I am thinking about a strategic (6 - 12 months) inflation Hedge. My portfolio is VT, employer company stock, BTC , gambling stocks.
I am now thinking about if there is good way to hedge for Inflation (I am working on the semicon industry and prices are sky rocking and lead times are super long.)
I am basically looking for the VT of commodities. I am looking into the following ETFs:
REMX (could also be a longer play)
XDWM (seems rather correlated to equities and not liquid, yet interesting companies)
Copper (no idea how to get exposure. ETF with futures are not offering the best return)
Gold (not really a big fan but hey… It’s cheap)
reduce US exposure (shift to east asia and europe)
One more thing: I assume Inflation will drive up interest rates which in return will increase the DCF discount rates. So, intrinsic value of growth stocks will fall resulting in less growth of QQQ stocks. QYLD could be in interesting option here as it yields ~11%.
My main inflation hedge is a well differentiated stock portfolio.
On the long term it should work just fine.
I’ve been considering a small allocation in real estate funds to hedge specifically for rent increase, but it won’t make a big difference anyway.
The US fed rates are low partly because they need to sustain their debt level, governement and corporate. The SNB rates are low because they’re trying to keep the CHF from rising, to support our exports. The Fed rates will probably rise before the SNB ones doe (because the SNB policy is in reaction to low rates elsewhere in the world).
I don’t forsee meaningful inflation in Switzerland in the coming years (if we exclude health insurance premiums and real estate from the basket). I’m asking the question because CHF would probably be a good edge against an inflation in the US.
As for domestic inflation, my first line of defense is my salary so the asset I’m investing in is my skillset. Then you’d have;
stocks (companies’ earnings should rise with inflation. If you’re worried about the US, you may tilt away from them, I’m no specialist of the topic.)
real estate (with mortgage(s) because debt is in nominal CHF that would loose value during inflation). Bonus points for a nice little piece of garden somewhere close enough from home.
commodities (nice if you have access to dedicated ETFs at your broker, otherwise, you can also stockpile consumables if you have the storage room - digging into debt to finance future consumption would be an inflation edge).
potentially cryptocurrencies (they could act as a refuge against fiat loosing its value but could just as well be dropping from their peak just as people start needing the money and try to sell their coins).
others.
I’m still betting on the USD loosing value, the CHF staying strong and little to no domestic inflation so my play is skillset + bags of rice/pasta/cans/spices + my own garden, which is not specifically inflation oriented but rather my run-of-the-mill standard doomsday state of preparedness. Small physical ingots of gold, silver and copper wouldn’t hurt but I haven’t set that into motion yet.
Edit: for homeowners: solar pannels and investments meant to improve the thermal efficiency of the building would be edges against a rise in the prices of energy. I’d do it first since there are programs subsidising it and they may not be there forever.
My key takeaway is that I am starting a stamps collection and building a wine cellar. Jokes aside, if paired with proper education on the topic, the wine cellar could be an actual good and interesting investment/activity once FIREd (or just when having more time).
Don’t worry. Soon we will not be sure if FED and BLS numbers are correct anyways
Fed will reduce rates at some point using low CPI as reason but if CPI itself is manipulated to please White house, then interest rates would not matter.
Just drink it! Dunno, these (wines, watches, art) are too illiquid and opaque to me. A friend of mine has built a big (for Greece) cash position - scratch that, it’s not a “position”, it’s just cash in the bank - over many years and has struggled to do anything meaningful with it while the market did 150% in the same timeframe. He’s faffing with Greek govt notes which were paying ~3% tax-free (now they’re down to 1% or so) but every once in a while he comes up with wonky ideas like buying a few Rolex watches, paintings, a parking lot to do something with the money… I tell him he’s spending a lot of effort finding bad ways to get his money moving, the GR notes were probably the best, but then he got FOMO once he realised what the market did in 2024. Now he’s back to these alternative investment ideas
He’s reading Kiyosaki for some reason, I told him Kiyosaki is a hack and a scammer…
I was studying in Spain in the 80s. A glass of wine was 5 Pesetas, with some side food 10 Pesetas. That is like 2.77 to 5.54 Euro Cents. In Andalusia it was 4 Pesetas.
Today you may pay 2.50 Euros for the same wine, with food maybe 10. Now that is way more than inflation and I speak of the common wine.
Now wine is difficult to store. But booze is not! We did organize a big party and bought a lot of booze. We bought it from an old man who used to have a bar. Instead of bringing his money to the bank he just bought booze, saying that you don’t get 40% from the bank…
He had like two whole floors of his house filled with cages and cages of booze. He sold it to us for 20% less than the supermarket. But what booze: 50 years old and more. There were tax seals of 0.5 Pesetas…
But the only real hedge against inflation is debt. I always have at least the amount of debt that I keep cash around in my different accounts in different currencies.
As long as the debt interest is lower than the dividend yield it is even good business. Stocks go up in real value, debt goes down in real value and you even get paid to enjoy that.
True, but with fixed mortgage debt on property, you have visibility over the debt cost and property yield.
With borrowing on margin to buy dividend companies, you have uncertainty over debt interest rate and also future dividend yields so is much more speculative.
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I am looking into the following ETFs:
