Building High-Performance Muscle™
Politics and World Issues
 
Inflation Hedges?
1 2 Next Last
 

NealRaymond2
Level 5

Join date: Oct 2005
Location: Massachusetts, USA
Posts: 513

Any opinions on what to hold for the next 5 to 15 years to hedge against the possibility of severe inflation? (Double-digit or low-triple-digit percentage per year for a number of years, let's say: not necessarily civilization-collapse but harsh compared to what most of us in the USA are used to.)

- Central Fund of Canada (CEF)?
Silver and Gold

- Greenhaven Continuous Commodities ETF (GCC)?
Commodities Futures divided among 17 commodities
and spread out among several months of contracts

- Global X Fertilizers/Potash ETF (SOIL)?
Maybe food price increases would drive this up
more than anything else?

- EuroPac Hard Assets Mutual Fund (EPHAX)?
Peter Schiff's inflation-hedging fund.

I am particularly interested to know what people's opinions are regarding how effective GCC would be in a high-double-digits or low-triple-digits commodities-led inflation scenario, as compared with CEF, EPHAX, and/or SOIL: clearly superior; clearly inferior; probably comparable? I currently own a little bit of all of them, and am wondering whether or not it would be wise to dump the GCC and use the proceeds to buy more CEF, EPHAX, and/or SOIL. ("Wise" from the inflation-hedging standpoint, not necessarily "wise" from the median-probable-outcome standpoint.)

If somebody wants to suggest TIPs, I suppose he or she is free to do so: but I am not interested in them myself.

Regards and Thanks.

  Report
 

Brother Chris
Level 2

Join date: May 2005
Location: Arizona, USA
Posts: 16910

You want to give us some kind of asset allocation numbers or are they evenly invested into?

  Report
 

Brother Chris
Level 2

Join date: May 2005
Location: Arizona, USA
Posts: 16910

Did some basic analytical study on these four investments. My suggestion: Get out of them.

After adjusting for risk (using the Treynor Method since I had no idea how you put your portfolio together asset allocation wise), this is what I found:

Ephax, CEF, GCC, SOIL are not compensating for the amount of risk you're taking by investing in them, compared to if you invested in the S&P 500. The biggest reason for this (because the average beta of these four things, if evenly invested in is .32) is because your returns suck:

I put these in arithmetic/geometric avg. format:
Ephax with -.66%/-1.01
CEF with .85%/.38%
GCC with -1.24%/-1.38%
SOIL with -.52%/-.95%

This is compared to the S&P 500:

Arith: .47%
Geo: .37%

The only one that comes close to being comparable is SOIL with a Treynor return (adj. for risk) of -2.35% (beta .43). Looking at the rest of the Treynor returns we can see that they are not compensating for risk at all (I just used the geometric avg here):

Ephax: -2.38%
CEF: -2.49%
GCC: -2.64%
SOIL: -2.35%
S&P: .31%

Looking at alpha, there is only one stock that produces an excess return over the market--with a positive alpha--CEF produces an annualized excess return of 12.88% over the market, this is to be expected bc it has a negative beta of -.13 and a return of .38% v. S&P's return of .37%. All the others have negative alphas:

Ephax with -12.31% annualized excess return.
GCC with -17.36% annualized excess return.
SOIL with a relatively moderate -14.14% annualized excess return.

So, yeah...sorry bub.

  Report
 

Brother Chris
Level 2

Join date: May 2005
Location: Arizona, USA
Posts: 16910

TIPS.

You can't really hedge inflation for 5-15 years, well you can. But not accurately, because good luck forecasting anything >1y/r, either you're not going to hedge enough or you're going to spend too much and kill what returns you have. You can invest in a way that will meet inflation (and pass it) and that is: equity. CF's go up with inflation, equity goes up with CF (kind of).

Plus, what you're trying to accomplish here is tactical asset allocation. Basically putting your money in front of certain equity stuff that's going to increase more than the rest of the group of equity. Which is fine, but I wouldn't bet the farm on it.

My current asset allocation is broken down like this (simply):

70% Equity
30% Debt

Equity is broken down into the following categories:
Domestic (30%)
Foreign developed-market stock funds (15%)
Emerging-market stock funds (10%)
Real Estate Investment Trusts (15%)

Debt is broken down into the following categories:
U.S. Treasuries (if you want a little TAA, go with short term) (15%)
U.S. Treasuries Inflation Protected (15%)

And, then I hold less than 5% cash.

Disclaimer: My specific portfolio isn't sexy at all. My friends won't even talk to me about my portfolio, because of how unsexy it is (it gets excited every start of a new quarter, because I reallocate my asset to the correct %'s, but I usually don't even sell anything, I just take the cash that is sitting in the portfolio and invest it.

That's cool that my portfolio isn't sexy, but my portfolio gave me a return this past year of .57% (it's done that after a bad week in the past quarter, though the market gave a return of .73% this past quarter) with the market returning .37%. So, definitely not sexy. But did me alright in the past year.

  Report
 

Brother Chris
Level 2

Join date: May 2005
Location: Arizona, USA
Posts: 16910

P.S. I recommend Unconventional Success by David F. Swenson (Yale Endowment Head).

  Report
 

Tiribulus
Level 1

Join date: Aug 2006
Location: Michigan, USA
Posts: 16188

Dearest Christopher has been paying attention in class. Or so it seems to me. I have no clue what he's talkin about so it seems quite impressive.

  Report
 

SexMachine
Level

Join date: Mar 2011
Location:
Posts: 5047

Brother Chris wrote:
P.S. I recommend Unconventional Success by David F. Swenson (Yale Endowment Head).


Reminiscences of a Stock Operator by Edwin Lefevre:

http://www.earnforex.com/...e_livermore.pdf

  Report
 

NealRaymond2
Level 5

Join date: Oct 2005
Location: Massachusetts, USA
Posts: 513

NealRaymond2 wrote:
Any opinions on what to hold for the next 5 to 15 years to hedge against the possibility of severe inflation? (Double-digit or low-triple-digit percentage per year for a number of years, let's say: not necessarily civilization-collapse but harsh compared to what most of us in the USA are used to.)

- Central Fund of Canada (CEF)?
Silver and Gold

- Greenhaven Continuous Commodities ETF (GCC)?
Commodities Futures divided among 17 commodities
and spread out among several months of contracts

- Global X Fertilizers/Potash ETF (SOIL)?
Maybe food price increases would drive this up
more than anything else?

- EuroPac Hard Assets Mutual Fund (EPHAX)?
Peter Schiff's inflation-hedging fund.

I am particularly interested to know what people's opinions are regarding how effective GCC would be in a high-double-digits or low-triple-digits commodities-led inflation scenario, as compared with CEF, EPHAX, and/or SOIL: clearly superior; clearly inferior; probably comparable? I currently own a little bit of all of them, and am wondering whether or not it would be wise to dump the GCC and use the proceeds to buy more CEF, EPHAX, and/or SOIL. ("Wise" from the inflation-hedging standpoint, not necessarily "wise" from the median-probable-outcome standpoint.)

If somebody wants to suggest TIPs, I suppose he or she is free to do so: but I am not interested in them myself.

Regards and Thanks.


I probably used the term "hedge" in a technically incorrect manner. What I really mean is, what investments have the best likelihood of keeping up with or exceeding the increase in the cost of food, energy, and other basic necessities, should we experience high double digit or low triple digit annual percentage inflation for a number of years, sometime within the next 15 years? Even if those investments are likely to sustain moderate losses in the absence of double digit inflation? i.e. "inflation insurance", where the losses in the absence of severe inflation would be viewed by me as the equivalent of insurance premiums.

  Report
 

NealRaymond2
Level 5

Join date: Oct 2005
Location: Massachusetts, USA
Posts: 513

Brother Chris wrote:
Did some basic analytical study on these four investments. My suggestion: Get out of them.

After adjusting for risk (using the Treynor Method since I had no idea how you put your portfolio together asset allocation wise), this is what I found:

Ephax, CEF, GCC, SOIL are not compensating for the amount of risk you're taking by investing in them, compared to if you invested in the S&P 500. The biggest reason for this (because the average beta of these four things, if evenly invested in is .32) is because your returns suck:

I put these in arithmetic/geometric avg. format:
Ephax with -.66%/-1.01
CEF with .85%/.38%
GCC with -1.24%/-1.38%
SOIL with -.52%/-.95%

This is compared to the S&P 500:

Arith: .47%
Geo: .37%

The only one that comes close to being comparable is SOIL with a Treynor return (adj. for risk) of -2.35% (beta .43). Looking at the rest of the Treynor returns we can see that they are not compensating for risk at all (I just used the geometric avg here):

Ephax: -2.38%
CEF: -2.49%
GCC: -2.64%
SOIL: -2.35%
S&P: .31%

Looking at alpha, there is only one stock that produces an excess return over the market--with a positive alpha--CEF produces an annualized excess return of 12.88% over the market, this is to be expected bc it has a negative beta of -.13 and a return of .38% v. S&P's return of .37%. All the others have negative alphas:

Ephax with -12.31% annualized excess return.
GCC with -17.36% annualized excess return.
SOIL with a relatively moderate -14.14% annualized excess return.

So, yeah...sorry bub.


Thank you for your thoughtful answer. But for these particular investments, I am not actually interested in likely returns under normal circumstances, as long as the likely returns are no worse than moderate losses. I am more interested in how well they would do in a severely inflationary environment, relative to the rising costs of necessities. I think I might have misled you by my improper usage of the term "hedge".

  Report
 

NealRaymond2
Level 5

Join date: Oct 2005
Location: Massachusetts, USA
Posts: 513

Brother Chris wrote:
TIPS.

You can't really hedge inflation for 5-15 years, well you can. But not accurately, because good luck forecasting anything >1y/r, either you're not going to hedge enough or you're going to spend too much and kill what returns you have. You can invest in a way that will meet inflation (and pass it) and that is: equity. CF's go up with inflation, equity goes up with CF (kind of).

I probably made a mistake using the term "hedge". Also, I suspect that if we have severe inflation within the next 5 - 15 years, the general stock market will not keep up; although I suppose it would probably even out over the next 100 years.

Plus, what you're trying to accomplish here is tactical asset allocation. Basically putting your money in front of certain equity stuff that's going to increase more than the rest of the group of equity. Which is fine, but I wouldn't bet the farm on it.

I am trying to put part of my net worth in front of certain equity stuff that's going to increase more than the rest of the equities, in the event of severe inflation. If there is no severe inflation, I am willing to lose some of this money and/or do poorly relative to the general market; but I don't want to be throwing it away on stuff that would not be much help in the event that there is severe inflation.

My current asset allocation is broken down like this (simply):

70% Equity
30% Debt

Equity is broken down into the following categories:
Domestic (30%)
Foreign developed-market stock funds (15%)
Emerging-market stock funds (10%)
Real Estate Investment Trusts (15%)
Debt is broken down into the following categories:
U.S. Treasuries (if you want a little TAA, go with short term) (15%)
U.S. Treasuries Inflation Protected (15%)

And, then I hold less than 5% cash.

Disclaimer: My specific portfolio isn't sexy at all. My friends won't even talk to me about my portfolio, because of how unsexy it is (it gets excited every start of a new quarter, because I reallocate my asset to the correct %'s, but I usually don't even sell anything, I just take the cash that is sitting in the portfolio and invest it.

That's cool that my portfolio isn't sexy, but my portfolio gave me a return this past year of .57% (it's done that after a bad week in the past quarter, though the market gave a return of .73% this past quarter) with the market returning .37%. So, definitely not sexy. But did me alright in the past year.

  Report
 

Da Man reloaded
Level

Join date: Nov 2010
Location: Ohio, USA
Posts: 258

NealRaymond2 wrote:
NealRaymond2 wrote:
Any opinions on what to hold for the next 5 to 15 years to hedge against the possibility of severe inflation? (Double-digit or low-triple-digit percentage per year for a number of years, let's say: not necessarily civilization-collapse but harsh compared to what most of us in the USA are used to.)

- Central Fund of Canada (CEF)?
Silver and Gold

- Greenhaven Continuous Commodities ETF (GCC)?
Commodities Futures divided among 17 commodities
and spread out among several months of contracts

- Global X Fertilizers/Potash ETF (SOIL)?
Maybe food price increases would drive this up
more than anything else?

- EuroPac Hard Assets Mutual Fund (EPHAX)?
Peter Schiff's inflation-hedging fund.

I am particularly interested to know what people's opinions are regarding how effective GCC would be in a high-double-digits or low-triple-digits commodities-led inflation scenario, as compared with CEF, EPHAX, and/or SOIL: clearly superior; clearly inferior; probably comparable? I currently own a little bit of all of them, and am wondering whether or not it would be wise to dump the GCC and use the proceeds to buy more CEF, EPHAX, and/or SOIL. ("Wise" from the inflation-hedging standpoint, not necessarily "wise" from the median-probable-outcome standpoint.)

If somebody wants to suggest TIPs, I suppose he or she is free to do so: but I am not interested in them myself.

Regards and Thanks.


I probably used the term "hedge" in a technically incorrect manner. What I really mean is, what investments have the best likelihood of keeping up with or exceeding the increase in the cost of food, energy, and other basic necessities, should we experience high double digit or low triple digit annual percentage inflation for a number of years, sometime within the next 15 years? Even if those investments are likely to sustain moderate losses in the absence of double digit inflation? i.e. "inflation insurance", where the losses in the absence of severe inflation would be viewed by me as the equivalent of insurance premiums.


here is a question out of left field- it may be silly, presumptious or just plain stupid, but:

is there a sound manor, or any manor at all, in which one can invest in such things that are likely to go sky high in the next few years? Food, energy production, fuels? I have 0 idea and am probably making a fool of myself just by asking, but I am honestly interested.

Would it make sense to do so? Would the "stock" of such things "go up"? I dont know if the words in quotes are the proper words to use. If the question makes no sense, I will try to reword it.

  Report
 

Sweet Revenge
Level 4

Join date: Nov 2005
Location: New Jersey, USA
Posts: 788

SexMachine wrote:
Brother Chris wrote:
P.S. I recommend Unconventional Success by David F. Swenson (Yale Endowment Head).


Reminiscences of a Stock Operator by Edwin Lefevre:

http://www.earnforex.com/...e_livermore.pdf


I'll check out 'Reminiscences' when I get more time, but I noticed in the philosopy section 'A Course in Miracles' is listed first. That seems very odd, or is it intended to be a joke? What does 'A Course in Miracles' have to do with trading probability?

  Report
 

NealRaymond2
Level 5

Join date: Oct 2005
Location: Massachusetts, USA
Posts: 513

Da Man reloaded wrote:
NealRaymond2 wrote:
NealRaymond2 wrote:
Any opinions on what to hold for the next 5 to 15 years to hedge against the possibility of severe inflation? (Double-digit or low-triple-digit percentage per year for a number of years, let's say: not necessarily civilization-collapse but harsh compared to what most of us in the USA are used to.)

- Central Fund of Canada (CEF)?
Silver and Gold

- Greenhaven Continuous Commodities ETF (GCC)?
Commodities Futures divided among 17 commodities
and spread out among several months of contracts

- Global X Fertilizers/Potash ETF (SOIL)?
Maybe food price increases would drive this up
more than anything else?

- EuroPac Hard Assets Mutual Fund (EPHAX)?
Peter Schiff's inflation-hedging fund.

I am particularly interested to know what people's opinions are regarding how effective GCC would be in a high-double-digits or low-triple-digits commodities-led inflation scenario, as compared with CEF, EPHAX, and/or SOIL: clearly superior; clearly inferior; probably comparable? I currently own a little bit of all of them, and am wondering whether or not it would be wise to dump the GCC and use the proceeds to buy more CEF, EPHAX, and/or SOIL. ("Wise" from the inflation-hedging standpoint, not necessarily "wise" from the median-probable-outcome standpoint.)

If somebody wants to suggest TIPs, I suppose he or she is free to do so: but I am not interested in them myself.

Regards and Thanks.


I probably used the term "hedge" in a technically incorrect manner. What I really mean is, what investments have the best likelihood of keeping up with or exceeding the increase in the cost of food, energy, and other basic necessities, should we experience high double digit or low triple digit annual percentage inflation for a number of years, sometime within the next 15 years? Even if those investments are likely to sustain moderate losses in the absence of double digit inflation? i.e. "inflation insurance", where the losses in the absence of severe inflation would be viewed by me as the equivalent of insurance premiums.


here is a question out of left field- it may be silly, presumptious or just plain stupid, but:

is there a sound manor, or any manor at all, in which one can invest in such things that are likely to go sky high in the next few years? Food, energy production, fuels? I have 0 idea and am probably making a fool of myself just by asking, but I am honestly interested.

I think probably there is, at least to some extent. I am just not sure whether or not I have the best stuff for that purpose. (Also not sure whether the necessities are "likely" to go sky-high, but it seems like a realistic possibility.)

Would it make sense to do so? Would the "stock" of such things "go up"? I dont know if the words in quotes are the proper words to use. If the question makes no sense, I will try to reword it.

Jim Rogers seems to believe the commodities themselves will do better than the commodity producers over the next decade or so, which would seem to be an argument in favor of owning one or more funds that track commodities futures in some manner. (The commodity producers' profits and most likely their share prices would be affected by both the costs of their inputs and the pricing power of their products, not just the latter.)

A study accessible via this link
http://papers.ssrn.com/...tract_id=560042
seems to show that commodities futures did very well during the stagflation of the 1970s, which in my non-expert, possibly wrong opinion would also seem to be an argument in favor of owning one or more funds that track commodities futures in some manner (as insurance against a severe form of stagflation, if one perceives that to be a priority at the current time).

But commodities futures funds either (A) have problems with tracking slippage, if they actually hold commodities futures contracts and they have to keep selling "near" contracts and buying "far" contracts; or (B) they have concentrated counter-party risk if they are just shares in a promise by one entity to pay off on the value of a basket of commodities at a certain date, where you have to hope that issuing party does not go bankrupt. GCC fits "A"; and I wonder whether or not the tracking slippage would get worse in the event of severe inflation. I also wonder how large a proportion of the futures contracts' counterparties would default in the event of severe inflation, although to me that seems less risky than the situation in "B" where the investor is relying on the one note issuer to stay solvent. The concerns in this paragraph might suggest that it would be better to invest in equities that are likely to do well in a severely inflationary environment, rather than commodities futures. (I think the equities held by SOIL and by EPHAX are likely to fit the preceding sentence.)

A fund that holds mostly physical precious metals might make sense as inflation protection. CEF, for example.

But gold and silver are already pretty high; and what if food runs up the most, as some experts seem to think is likely to happen? SOIL and possibly GCC might be better than CEF, in that case.

Alternatively, one might suppose that the experts working for Peter Schiff know better than you or I, so why not just buy EPHAX for inflation protection and be done with it.

But I think Peter Schiff was surprised by the rising dollar in 2008; so that makes me wonder if trusting EPHAX as my sole protection against inflation would be prudent.

So, considering all of the above, I currently have some GCC, some CEF, some SOIL, some EPHAX.

But if I understood Brother Chris correctly, three of the above have unfavorable values for one standard measure of reward vs. risk, while all four have unfavorable values for another standard measure of reward vs. risk. That might be an argument against owning any of them: although I am not sure whether those particular measurements should be extrapolated to the possible circumstances I have in mind where I think owning these might be beneficial; or if they should, I don't know what would be better to own that would be comparably beneficial in those particular circumstances.

  Report
 

SexMachine
Level

Join date: Mar 2011
Location:
Posts: 5047

Sweet Revenge wrote:

I'll check out 'Reminiscences' when I get more time, but I noticed in the philosopy section 'A Course in Miracles' is listed first. That seems very odd, or is it intended to be a joke? What does 'A Course in Miracles' have to do with trading probability?


That's not the book, that's a page on the website. The book is the link in the middle of page. I don't know anything about the website. I was just looking for a free copy of the book.

From the introduction(my copy:)

'The book is often mentioned by famed traders today as their bible, or the work that inspired them to go into investment business...'

It's an historical novel based on the real life stock operator Jesse Livermore.

  Report
 

Tiribulus
Level 1

Join date: Aug 2006
Location: Michigan, USA
Posts: 16188

I used to own "A Course in Miracles".

  Report
 

Sweet Revenge
Level 4

Join date: Nov 2005
Location: New Jersey, USA
Posts: 788

Tiribulus wrote:
I used to own "A Course in Miracles".


I USED to own it too. (I'm sure that doesn't suprise you)
I thought it was really interesting at first, but it soon started babbling like a brook.

Then, I experienced two rather painful life-changing experiences (about 2 years apart) and became a little superstitious about having it around. I ended up donating it to a church book sale. But not without a few prayers of blessings and protection for the next owner!

Anyway, back to my original question. What does CM have to do with the probabilities in trading. I don't get the connection.

  Report
 

Sweet Revenge
Level 4

Join date: Nov 2005
Location: New Jersey, USA
Posts: 788

SexMachine wrote:
Sweet Revenge wrote:

I'll check out 'Reminiscences' when I get more time, but I noticed in the philosopy section 'A Course in Miracles' is listed first. That seems very odd, or is it intended to be a joke? What does 'A Course in Miracles' have to do with trading probability?


That's not the book, that's a page on the website. The book is the link in the middle of page. I don't know anything about the website. I was just looking for a free copy of the book.

From the introduction(my copy:)

'The book is often mentioned by famed traders today as their bible, or the work that inspired them to go into investment business...'

It's an historical novel based on the real life stock operator Jesse Livermore.


It looks like the links for Reminiscences and A Course in Miracles give the full books, but without the Title pages and Forwards, if any.

But now that you mention it, I think CM started with....'everything you see is unreal' and 'nothing unreal exists'.....or something like that.

  Report
 

Tiribulus
Level 1

Join date: Aug 2006
Location: Michigan, USA
Posts: 16188

Sweet Revenge wrote:<<< I USED to own it too. (I'm sure that doesn't suprise you) >>>
Nope lol.
Sweet Revenge wrote:<<< I thought it was really interesting at first, but it soon started babbling like a brook. >>>
I'm pretty sure I don't have to tell you what I thought of it. I hope those painful life changing experiences take on new meaning for you one day(sincere statement)

  Report
 

LIFTICVSMAXIMVS
Level 1

Join date: Apr 2005
Location:
Posts: 11983

Any marketable good is a suitable hedge for inflation. Productive assets are even better hedges for inflation because theoretically incomes produced by them can also rise with inflation.

  Report
 

NealRaymond2
Level 5

Join date: Oct 2005
Location: Massachusetts, USA
Posts: 513

Sweet Revenge wrote:
Tiribulus wrote:
I used to own "A Course in Miracles".


I USED to own it too. (I'm sure that doesn't suprise you)
I thought it was really interesting at first, but it soon started babbling like a brook.

Then, I experienced two rather painful life-changing experiences (about 2 years apart) and became a little superstitious about having it around. I ended up donating it to a church book sale. But not without a few prayers of blessings and protection for the next owner!

Water under the bridge, but you should have shredded it or burned it. Seriously.

Anyway, back to my original question. What does CM have to do with the probabilities in trading. I don't get the connection.

  Report
 

NealRaymond2
Level 5

Join date: Oct 2005
Location: Massachusetts, USA
Posts: 513

LIFTICVSMAXIMVS wrote:
Any marketable good is a suitable hedge for inflation. Productive assets are even better hedges for inflation because theoretically incomes produced by them can also rise with inflation.


Might not be quite that simple.

In the event of severe inflation combined with general economic havoc, less-critically-necessary marketable goods might have nominal increases in value that are relatively piddling compared to food and possibly energy. Also, productive assets that produce less-critically-necessary marketable goods might see their incomes and values have nominal increases that are relatively piddling compared to food and possibly energy.

Critically-needed marketable goods:

A lot of food is perishable, so it can't be stored for a long period of time. Canned goods take up a lot of room, and are not as healthful as fresh or frozen food (although they are certainly better than starving). Oil and natural gas are expensive to store. Futures contracts have possible problems mentioned further above.

Assets that produce critically-needed marketable goods:

Pick the wrong ones, and if severe economic dislocations hit their costs will run up faster than their revenues.

  Report
 

NealRaymond2
Level 5

Join date: Oct 2005
Location: Massachusetts, USA
Posts: 513

NealRaymond2 wrote:
Sweet Revenge wrote:
Tiribulus wrote:
I used to own "A Course in Miracles".


I USED to own it too. (I'm sure that doesn't suprise you)
I thought it was really interesting at first, but it soon started babbling like a brook.

Then, I experienced two rather painful life-changing experiences (about 2 years apart) and became a little superstitious about having it around. I ended up donating it to a church book sale. But not without a few prayers of blessings and protection for the next owner!

Water under the bridge, but you should have shredded it or burned it. Seriously.

Anyway, back to my original question. What does CM have to do with the probabilities in trading. I don't get the connection.

CM might appeal to some people as alternative means to win at trading. But the ultimate cost for using these alternative means will dwarf all winnings.

  Report
 

Sweet Revenge
Level 4

Join date: Nov 2005
Location: New Jersey, USA
Posts: 788

I'd like to get back into trading. I sold property last year and I'm sitting on way too much cash in the wrong place. All because I've been too busy to develop a plan. With stocks, I prefer the contrarian approach when the opportunity arises and it's served me well in the past (Ford, AIG).

And I enjoyed tinkering with commodities for years. Used to trade with Lind-Waldock back when they were around. It's distressing that they became MF Global and went backrupt under Corslime. Who is a good futures broker now? Is Forex just for currencies?

  Report
 

LIFTICVSMAXIMVS
Level 1

Join date: Apr 2005
Location:
Posts: 11983

NealRaymond2 wrote:
LIFTICVSMAXIMVS wrote:
Any marketable good is a suitable hedge for inflation. Productive assets are even better hedges for inflation because theoretically incomes produced by them can also rise with inflation.


Might not be quite that simple.

In the event of severe inflation combined with general economic havoc, less-critically-necessary marketable goods might have nominal increases in value that are relatively piddling compared to food and possibly energy. Also, productive assets that produce less-critically-necessary marketable goods might see their incomes and values have nominal increases that are relatively piddling compared to food and possibly energy.

Critically-needed marketable goods:

A lot of food is perishable, so it can't be stored for a long period of time. Canned goods take up a lot of room, and are not as healthful as fresh or frozen food (although they are certainly better than starving). Oil and natural gas are expensive to store. Futures contracts have possible problems mentioned further above.

Assets that produce critically-needed marketable goods:

Pick the wrong ones, and if severe economic dislocations hit their costs will run up faster than their revenues.


Quit thinking in currency.

Marketable goods can be bartered.

If it is marketable then that means people have want for it. No biggie.

And by definition "productive assets" can only produce "marketable goods" otherwise it could not be considered "productive".

  Report
 

Brother Chris
Level 2

Join date: May 2005
Location: Arizona, USA
Posts: 16910

Sweet Revenge wrote:
Is Forex just for currencies?


FOREX = Foreign Currency Exchange Market

  Report
1 2 Next Last