I use an investment company that invests for me in a mix of ethical stocks, bonds, and yes, unfortunately, some gold. None of this will do me any good if the current stock market highs turn out to be a bubble.
I'd be happy to be disproven with data, but my anecdotal experience since 2008 is that while my purchasing power hasn't budged much (for things like electronics, travel, food...), my ability to purchase a house from my wages has decreased and will only continue to do so (despite my wage nominally increasing during that time period).
Obviously it's fair to say that inflation may be measured more in some prices than others, but you're sort of muddying the waters by referring to housing as both an asset class and a cost-of-living, right?
Perversely, if inflation primarily affects "assets" (i.e. of the investment/speculation type), the premise of the original question here is sort of flawed: if increasing the money supply increases the price of assets, those with savings get richer—exactly the opposite of the ordinary understanding of "inflation!"
Which is not inflation, but asset appreciation (i.e. the goal of investment). Inflation measures the price level of consumables. Stock and real estate is not consumed.
Germany lost the first world war and had very high and quite sudden war debts plus suddenly had to pay reparations amounting to about 25% of GDP, denominated in foreign currency - this is important. Germany then printed money (this is similar to today) and bought foreign currency in the FX markets, at essentially any price available (this is not). The money flowed to the war winners, out of the domestic economy. This caused instant and quite strong devaluation of the German currency.
What the US does: It invests a comparatively tiny amount of money (~$2 trillion, <4% of GDP) into the local economy, where it will cause actual economic action (people buying things and services), to make up for lack of demand caused by Covid. FX markets are not touched. AFAIK it is aiming to finance at least a part of this through taxation.
With continuous compounding, 1/2 = (1-2.6%)^n = 0.974^n n = log(1/2) / log(0.974) = 26.3 y
Same answer on a Deci-Lon.
With annual compounding, HP-12c gives 27y
Inflation based on the TIPS spread (which is just a market prediction of expected inflation) is basically where its been for years.
Secondly, hedging inflation with gold has historically been a bad idea. Unless we see hyperinflation (which doesn't seem likely in the US for a number of reasons) it's far better to put your money in assets which produce value over time like stocks. The problem with gold is that if you're investing in it as a store of value and inflation remains steady at around 2% you're looking at around a 2% annual return which is awful.
Crypto could be more promising, not because it's a store of value, but because it's a new asset class currently experiencing mass adoption making it likely to continue growing in value if this trends continue.
Personally I'd keep it simple. Invest in stuff you believe in and don't try to be too smart. Predicting inflation before the rest of the market based on things you've heard on YouTube or Reddit then making investment decisions based on that is a good way to make a bad investment decisions. IMO inflation should always be seen as a drag if you're a saver. Any money outside of your reserve fund would probably be better invested somewhere it can appericate in value at a rate above inflation.
You have to look at more than just inflation related data for the asset. Gold tends to be a inversely correlated to the economy because people use it safety asset. So right now, I think the gold prices are already inflated from people moving into it during the crash last year. Silver seems to have suffered a similar fate after the GME thing too. If you are looking at metals, it might be good to look at those positively correlated with the economy. After all, we will only see real inflation if the economy is doing well too. I like platinum, but got into that about 9 months ago. Copper would have been good too. I'm not sure if they still make sense at their current levels, but what do I know.
Crypto is not a real inflation hedge in my opinion. If you're hedging, it's not supposed to be highly speculative (on other factors). Crypto is much more likely to experience wild swings unrelated to inflation.
Real estate is an option, like raw land or maybe residential rentals. I say maybe for rentals because of all the coronavirus restrictions on collecting rent. I wouldn't be surprised if that sort of sentiment continues or expands in the future. I like raw land, but that depends on the area and other stuff. There's an increasing threat that raw land could be zoned conservation, removing it's potential future value (I won't get into the bigger conversation around that). The mortgage on your own house can be beneficial.
I plan to stay with mostly equities. There are a lot of options in there as far as sectors or industries. A materials or induatrials ETF could be good, but it would require more research to see how covid has affected supply/demand.
Yes, rising interest rates will cause pain, but not as much pain as significant inflation, so the fed will not hesitate.
If you think there is inflation in the U.S., check the Chicago real-estate market. It has been in a depression in the last decade, more so in the last year. There is an imbalance between US cities which is inflating some cities and depressing some others. Hyper-inflation occurs when, regardless, everything is increasing in price because of monetary debasement. I'll start worrying when Chicago real-estate market start a bull-run without a change in fundamentals.
On the other hand, if you are living in a hot city, you are definitively experiencing local inflation. If you are able to move to a lower-cost area, you should definitively do that. Be mindful also, that shortages can cause price spikes but these are not (monetary driven) inflation. If the suez canal is blocked by a ship, you might see prices spike for a while until traffic is back to normal. The pandemic has caused lots of disruption and multiple goods have experienced that effect.
Alternatively owning regular assets should help; stocks, gold, crypto, art, etc
There is no reliable way to predict inflation accurately, at least for more than a few years into the future.
I should be fine with my 100% equities portfolio with a SCV tilt anyway.
Crypto/gold/real estate are not hedges against inflation. They’re pretty wild bets. If you do this, make sure you diversify...
On a side note, inflation is a good thing cause it makes you want to invest your money. Seeking a refuge value is not playing the capitalism game. It’s better for everyone if you invest your money in some active venture (like stocks or bonds) rather than in some sitting asset...
