.

But not things that are bulky, cheap and hard to store which is pointless.  Things like (as above) stamps, razor blades, medicines etc.  Assuming you use stamps every year - Christmas cards or whatever - buying £100 of them now rather than paying £120 for them next Christmas seems like a risk free 20% return to me.