I am curious how people intend on positioning their overall investments / portfolio when inflation (eventually) kicks-in? Inflation may be still off in the distance but once it appears in earnest, it seems it will be hard to stop and am guessing the folks in Washington may not want it stopped.
Given my relatively novice skill set and experience level, I'm not sure what type of investments (including non-financial) would be prudent to own.
Comments
Precious metals are one element, but as I've often said, I think there are many other forms of possible protection against inflation, such as infrastructure, natural resources companies, other commodities (I like ag long term) and I think prime real estate. Hard assets. Farmland, too, although there's no "pure-play" farmland investment for retail investors, just as part of larger companies.
Timber is another thing that may do well if inflation really takes off, although it hasn't done well in the last few years, given what's going on in housing and other factors.
Relative to your other recommendations, are there Funds you would recommend to address Infrastructure, Natural Resources, and / or Prime Real Estate? I was considering small plays with VGENX, as well as USAGX for Precious Metals.
I apologize in advance if I'm asking stuff you've commented on in the past. I've been out of pocket on MFO for a while.
Just a quick follow-up, why do you feel that for youngsters who mostly hold equities there is little need for other inflation assets? Do you feel equities should do well in an inflationary environment? FWIW, I'm currently 46.
There are some mutual funds, as well; while I don't particularly like a lot of what Alpine offers, their global infrastructure fund is one of the better mutual fund infrastructure offerings, in my opinion, and can invest in EM, where some of the other funds, such as the Cohen and Steers fund, appear to focus on developed markets.
Pimco's new multi-asset inflation fund (real estate, emerging currencies, commodities, tips, gold, mild hedging) hasn't exactly done remarkably so far, but is conceptually an interesting fund.
Prime real estate is really a difficult thing in terms of specifics, as you get a real estate fund with a bunch of malls and I tend to think that real estate will more likely do well in a more significantly inflationary period. I do not like mall REITs in the US, aside from specific things (Tanger Outlet Stores would be a maybe, as I think outlets will do well) and I think even if things were to get better in the US, malls are overbuilt - those that do not evolve will not do well over the next 5-10 years will absolutely not fare well. I like prime space in major cities, such as Boston Properties, Vornado, Brookfield or some of the foreign REITs, such as BR Properties. It's hard to be specific, and I think I'm really looking at the replacement value of skyscrapers or other major properties in big cities.
Farmland is held to some degree by Glencore (GLCNF.PK), Sprott Resources (SCPZF.PK), Adecoagro (AGRO), Cosan (CZZ) and a few other ones I'm forgetting (there's another Brazilian one that starts with a C I think). US Global's resources fund (PSPFX) is the most aggressive - I'd say - mutual fund play, but it is hot/cold as a result. Still, I do think Frank Holmes is a highly skilled and knowledgeable manager. That fund does also have a *bit* broader range of holdings under the natural resources banner than most funds in the category do - for better or worse. Awesome that you were able to grab some farmland - I think I remember you talking about that on the board a while back.
There are also the MLPs - I like Salient MLP Energy and Infrastructure (SMF), which is the only MLP fund that can hedge. It is a closed-end fund.
Timberland is really more of a company-specific thing, although I believe there's an industry ETF.
If inflation really takes off, I definitely think there will be some stocks that will have much more difficulty passing off costs. I don't think equities will do well across the board.
Speaking of tactics, an article from Bloomberg this morning:
Pepsico waters down Tropicana:
http://www.bloomberg.com/news/2012-02-15/pepsico-adds-water-to-tropicana-to-juice-brand-s-margin-retail.html
a lol moment early in the article:
"Some consumers prefer orange juice that’s less thick. Others want juice with the “goodness” of oranges and fewer calories, said PepsiCo Global Beverages Chief Massimo D’Amore. And consumers will pay the same -- or more -- for such versions.
“They themselves add water before drinking OJ,” D’Amore said. “So why not add the water ourselves and charge for it?”"
They just are looking for any way to offer less and charge the same.
Finally, recommended reading - two somewhat different takes on the future of the currency: Jim Rickards ("Currency Wars") and Barry Eichengreen's "Exorbitant Priviliege: The Rise and Fall of the Dollar" - some local libraries may carry one or both, or visit amazon via the fundalarm link. Both books came out last year.
http://myinvestingnotebook.blogspot.com/2012/02/warren-buffett-why-stocks-beat-gold-and.html
BTW, have you researched or formed any opinions on VGENX or USAGX?
http://mjperry.blogspot.com/2012/02/higgs-on-immiseration-of-personal.html
http://econompicdata.blogspot.com/2012/02/some-more-ugly-bond-math.html
An additional trillion borrowed last year, the year before, this year, next year.
Someone pays. A thank you would be preferable to demonization but don't hold your breath.
We have maintained a simple "write it down" for expenses for years, and are also able to view the changes in costs. We use about 20 major categories. We miss a candy bar expense here and there, but do have a good overview of our budget costs over the years.
Take care,
Catch
It's worked really well, as so far our retirement expenses are pretty much the same as pre-retirement, except for the house mortgage, which was fully paid off prior to retirement. That chunk now pretty well covers our traveling expenses.
Not hard to do- at month end look at the checkbook and the credit-card statements, and plug those into the categories. For routine cash expenditures, assume mostly food- that puts the cash into the "essential" category, and requires little or no detailed accounting. Candy bars go there too.
Do this for a few years and you will easily see the spending patterns, and get a real good picture of your retirement income needs. Believe me, they will NOT go down substantially after retirement if you want to do anything more than sit on a park bench all day.
Commentary here:http://fpafunds.com/hc_crescent.html
Here is a lnk to the Principle Global Global Diversified Income fund web site for a more accurate description. http://www.principalfunds.com/investor/promo/gdif/
The other diversified fund I've used in my fixed income bucket for a while now is HSTRX. This fund is pretty conservative with consistant returns year after year.
I reduced but still holding on to some LSBRX and MWTRX
So I'm hoping that when inflation starts to take off, these diversified type allocation funds will hold up better then your typical total return or intermediate bond fund will. I know it's not a traditional bond/ fixed income portfolio, but it offers more flexibility in the fixed income category.