The Inflation Protection Thread

[Kung Fu Steve]

I haven't been around much because I've been so busy. (It's been a good thing )

But I have a strong feeling that inflation is going to hit hard. Especially in my area. I know there are several threads about this already but if you are up for it, I'd like to make a list of simple things we should all watch out for and ways to protect ourselves and our assets. Hopefully some of the greats on the forum are willing to contribute here

The one thing I know that I am doing is reducing expenses and increasing profit margins in my business all around. From negotiating wholesale discounts, to negotiating rent, to tracking and recording advertising and making sure ROI is high. No dollar is spent without cause and every price is negotiated extremely hard. So...

1. Decrease Expenses.
2. Increase profit margins in business.

Any takers? Anyone add to this?

[JScott]

Own assets (like leveraged real estate) that are somewhat more immune (and perhaps even beneficial) during times of inflation...

[MonTexan]

I've heard it said that "you'll want to own things that would hurt if you dropped them on your foot." Think gold, oil (in a barrel), houses, guns...

[hatterasguy]

Real estate and guns are my favorite investments. Guns may sound silly but they usualy do pretty good. As long as you keep them clean and buy right, guns don't depreciate. Quite the opposite usualy happens.

[Jonleehacker]

Own assets (like leveraged real estate) that are somewhat more immune (and perhaps even beneficial) during times of inflation...

I see the logic of owning tangible assets like real estate during inflationary periods, but the "leveraged" part doesn't see to fit.

What happens to your ability to leverage if interest rates go to 14% on your loans? Seems to me that is not the best place to be in (if we assume inflation will produce high interest rates).

[Bilgefisher]

I think if you own fixed rate leveraged assets but stear very clear from adjustable rate items. Ie get rid of credit card debt now, get away from adjustable rate mortgages etc. If you have a fixed rate mortgage it will be much easier to pay off the loan amount when you have many more dollars at your disposal.

[Kung Fu Steve]

Is there anything people can do to have a better advantage during this time as well guys?

I see things such as getting out of credit card debt and getting into a fixed rate mortgage have been suggested. Care to elaborate? Is this the time for first time home buyers? (IE - myself) What can be taken advantage of?

[JScott]

I see the logic of owning tangible assets like real estate during inflationary periods, but the "leveraged" part doesn't see to fit.

What happens to your ability to leverage if interest rates go to 14% on your loans? Seems to me that is not the best place to be in (if we assume inflation will produce high interest rates).

As Bilge pointed out, what I meant was to leverage using *fixed* interest rate financing...

[Jonleehacker]

As Bilge pointed out, what I meant was to leverage using *fixed* interest rate financing...

It may be a cultural misunderstanding as well.

In Canada, our mortgages have terms as well as rates.

Meaning that I can have a 4% fixed rate, but it still might only have a 3 year term. If interest rates shoot up just as your term expires, you'll need to renegotiate at the interest rates at the time of expiry. The longest terms available are 10 years (and you'll pay a big premium to go that long) 5 yr and less are more common.

These terms are unrelated to amortization, of course.

I'm guessing you don't have terms on your mortgages, since you seem way more relaxed and certain about having a *fixed* rate, then I would be.

[Russ H]

Jon--

Because of Fannie and Freddie, Americans can get 30 (and now even 40) year fixed rate mortgages.

12% inflation? 6% mortgage?

8% interest rates in money market accounts?

Makes inflation a pretty suh-weet deal if yah got a long term fixed rate mortgage.

-Russ H.

PS I know you're staying in Canada, but this is one of the things that makes US real estate a groovy investment. Even some of our SBA business loans have 20 year fixed rates!

[hatterasguy]

I see the logic of owning tangible assets like real estate during inflationary periods, but the "leveraged" part doesn't see to fit.

What happens to your ability to leverage if interest rates go to 14% on your loans? Seems to me that is not the best place to be in (if we assume inflation will produce high interest rates).

Inflation reduces the real value of your debt. Thats how the government is going to fix that national debt, inflate the heck out of our currancy.

[Pinnacle]

Inflation reduces the real value of your debt. Thats how the government is going to fix that national debt, inflate the heck out of our currancy.

Bastards. And their minions in the financial media tell us to be responsible with our money.