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More poetry..
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Inflation - Your Friend?
- Thread starter yieldmatters
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More poetry..
Hang on, that's Star Trek isn't it?
Hi All
Great thread
my opinion with regards to inflation is that hard assets continue to rise ( even if they stand still measured against inflation) but the purchasing power of money goes down, so does your initial cost of capital as inflation eats away at your borrowed static loan. Yields increase to compensate for rising interest rates therefore the investor should end up with more equity.
The problem is if you keep buying and increasing debt you will come to a sticky end when inflation turns down again.
cheers
Great thread
my opinion with regards to inflation is that hard assets continue to rise ( even if they stand still measured against inflation) but the purchasing power of money goes down, so does your initial cost of capital as inflation eats away at your borrowed static loan. Yields increase to compensate for rising interest rates therefore the investor should end up with more equity.
The problem is if you keep buying and increasing debt you will come to a sticky end when inflation turns down again.
cheers
Oh I don't know. Assuming you survived the high interest rates, your property investments would have done ok in the last decade or so of low inflation.
Alex
The key to your answer was " if you survived" and I wonder what type of investor managed to do that. Would be interesting to know and copy them
cheers
Don't copy anyone too closely. (i.e. Don't copy what someone did in 1990 and expect it to apply in 2008).
Investing isn't about copying people, it's about taking on risks & then managing those risks. Those who survived managed the risks successfully - there's lots of threads about managing risk.
I can't see any problem in copying successful strategies for certain economic environments. There is nothing new under the sun.
If you read resource materials and you adopt a strategy from the author are you not copying?
Seems to me some peoples' egos lead them to believe that their strategies are original. scoff
never the less good luck to you
cheers
If you read resource materials and you adopt a strategy from the author are you not copying?
Seems to me some peoples' egos lead them to believe that their strategies are original. scoff
never the less good luck to you
cheers
you mean manage the risk THEN take it on....
i saw a short once where it was explained that in Roman days an ounce gold coin could buy you an embroidered toga, leather belt and leather soled sandals.
today an ounce of gold can still buy a good suit, shirt, tie, shoes and belt.
gold is your friend to manage inflation.
hi Goyco
not sure you are correct with.
The problem is if you keep buying and increasing debt you will come to a sticky end when inflation turns down again.
if you rental is infront of rates and your equity level or cash flow increases when rate drop (if they do) and you have structure your debt to cover for inflation then if inflation drops or (and we have not seen it we have negative inflation as in prices goes backwards) I am not sure where they would be in a sticky situation.
if costs rise then you are increasing risk.
if costs drop but return rises then risk is reduced or have I missed something here.
if you increase debt as rates rise and you are covered at the top of a cycle and your debt level is covered then as you go over that hump you cost drop but your returns don't unless leases and rents drop( negative inflation)( which I have not seen not saying it couldn't happen).
as rate rise I look at buying not selling and cover at the highest rate you think.
why
because you are the only one buying not alot of competion.
but thats me
not sure you are correct with.
The problem is if you keep buying and increasing debt you will come to a sticky end when inflation turns down again.
if you rental is infront of rates and your equity level or cash flow increases when rate drop (if they do) and you have structure your debt to cover for inflation then if inflation drops or (and we have not seen it we have negative inflation as in prices goes backwards) I am not sure where they would be in a sticky situation.
if costs rise then you are increasing risk.
if costs drop but return rises then risk is reduced or have I missed something here.
if you increase debt as rates rise and you are covered at the top of a cycle and your debt level is covered then as you go over that hump you cost drop but your returns don't unless leases and rents drop( negative inflation)( which I have not seen not saying it couldn't happen).
as rate rise I look at buying not selling and cover at the highest rate you think.
why
because you are the only one buying not alot of competion.
but thats me
Hey, nice one Blue Card.
I've never understood gold as an investment, but that story explains things as good as I've heard yet.
See ya's.
Hi Grossreal
Thanks for your reply but I'm having a few problems following your argument.
Suffice to say that asset classes go down as well as up. The problem arises when people are highly leveraged in one asset class believing it to only go up. When things turn down and if they are lucky enough to survive they are not in a postion to buy the bargains when they appear.
IMO for property rising yields, flat or falling prices and low vacancy rates signal a good tiime for property ( some would argue that is where we are now) the danger signals are falling yields, rising prices and rising vacancy rates ( above 3% ).
Having an investment strategy for all scenarios I believe will put you in the drivers seat when those bargains appear.
Good luck
cheers
Goyco
you mean manage the risk THEN take it on....
i saw a short once where it was explained that in Roman days an ounce gold coin could buy you an embroidered toga, leather belt and leather soled sandals.
today an ounce of gold can still buy a good suit, shirt, tie, shoes and belt.
gold is your friend to manage inflation.
Hi Blue Card
I have heard that too! Just proves that it is not that gold actually goes up in value it's just that everything else ( that is not a commodity ) goes down
cheers
Especially as all our currencies are backed by nothing. Still, people BELIEVE it has value, so it does. I just have to make sure that my worthless dollars are increasing faster than the government is debasing it.
Alex
Alex
Ahhhh. The old Fiat currency system conspiracy pops up again and again. In fact the currency is backed by 1) The peoples' ability to create more goods more efficiently 2) Good sound management from the caretakers of the economy.
Question is "are we more efficient?" and "How is our central bank doing as a manager?"
Gold and commodities are the benchmark to measure your economy by. ATM judging by the price of Gold, oil, food etcI think it is a reasonable assumption to say that inflation is running at a much higher rate than the central banks of the world are letting on.
You, like myself, have strategies in place regardless of the outcome. I think to be a pragmatic investor is the best way to win this game
cheers
Goyco
