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Top inflation hedges?

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  • Jun 12th, 2021 6:29 am
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Member
Jun 10, 2015
272 posts
89 upvotes
Canada

Top inflation hedges?

My working theory is that inflation will continue to climb. The Fed is keeping quiet on this front for obvious reasons. Many people think financials are a safe haven. However, that is far from the case as inflation erodes the real value of loan repayments. Furthermore, an interest rate spike will only reduce demand for loans. Look to the 70s. Wells Fargo and Mellon of NY did terribly.

In my opinion the top inflation hedges are the minerals gold and copper which likely will be seen as a store of value going forward. Money will flow from crypto to real stores of wealth.

I will be investing in the producers rather than the physical asset as they are the ones that actually make the stuff.
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Deal Fanatic
Jul 23, 2007
5134 posts
4928 upvotes
redflagdealsnewb wrote: My working theory is that inflation will continue to climb. The Fed is keeping quiet on this front for obvious reasons. Many people think financials are a safe haven. However, that is far from the case as inflation erodes the real value of loan repayments. Furthermore, an interest rate spike will only reduce demand for loans. Look to the 70s. Wells Fargo and Mellon of NY did terribly.

In my opinion the top inflation hedges are the minerals gold and copper which likely will be seen as a store of value going forward. Money will flow from crypto to real stores of wealth.

I will be investing in the producers rather than the physical asset as they are the ones that actually make the stuff.
You could be right, but referring to gold, from what I've read the physical asset performs better than the producers in times of turmoil. That's probably why the adherents of the permanent portfolio or the all-weather type portfolios mostly invest in the bullion.

From 1963 to 1983 the TSE gradually went up, but not including dividends inflation outperformed the index, and in the TSE at that time the basic materials sector was full of producers, and that's not even including the energy sector.

Perhaps dividends are the key to outperform inflation. Just keep re-investing them, at least that's what I plan to do through any stock market scenario that may lie ahead.

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