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Your Best and Worse Defenses for Inflation...

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MJ DeMarco

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Here are my best defenses, and worse defenses for inflation, in order of strength.

This, of course, is purely my opinion based on 50+ years of experience on this planet Earth.

Feel free to comment, add your thoughts, or add your rankings.

And then, adjust your strategy now and in the future.

Notice how these strategies all fall-in line with a Fastlane strategy.

BEST DEFENSE (IN ORDER OF POWER)ACTIONABLE DEFENSE
A businessRaising prices.
Rental propertyRaising rents.
A specialized skillRaising your return on labor rental
Real estateNone, but creates a long-term preservation of buying power
Personal influenceIncrease that rates at which you exert influence (A YouTube channel with 1 million subscribers can help you beat inflation!)
A sales jobSell more at higher prices through indirect association of the patriarch business
Hard assets and commoditiesBuy gold, silver, gas, hard assets.
Commodity investmentsBuy commodity assets on an exchange, like DBC, futures, etc.
Stockpiling suppliesBuy life's necessities and store for later user
A money systemIncrease return on cash via raising interest rates.
A part time jobIncrease return on your time through higher labor costs
WORST DEFENSEACTIONABLE DEFENSE
A government paycheckNothing.
A pension, social securityNothing.
A salaried jobNothing.


Feel free to add in anything I might have forgotten!

Or add your thoughts or opinion.
 
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YanC

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Great list. First time going through this given my age obviously, but I started preparing for it a few years ago. I'm doing #1, #2 and #4 with my short term rental business. I would add borrowing at fixed rate in an inflating currency to finance this kind of cash flowing asset maybe ? Without going crazy though, debt is a double edged sword and you can always be wrong.

Working on #7 and #10 as well but I'm a little guy here, I haven't made my fortune yet :happy:
 

Longshot

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Aug 17, 2012
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Here are my best defenses, and worse defenses for inflation, in order of strength.

This, of course, is purely my opinion based on 50+ years of experience on this planet Earth.

Feel free to comment, add your thoughts, or add your rankings.

And then, adjust your strategy now and in the future.

Notice how these strategies all fall-in line with a Fastlane strategy.

BEST DEFENSE (IN ORDER OF POWER)ACTIONABLE DEFENSE
A businessRaising prices.
Rental propertyRaising rents.
A specialized skillRaising your return on labor rental
Real estateNone, but creates a long-term preservation of buying power
Personal influenceIncrease that rates at which you exert influence (A YouTube channel with 1 million subscribers can help you beat inflation!)
A sales jobSell more at higher prices through indirect association of the patriarch business
Hard assets and commoditiesBuy gold, silver, gas, hard assets.
Commodity investmentsBuy commodity assets on an exchange, like DBC, futures, etc.
Stockpiling suppliesBuy life's necessities and store for later user
A money systemIncrease return on cash via raising interest rates.
A part time jobIncrease return on your time through higher labor costs
WORST DEFENSEACTIONABLE DEFENSE
A government paycheckNothing.
A pension, social securityNothing.
A salaried jobNothing.


Feel free to add in anything I might have forgotten!

Or add your thoughts or opinion.
Nice. As for "stockpiling supplies," there was an interesting from the late 70s called "The Alpha Strategy" about that. They were also going through a time of stagflation. The author was very much a libertarian who thought the government and Fed messed everything up--but gave practical solutions and didn't just complain.
 

Johnny boy

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That's the beauty of inherent value. A business provides an inherent value. You trade useless paper for it and use the useless paper to scale up your ability to provide inherent value to more people.

You are always trading in terms of whatever the current placeholder for value happens to be.

Years from now when it costs $79 for a gallon of gas, it will cost $2,370 a month to get your small-medium yard cut, and we will pay over $300 an hour for employees = same margins, same profits adjusted for inflation, same lifestyle and relative income, just different numbers.

My form of money is in terms of customers. I don't think I need a million for a million dollar house. I need 300 customers worth of income to qualify for the mortgage on that type of house. The dollar amount is now irrelevant.

The only threats are a change to the inherent value. The actual supply and demand of the things that affect your industry.
 
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Ismail941

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Perfect. Short and Simple without any complicated scenarios.
Thank you, Demarco! You are the best!
 

c23r

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Jan 24, 2022
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Rental propertyRaising rents.
Raising rents might not be possible, there might even be governmental restrictions that prevents you from raising rates.

Or even worse, the green people come up with new regulations and do not allow you to rent your property out, because it does not meet the current energy saving guidelines.

Real estateNone, but creates a long-term preservation of buying power
I am still not sure if it has to be debt free or not.

Commodity investmentsBuy commodity assets on an exchange, like DBC, futures, etc.
Not all commodities are the same, as I've learned the hard way. Pick the right ones, and the right timing.

Stockpiling suppliesBuy life's necessities and store for later user
Only works in the short term. People from Argentine suggested to stockpile toilet rolls and canned food. As a means to trade ...

Gold won't work for trading. Store of value vs trading value ...
 

jdm667

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Great list MJ. Having skills & providing value will always act as currency, regardless of inflation due to money printing, supply chain issues, etc.

For even better results, combine 2 or more of the items in the list to achieve synergy.

For example:
  1. First, learn a specialized skill and master it.
  2. Next, build up influence by creating content around that skill.
  3. Finally, provide a book, course, or training to teach the skill.
As inflation worsens, more people will look for a part-time job (or a better paying full-time job). They will gladly pay good money to learn your well-paid, specialized skill.

Later, create systems to automate operations & hire others to scale faster (and now it is a larger business).

With your free cash flow, diversify to real estate & other options.
 
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Xeon

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Was half expecting cryptos to be in the actionable defenses list....
 

YanC

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Raising rents might not be possible, there might even be governmental restrictions that prevents you from raising rates.

Or even worse, the green people come up with new regulations and do not allow you to rent your property out, because it does not meet the current energy saving guidelines.
The problem if you start thinking in terms of what the government and their friends may do or not do, is that you're likely to do nothing as there is no safe escape.

History has shown countless times that they gladly change laws to suit their wants and needs and that they have no problem shutting down businesses, seizing gold, implementing foreign exchange controls or "blocking" prices. So yes, they may as well regulate rents even more and make short term rental illegal while they are at it.
 
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Last edited:

c23r

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Jan 24, 2022
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The problem if you start thinking in terms of what the government and their friends may do or not do, is that you're likely to do nothing as there is no safe escape.

History has shown countless times that they gladly change laws to suit their wants and needs and that they have no problem shutting down businesses, seizing gold, implementing foreign exchange controls or "blocking" prices. So yes, they may as well regulate rents even more and make short term rental illegal while they are at it.
Totally agree. Owning and renting property is a good idea.

It is always difficult to put things into perspective. Is it "just" a recession, or is this a once in a lifetime event, doomsayers are warning us about.
 

isaacdramera

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Here are my best defenses, and worse defenses for inflation, in order of strength.

This, of course, is purely my opinion based on 50+ years of experience on this planet Earth.

Feel free to comment, add your thoughts, or add your rankings.

And then, adjust your strategy now and in the future.

Notice how these strategies all fall-in line with a Fastlane strategy.

BEST DEFENSE (IN ORDER OF POWER)ACTIONABLE DEFENSE
A businessRaising prices.
Rental propertyRaising rents.
A specialized skillRaising your return on labor rental
Real estateNone, but creates a long-term preservation of buying power
Personal influenceIncrease that rates at which you exert influence (A YouTube channel with 1 million subscribers can help you beat inflation!)
A sales jobSell more at higher prices through indirect association of the patriarch business
Hard assets and commoditiesBuy gold, silver, gas, hard assets.
Commodity investmentsBuy commodity assets on an exchange, like DBC, futures, etc.
Stockpiling suppliesBuy life's necessities and store for later user
A money systemIncrease return on cash via raising interest rates.
A part time jobIncrease return on your time through higher labor costs
WORST DEFENSEACTIONABLE DEFENSE
A government paycheckNothing.
A pension, social securityNothing.
A salaried jobNothing.


Feel free to add in anything I might have forgotten!

Or add your thoughts or opinion.
Buying land can also be considered as hard asset and commodities right ?
because right now my business is mostly base on land … like agriculture and breeding ( farming ). Plus I have some opportunities to buy good land in space less developp by now
 

Nicole

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A privately owned business doesn't have as much pressure to always profit, every quarter. This was something Elon Musk mentioned when he was trying to buy Twitter. A publicly traded company has a lot of pressure to always profit. A private company doesn't necessarily have to show the whole world all of their accounting, so if there's inflation during one quarter, or one whole year, and you keep your prices the same, and your expenses are going up while your revenue is staying the same, your profits are going to be not great, or you will take a loss, and it doesn't matter, because nobody's looking at the books. It will only start to matter if you can no longer pay the landowners and anybody that you borrowed money from. Keeping prices the same, during inflation, could attract customers who really appreciate it, and it could draw those people away from other places who were aggressively raising prices to keep up with their rising costs. You could underprice the competition, as a strategy.
 

MJ DeMarco

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Was half expecting cryptos to be in the actionable defenses list....

We only have records of crypto and inflation coexisting one time in history... NOW.

How has it done?

An asset class that is down 50-70% isn't a store of buying power.

That's why it's not on list.

However due to a limited history, that could change.
 
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fastlane_dad

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Great list and framework of where your effort should be headed, whether in THIS inflation period or the next. The list also works well in non-inflationary times as well!

All boils down to control, some version of branding, and skills and knowledge to know how to promote, sell and market yourself and your products (business).

Great reminder to all once again - and I don't see this list CHANGING anytime soon into the future.
 

akhilesh1311

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What's the difference between a Specialized Skill vs a Salaried Worker ? Both need a specialized skill. Is it like a contractor vs a salaried worker we are talking about?
 

jdm667

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What's the difference between a Specialized Skill vs a Salaried Worker ? Both need a specialized skill. Is it like a contractor vs a salaried worker we are talking about?
To me, it comes down to levels of expertise and how common the skill is, which gives you more time and leverage:
  • Basic MS Excel skills (e.g. data entry - most salaried office workers need this and have it, so it is very common, and not really specialized)
  • Advanced MS Excel skills (e.g. vlookups, pivot tables, data analysis, forecasting - fewer salaried office workers have this, but it is still somewhat common, and somewhat specialized)
  • VBA Macros in MS Excel for process automation (few salaried office workers have this skill, so it is somewhat rare and very specialized)
If you went out on your own freelancing, you might not even be able to get $10 per hour for basic Excel skills (data entry, etc.), but you might be able to find clients who will pay $50 per hour for process automation.

It is the difference between working 40 hours per week doing basic Excel work and working 8 hours per week doing process automation - for exactly the same pay. Scenario 2 gives you more time to work on a Fastlane business (or you can work 40 hours to make 5x the money).

Also, if you freelance with your specialized skill, have 5 clients, and lose 1, you still have 80% of your pay. If you lose your 1 salaried job, your whole income is gone, along with any benefits.
 
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heavy_industry

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We only have records of crypto and inflation coexisting one time in history... NOW.

How has it done?

An asset class that is down 50-70% isn't a store of buying power.

That's why it's not on list.

However due to a limited history, that could change.
When people get scared, they sell their perceived high risk assets for cash, therefore those assets plummet in price.

Not necessarily the most rational behavior, since cash can be printed to infinity and beyond, unlike a physical item such as a bar of gold or some land.
 

thechosen1

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When people get scared, they sell their perceived high risk assets for cash, therefore those assets plummet in price.

Not necessarily the most rational behavior, since cash can be printed to infinity and beyond, unlike a physical item such as a bar of gold or some land.
It wouldn't be, except that bills are paid in cash. Average people don't have much cash, or income (cash flow). So they are forced to sell their assets. What's more, lots of rich people don't have their assets structured smartly, so they have insufficient cash flow too, like the guy worth a million on paper but who invests in empty land for pure appreciation... (I know this guy, sigh)
 
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lludwig

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I agree with @MJ DeMarco recommendations, but we are still F*cked. With a 9.1% CPI for July, these options will just make things suck a little less.

In real terms, none of this will keep up with a 9.1% CPI, especially with the current valuations.
 
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Dangerous Donna

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Here are my best defenses, and worse defenses for inflation, in order of strength.

This, of course, is purely my opinion based on 50+ years of experience on this planet Earth.

Feel free to comment, add your thoughts, or add your rankings.

And then, adjust your strategy now and in the future.

Notice how these strategies all fall-in line with a Fastlane strategy.

BEST DEFENSE (IN ORDER OF POWER)ACTIONABLE DEFENSE
A businessRaising prices.
Rental propertyRaising rents.
A specialized skillRaising your return on labor rental
Real estateNone, but creates a long-term preservation of buying power
Personal influenceIncrease that rates at which you exert influence (A YouTube channel with 1 million subscribers can help you beat inflation!)
A sales jobSell more at higher prices through indirect association of the patriarch business
Hard assets and commoditiesBuy gold, silver, gas, hard assets.
Commodity investmentsBuy commodity assets on an exchange, like DBC, futures, etc.
Stockpiling suppliesBuy life's necessities and store for later user
A money systemIncrease return on cash via raising interest rates.
A part time jobIncrease return on your time through higher labor costs
WORST DEFENSEACTIONABLE DEFENSE
A government paycheckNothing.
A pension, social securityNothing.
A salaried jobNothing.


Feel free to add in anything I might have forgotten!

Or add your thoughts or opinion.
As far as commodity choice, PDBC is favored over DBC and do not have to complete K1 tax form.
 

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