Your Best and Worse Defenses for Inflation...

[heavy_industry]

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.

 

[Guest-5ty5s4]

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)

 

[Dangerous Donna]

Sounds like now its good idea to throw money into dividend stocks and hard assets

Exactly

 

[Bounce Back]

I've increased my carpet cleaning pricing by 50% over a span of 3 years. There was initially some resistance, but clients now seem to just accept that obscenely higher prices are the way of life. I don't know how the common paycheck to paycheck American is surviving in today's world.

I'm currently in the process of exiting real estate and transferring all of the funds to high end watches. My watches have always outperformed everything else I've ever invested in.

My rental property portfolio has taken an absolute beating in the past 3 years because I didn't diversify enough. My fault for only investing in blue collar neighborhoods. Lots of money lost due to vacancies and repairs, but big lessons learned.

Do you think if you had done afluent neighborhoods but gotten less rent as a ratio of purchase price (often I see on zillow it doesn't scale after average apartment rental price in the area) you would have had less repairs/vacancies? In your city would you have made it up on equity?

I had a rental some years back I got out of after a year or so but it was just taking too much time (didn't use property management) and had a couple expensive repairs needed within that year. The house now that I sold has doubled in value some 4 years since the sale. Now I am considering getting back in and being more long term focused and not necessarily worrying about cash flow from rent so I'd appreciate your perspective.

 

[Oso]

I've seen some people who do huge volume in Pokemon cards. My question is always this - do you just not care about counterfeits? Its not like it would be hard to 1:1 copy these things I'd imagine.

You wouldn't believe how difficult creating GOOD fakes is, especially for a game such as Pokémon that has cards with different types of layered "foiling."

MTG is simple as you can take a magnifying glass to the card to confirm the layered ink pattern. Fake cards cannot replicate the ink patterns, especially in older cards.

And faking Yugioh cards is a joke, tbh. If anyone cracks the code to making believable yugioh fakes, they deserve Elon's net worth.

Their processes are sealed. Obviously, anyone can begin printing out a TCG card. It's just cardboard and some shiny shit. But to print one with MTG's art/quality, Pokémon's foiling, etc.

If it were truly that easy to fake cards, you're right: they'd have next to 0 value. Instead, these goofy (and beautiful) Black Lotus I have, combined in their current condition, hover anywhere between 800k-1.2m.

Then if you had the other 8 pieces to finish all of the sets... In just "Power 9," I'm hitting numbers I'd spend years trying to hit with an outright business.

Cheers.

 

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[NervesOfSteel]

I think my being based in Germany is what's contributing to this doom and gloom attitude, with the weak Euro and structural weaknesses here. So I'm working on a move to the U.S. to at least swim with the inflation current. Living in Europe feels not just like swimming against the current, but doing it in a different river that's slowly running dry.

When the world's strongest nation offers a lavish life to its citizens with the luxury to choose any imaginary gender they please, by being in debt of 34 Trillion USD, I only find this equation to be fascinating!

Unfortunately there's a limit to that. Basically, if you have a B2C business you are more or less F*cked after some point, because wages are way behind inflation.

Much easier with B2B. Price increases just go down the supply chain until they hit some B2C sucker at the end of the line, who will then slowly go bankrupt.

I have done B2B and B2C.

You probably live in Heaven where B2B clients are willing to offer higher price than decided because XYZ happened and price hiked on other ABC factor!

B2B people in Germany are literally stupid as compared to B2B clients in my country where they enter a written agreement for the same "average" price for 2-3 year contract!
Its always the manufacturer's headache to stay hedged for possible price hike in raw materials ! LOL.

B2C client is like a lamb! B2C buys when he needs it at the price when he needs the product! You can easily upsell the B2C customer but try your luck with B2B clients (Germany not included) :lol:

Hard disagree with "none". The increases in RE prices have been absolutely crazy. I'd say the defense is built-in. I'm doubtful that there will ever be a housing market crash again. They will just keep it propped up.

If you don't own RE right now, you probably never will (exception: massively outsized business success).

On the other side, to people that own RE, everything in life just seems like a game / monopoly-money to them. I often can't believe how casually those huge numbers are thrown around here.

You're experiencing FOMO !

get a hold of yourself .. an RE is always profitable on any given day ... if you can give it a decade to grow in its value ..

For instant 100x gains, try Casinos! LOL

I will wait another 5-7 years for the RE industry to crash in my country! It always does in a decade or so! Be clever!

Patience is a virtue my friend!

 

[theag]

So the next step is to escape B2C completely or get into B2C for rich people?

For my next business I will most likely not do B2C again yea. But that is probably a few years down the road. Who knows what will happen until then.

I think the sweetspot customers for a self-funded online-service/SaaS business are small- to medium-sized businesses that will sign up on their own, without requiring contract negotiations / enterprise sales. But we'll see... Might also go more into the real estate or any other "offline" business route, just to be able to use leverage to scale up faster.

And why is your business not good enough? Product quality? Or the targeted audience who can't keep up with inflation?

It's a niche in a huge market, so in theory a nice business. Decent barrier to entry due to manufacturing complexity and other streamlined business processes.

Main challenge is scaling it with low revenue per customer. Need to sell a shit ton of $20-50 widgets or services to get anywhere.

Products are not consumable and product quality is so good that there aren't many reorders, so potential for recurring revenue is low. Restarting every year/month at basically zero is tiring.

Although we get a lot of word-of-mouth, growth is very dependent on advertising, which has gotten more difficult over the years due to all the data privacy stuff.

In a nutshell, nice "lifestyle business", but the path to getting it to a size that I would consider a reasonable fastlane exit number in todays inflated environment (~$100m) is extremely hard or more likely impossible.

 

[c23r]

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.

 

[Nicole]

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

Silver is used for everyday things, like grocery shopping, instead of gold.

 

[Nicole]

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.

 

[akhilesh1311]

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?

 

[bangL]

Worst: Saving 10% of your income in today's money will worth much less in 20 years.

 

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[Bounce Back]

This is goofy af. But collectibles.
When covid initially hit, I unloaded my MTG collection for about 60k. Never thought I'd get back into it.
Now, here I am, with 7 figures in cardboard because I can't stop finding collections at rock bottom prices.
I get the vibe people are panic selling, but the prices are only going up, and people are picking up items at said prices. Shits wild.
If it keeps going at this rate, I'll be selling agency number 2, and hiring a few people to help me flip collectibles full time.
Cheers.

I've seen some people who do huge volume in Pokemon cards. My question is always this - do you just not care about counterfeits? Its not like it would be hard to 1:1 copy these things I'd imagine.

 

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[NervesOfSteel]

The study of precious metals charts ... Forced me to invest in them to beat inflation easily!

 

[Andy Black]

I feel like I'm starting from zero again, or rather, never left the starting block

You're not starting from zero at all. You left the starting block and achieved a lot already.

What needs to happen for you to be happy with your direction?

 

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[MTF]

I feel exactly the same as you, but I live in California. Inflation + corrupt politicians are ruining the state and I am now at a point where I'm considering leaving. My house is worth $1.3M and I don't feel safe walking around outside. The homeless zombies are multiplying here because fentanyl is cheaper than heroin and 50x stronger.

If you were to sell the house and move to, say, Tennessee, where prices (I guess) are at least 2x lower, how does that make you feel? How does an average person in California these days looks at what they get there vs what they can get somewhere else, even though they would no longer live in a "cool" state?

 

[MTF]

My main problem is being way behind the market. My business isn't worthless, but it's currently simply not good enough for this new world with 10-20% yearly inflation. As long as that's the case I won't be able to afford even a simple middle class lifestyle. And middle class lifestyle isn't exactly the goal of the fastlane.

I'm working on improving the business (going international and focussing more on digital services vs physical products), which should help with general scale and margins. Next step will be rolling the profits from the current business into a new one with much higher potential, either by selling it or just using the cashflow to fund the new one.

Is the digital service a B2B service?

 

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[IceCreamKid]

If you were to sell the house and move to, say, Tennessee, where prices (I guess) are at least 2x lower, how does that make you feel?

It would be nice to get a much nicer house for the same dollar, but I'd be leaving a ton of family behind. My family ties are strong here and it would make me sad to leave them behind.

How does an average person in California these days looks at what they get there vs what they can get somewhere else, even though they would no longer live in a "cool" state?

I don't think most of them ever pause to truly reflect on this. Since the cost of living here is extremely high everyone sorta just puts their heads down and grinds through their daily work.

I see 2 types of people in California now: those who own assets that benefit from inflation and those who do not. It was always this way but now it's extremely obvious.

We have pockets of communities called Teslanaire neighborhoods. The entire block is composed of people who became millionaires by investing in Tesla stock early on.

 

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[Ismail941]

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

 

[Dangerous Donna]

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 business	Raising prices.
Rental property	Raising rents.
A specialized skill	Raising your return on labor rental
Real estate	None, but creates a long-term preservation of buying power
Personal influence	Increase that rates at which you exert influence (A YouTube channel with 1 million subscribers can help you beat inflation!)
A sales job	Sell more at higher prices through indirect association of the patriarch business
Hard assets and commodities	Buy gold, silver, gas, hard assets.
Commodity investments	Buy commodity assets on an exchange, like DBC, futures, etc.
Stockpiling supplies	Buy life's necessities and store for later user
A money system	Increase return on cash via raising interest rates.
A part time job	Increase return on your time through higher labor costs
WORST DEFENSE	ACTIONABLE DEFENSE
A government paycheck	Nothing.
A pension, social security	Nothing.
A salaried job	Nothing.

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.

 

[ericaung]

I am thinking how much percentage of should I invest into hard assets and commodity investments beside of money system investments like REITS.

I currently invested into physical silver bullion coins and DBC ETF for a small portion like 1%. I currently have some capital to deploy into. Any advice recommend?

 

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[ericaung]

The run on DBC is a bit late, I've been rolling out of my positions here, the only reason why I haven't liquidated all of them is because I'm waiting to hold for LT capital gains, versus short. In fact, I hold DBC long puts as I expect a recession to depress commodity prices.

Sounds like now its good idea to throw money into dividend stocks and hard assets

 

[gpetukhov]

Real Estate is also a good inflation hedge as build costs go up in an inflationary environment - labour and materials will go up so a house being built today is more expensive

 

[luminis_]

I'm currently in the process of exiting real estate and transferring all of the funds to high end watches. My watches have always outperformed everything else I've ever invested in.

Do you tend to focus on newly-released watches or vintage? And what brands do you see performing best (I've heard Rolex Daytona's skyrocketed over the past few years and same with Patek Nautilus)

• You have more control over the value of the asset as opposed to being reliant on market forces

Wouldn't it still be impacted by supply/demand? Or is it less "efficient" than say Real Estate because prices can vary widely depending on condition, release year, etc.?

 

[ZackerySprague]

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 business	Raising prices.
Rental property	Raising rents.
A specialized skill	Raising your return on labor rental
Real estate	None, but creates a long-term preservation of buying power
Personal influence	Increase that rates at which you exert influence (A YouTube channel with 1 million subscribers can help you beat inflation!)
A sales job	Sell more at higher prices through indirect association of the patriarch business
Hard assets and commodities	Buy gold, silver, gas, hard assets.
Commodity investments	Buy commodity assets on an exchange, like DBC, futures, etc.
Stockpiling supplies	Buy life's necessities and store for later user
A money system	Increase return on cash via raising interest rates.
A part time job	Increase return on your time through higher labor costs
WORST DEFENSE	ACTIONABLE DEFENSE
A government paycheck	Nothing.
A pension, social security	Nothing.
A salaried job	Nothing.

Feel free to add in anything I might have forgotten!

Or add your thoughts or opinion.

Just learned that at my salaried job, the entire department is going away. All Stealth Delivery positions will be eliminated in 2 years or less. I got lucky when they laid me off. Blessing in disguise.

 

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[JordanK]

Inflation seems to be easing in Ireland. Haven't noticed anything crazy in the last few months.

 

[Kevin88660]

I've increased my carpet cleaning pricing by 50% over a span of 3 years. There was initially some resistance, but clients now seem to just accept that obscenely higher prices are the way of life. I don't know how the common paycheck to paycheck American is surviving in today's world.

I'm currently in the process of exiting real estate and transferring all of the funds to high end watches. My watches have always outperformed everything else I've ever invested in.

My rental property portfolio has taken an absolute beating in the past 3 years because I didn't diversify enough. My fault for only investing in blue collar neighborhoods. Lots of money lost due to vacancies and repairs, but big lessons learned.

Do you mind sharing more on your expertise and lessons in watch investing as well as rental real estate investing?