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The Masked Tulip

When Does Inflation Become A Threat To Strers?

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If inflation runs amok at what point does it become a threat to those who have STRed and have a wodge of cash and or savings and who are waiting to buy?

I mean, which comes first when inflation takes hold - HPs crash or inflation runs amok and the value of savings becomes less and less in real terms thereby eroding the chance to buy?

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If inflation runs amok at what point does it become a threat to those who have STRed and have a wodge of cash and or savings and who are waiting to buy?

I mean, which comes first when inflation takes hold - HPs crash or inflation runs amok and the value of savings becomes less and less in real terms thereby eroding the chance to buy?

I dont know...but i do like your sig. About sums it up really. Now, where's that ayrab?

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If inflation runs amok at what point does it become a threat to those who have STRed and have a wodge of cash and or savings and who are waiting to buy?

I mean, which comes first when inflation takes hold - HPs crash or inflation runs amok and the value of savings becomes less and less in real terms thereby eroding the chance to buy?

It's not inflation per se that matters but the real rate of return after tax that counts. So, I think the answer is something like 'at the point where (RR * TR)- IR goes negative (RR = rate of return on whereever the STRer has his/her money saved or invested, TR = tax rate they're paying, IR = your chosen value for inflation).

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If inflation runs amok at what point does it become a threat to those who have STRed and have a wodge of cash and or savings and who are waiting to buy?

I mean, which comes first when inflation takes hold - HPs crash or inflation runs amok and the value of savings becomes less and less in real terms thereby eroding the chance to buy?

If you are a STR and house prices fall the rate of inflation elsewhere in the economy does not matter.

Much also depends on what you do with the STR fund. I STM* in late 2003 and put most of the fund into global stocks and rode the market up by an average of around 17-20% until this year when I became ultra cautious. I am now only about 10% in stocks and 90% in cash and ultra short bond funds that are paying around 5.25%. Looking back and comparing my STM fund with house prices in my area (WEst Midlands) I have stayed well ahead of any HPI ands continue to do so even at 5.25% as HPI is said to be falling faster in my region than anywhere else in the country.

But your point is a good one. It seems that the economies of the world are on the brink of a severe recession and IR will have to come down to soften the blow. The next decade will be a rough one for jobs, economic growth and utterly devastating for the bubbles of the past 10 years of debt powered inflation.

________________

* Sold to move. Job transfer--would not have sold otherwise although seeing what is happening in Southern California now it was probably a good thing as I could go back and buy my old gaff back at less that what I sold it for and have made quiote a bit opn stocks in the meantime.

Edited by Realistbear

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If inflation runs amok at what point does it become a threat to those who have STRed and have a wodge of cash and or savings and who are waiting to buy?

I mean, which comes first when inflation takes hold - HPs crash or inflation runs amok and the value of savings becomes less and less in real terms thereby eroding the chance to buy?

I have exactly the same concerns and my basic economic education indicates that if we have high inflation, our currency will weaken against others with lower inflation. (Purchasing power parity). I have been trying to ascertain which currencies are likly to stregthen against sterling as a consequence of Brown pumping money to cover the cracks. All current thinking is Euro, (but only temporarly), Canadian Dollar, YEN, Swiss Franc.

I am now trying to see which instruments are available to hedge against UK inflation, i.e. futures/spreadbetting/outright conversion. :unsure:

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I have exactly the same concerns and my basic economic education indicates that if we have high inflation, our currency will weaken against others with lower inflation. (Purchasing power parity). I have been trying to ascertain which currencies are likly to stregthen against sterling as a consequence of Brown pumping money to cover the cracks. All current thinking is Euro, (but only temporarly), Canadian Dollar, YEN, Swiss Franc.

I am now trying to see which instruments are available to hedge against UK inflation, i.e. futures/spreadbetting/outright conversion. :unsure:

The answer to your question about which currency will do best is found in the Wisdom of Warren Buffett. What is the crowd doing? Do th eopposite.

The CONSENSUS among currency traders is that within 3 years the strongest currencies will be the Indian Ruppee, Russian Ruble, Japanese Yen and US $.*

__________________________________

* http://seekingalpha.com/article/47816-curr...r-to-strengthen

Edited by Realistbear

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If inflation runs amok at what point does it become a threat to those who have STRed

At the very second they sign the contract. Money supply has been running into double digits for many years now, this IS inflation and will erode the purchase power of cash. Sure, you can invest the cash, but most people don't have the know how to do this successfully. If the gains on your cash are less than the annual money supply growth then you are losing.

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If STR's are canny with their funds,inflation is not a threat.

I would much rather be earning 6 % in a bank risk free than run the gauntlet of "static" house prices for a decade.

the static bit really means inflation erosion of capital.

My investments are based on beating money supply....the true measure of inflation IMHO....which is 14% at present.

If your capital is not appreciating at 14%+ per annum.....you are losing money.

...as for renting,tenants need to be on the ball and read the riot act to their landlord.......food prices are up,petrol up,council tax up etc.......all in excess of CPI by a large margin.......so sorry buddy,your 15% rent rise won't wash.Can't afford it.

...keep the rent static or I do things more cheaply and house-share...leaving you with a fecking great void period.

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The answer to your question about which currency will do best is found in the Wisdom of Warren Buffett. What is the crowd doing? Do th eopposite.

The CONSENSUS among currency traders is that within 3 years the strongest currencies will be the Indian Ruppee, Russian Ruble, Japanese Yen and US $.*

__________________________________

* http://seekingalpha.com/article/47816-curr...r-to-strengthen

Sorry RB, you are saying don't invest in Above?

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you can always stick what you can in a tax free NS&I bond that pays inflation + a small %age as a hedge against inflation. And NS&I uses RPI (which is still stubbornly high while CPI falls) as the basis for the interest paid.

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