Inflation - maintaining buying power

[bargainman]

So debt to GDP is out of control, debt spiral where the debt payments get too large to handle and require more debt is within throwing distance.  Gold at all time highs, people talking about stagflation.  The reported numbers seem to vastly understate the real lived cost of living increases....

 

what are folks doing to protect against high inflation/ hyperinflation?  Just equities with pricing power?  Any thoughts on other hedges?  Any gold bugs or crypto folks?  

[WayWardCloud]

You could diversify into countries that have healthy balance sheets and/or wealth funds such as Norway, Switzerland, Denmark or Singapore.

[Spekulatius]

2 hours ago, WayWardCloud said:

You could diversify into countries that have healthy balance sheets and/or wealth funds such as Norway, Switzerland, Denmark or Singapore.

Yes, but their home markets are tiny so the business that you can invest in export or have direct business in any other countries including the USA. So this is not really a solution.

[Red Lion]

12 hours ago, bargainman said:

So debt to GDP is out of control, debt spiral where the debt payments get too large to handle and require more debt is within throwing distance.  Gold at all time highs, people talking about stagflation.  The reported numbers seem to vastly understate the real lived cost of living increases....

 

what are folks doing to protect against high inflation/ hyperinflation?  Just equities with pricing power?  Any thoughts on other hedges?  Any gold bugs or crypto folks?  

I think rental real estate has been a good hedge over the long term for inflation. Especially with some fixed rate mortgages. 
 

 

[Marco Van Basten]

2 hours ago, Red Lion said:

I think rental real estate has been a good hedge over the long term for inflation. Especially with some fixed rate mortgages. 
 

 

100% agree, but jurisdiction is paramount

[TwoCitiesCapital]

2 hours ago, Red Lion said:

I think rental real estate has been a good hedge over the long term for inflation. Especially with some fixed rate mortgages. 

 

Yes and no. 

 

The real problem is that it opens you up to other risks because you can't take the land with you. 

 

I'd argue higher inflation INCREASES the risk of things like additional taxes to fund local governments and etc - particularly if things get really bad. It's not a bad piece of a multi-pronged inflation resistance, but would be warry to have it be a primary form of it. 

[maplevalue]

Whatever you do, you absolutely cannot own government bonds. Western governments need the value of these debts to decrease relative to real economic output.

[SharperDingaan]

There is a reason why BTC/BTC-ETF is often cited as the preferred vehicle for this. You have inflation protection, anonymity, security, AND ability to easily move your wealth anywhere without currency restrictions. It's just not what many want to hear 

 

SD 

[Red Lion]

1 hour ago, Marco Van Basten said:

100% agree, but jurisdiction is paramount

 

Totally. 

57 minutes ago, TwoCitiesCapital said:

Yes and no. 

 

The real problem is that it opens you up to other risks because you can't take the land with you. 

 

I'd argue higher inflation INCREASES the risk of things like additional taxes to fund local governments and etc - particularly if things get really bad. It's not a bad piece of a multi-pronged inflation resistance, but would be warry to have it be a primary form of it. 

 

I fully agree there are other risks and hassles that go along with it. Lack of liquidity, possible legal liability, problem tenants, etc. 

 

Even in the stagflation of the 70s, real estate massively outperformed stocks and bonds, and threw of some income in the process. 

 

I'd agree that you can't take land with you. So it's not the investment you want if shit hits the fan, regime change, etc. 

 

Multi-pronged inflation resistance makes sense, and covers some of these other issues (lack of liquidity and portability with real estate). Gold (and maybe some bitcoin?) just in case the shit really hits the fan, some commodity exposure somehow. 

 

One thing that's great about real estate though, the long term fixed rate mortgages would allow you to hold 50-100% of your net worth in rental real estate while still having 60-80% in other investments. If we have really bad inflation, nominal prices will likely keep up with inflation in the long run, a 6.5% mortgage looks like a steal, and rents will hopefully rise faster than your taxes and insurance. If rates go down or if nominal prices go up with inflation, there's the kicker of being able to play the refinance game to raise liquidity without selling.

 

I've got about 65% of my net worth in investment real estate, but have mortgages for about 50% LTV which free up capital to still let me have 50% of my net worth in equity (stocks and private business ventures) and ~15% in my primary residence. 

 

I definitely need to consider having a bucket for gold/commodities (still can't see myself buying crypto). And it's something I plan to incorporate in the future. Maybe up to 20%.

[73 Reds]

15 hours ago, bargainman said:

So debt to GDP is out of control, debt spiral where the debt payments get too large to handle and require more debt is within throwing distance.  Gold at all time highs, people talking about stagflation.  The reported numbers seem to vastly understate the real lived cost of living increases....

 

what are folks doing to protect against high inflation/ hyperinflation?  Just equities with pricing power?  Any thoughts on other hedges?  Any gold bugs or crypto folks?  

Desirable rental real estate and great businesses, both of which should throw off a lot of cash.

[Gamecock-YT]

Royalties

[schin]

20 hours ago, bargainman said:

So debt to GDP is out of control, debt spiral where the debt payments get too large to handle and require more debt is within throwing distance.  Gold at all time highs, people talking about stagflation.  The reported numbers seem to vastly understate the real lived cost of living increases....

 

what are folks doing to protect against high inflation/ hyperinflation?  Just equities with pricing power?  Any thoughts on other hedges?  Any gold bugs or crypto folks?  

 

Knowledge and expertise is the ultimate hedge on inflation.  Being better/more efficient/thorough than your fellow colleagues, knowing more, studying more, being more valuable or more customer focused -- translates to strong relationships, a brand of dependability, and ultimately opportunities/promotions down the line.  If you get downsized, it should translate to calls from competitors that want to upgrade their program/bench with one's know-how.

[Marco Van Basten]

2 hours ago, schin said:

 

Knowledge and expertise is the ultimate hedge on inflation.  Being better/more efficient/thorough than your fellow colleagues, knowing more, studying more, being more valuable or more customer focused -- translates to strong relationships, a brand of dependability, and ultimately opportunities/promotions down the line.  If you get downsized, it should translate to calls from competitors that want to upgrade their program/bench with one's know-how.

Absolutely right, however it only applies if you are 20-30-40 and in good health.  If you are close to retirement or ill or a family member is seriously ill and you have to devote time to caring for him, then this does not apply.  You can be an incredible plumber but you probably cannot work past 65-70, same for electricians, carpenters, many doctors/lawyers/other professionals.  Very small percentage of people can work post 70.  

[Red Lion]

On 9/27/2025 at 4:52 PM, schin said:

 

Knowledge and expertise is the ultimate hedge on inflation.  Being better/more efficient/thorough than your fellow colleagues, knowing more, studying more, being more valuable or more customer focused -- translates to strong relationships, a brand of dependability, and ultimately opportunities/promotions down the line.  If you get downsized, it should translate to calls from competitors that want to upgrade their program/bench with one's know-how.

 

I'd agree when it comes to earning capacity, but from a capital perspective I think investment selection is much more important for those who already have (close to) enough to live on their capital. 

[scorpioncapital]

To protect against inflation, equities are not of themselves sufficient. They must have several characteristics:

 

1. a monopoly or strength that provides earning power and growth.

2. debt free OR fixed rate debt. Variable rate debt which is hard to extinguish won't cut it. That's why highly leveraged assets are not always good inflation hedges.

3. they must be modestly priced. This is also often forgotten. Inflation contracts multiples, even with #1 above. So you better not have an insane multiple to start with. This is because even if interest rates don't keep up with the inflation, they still act as a brake on multiples. 

 

Some people have said direct inputs like oil, gold, land, etc.. are good hedges, and that may be so but it really depends on the vehicle and financing. 

I also think oil might be a little restrained than in the past due to changes in usage of oil in general. But it still is a hard asset so should do better than say a 100x p/e tech stock.

I actually like overcollateralized crypto tokens because you are basically protected by the counterparty who loses by making a 'loan' at the wrong price. But it isn't easy to find say a 200% collateralized flat or stablecoin but there are some around.

 

[Saluki]

I think it naturally depends on your specific situation and risk tolearance. My parents bought a house in a working class neighborhood in NYC in the 1970s for $22k. According to Zillow, it's worth $1.5mm now. I will never tell my parents this because they will have a heart attack. However, while that did provide a hedge against inflation if they had $22k sitting around and put it into an index fund they would have a much better run (but much lumpier) and much more liquidity. 

 

Since I am getting a small pension that is not indexed to inflation for another 8 years, if I wanted to protect that income stream from inflation, I could be adventurous and just go with stocks. I could double down on my inflation thesis by focusing on things like oil and gold too. Or, I could just own my home without paying down the mortgage. The mortgage is fixed and inflation is floating, so it's like doing a fixed for floating swap. Any pain in lost buying power from my pension is made up for by increase in real estate (hopefully). Then when I sell, I can use those new nominal gains to replace the income stream with a new instrument that has a larger notional, and I am in the same position as if I had a floating pension. 

[Red Lion]

3 hours ago, Saluki said:

However, while that did provide a hedge against inflation if they had $22k sitting around and put it into an index fund they would have a much better run (but much lumpier) and much more liquidity. 

 

I think it would be really interesting to do the numbers on taking the cashflows from renting it out, and putting those into the index fund. 

[Eldad]

If you have a good job that’s always in demand, some non-recourse fixed rate debt on some real estate is probably the ultimate. 

[Paarslaars]

On 9/27/2025 at 8:13 PM, SharperDingaan said:

There is a reason why BTC/BTC-ETF is often cited as the preferred vehicle for this. You have inflation protection, anonymity, security, AND ability to easily move your wealth anywhere without currency restrictions. It's just not what many want to hear 

 

SD 

Indeed, it was specifically designed for this...