what to buy if inflation returns

Quote from sprstpd:

By then your nice return on your money market fund won't be so nice in terms of inflation eating away at it.
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True. I agree that money markets probably aren't the greatest choice.

Here is Warren Buffett:

My own preference -- and you knew this was coming -- is our third category: investment in productive assets, whether businesses, farms, or real estate. Ideally, these assets should have the ability in inflationary times to deliver output that will retain its purchasing-power value while requiring a minimum of new capital investment. Farms, real estate, and many businesses such as Coca-Cola (KO), IBM (IBM), and our own See's Candy meet that double-barreled test. Certain other companies -- think of our regulated utilities, for example -- fail it because inflation places heavy capital requirements on them. To earn more, their owners must invest more. Even so, these investments will remain superior to nonproductive or currency-based assets.
 
Inflation will not be allowed to return in the US. May be in other countries but in US federal reserve has various tools available to avoid the rapid erosion of values. :D
 
Actually I think the reason that paper assets in general do poorly during inflation, even if they are linked to short term interest rates (like money markets) is that paper assets are denominated in a particular currency.
 
Quote from billyjoerob:

Farmland is another good one.

I'm just not convinced gold is a good inflation hedge. Gold generates no income, so why would I own gold if I could own a money market fund paying a nice return? Hard to believe gold will appreciate compared with income-paying assets.
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5th grade math question.

Person A owns 1 oz of gold at $1600 per oz.

Person B owns a money market fund paying 5% dividend.

1 year later gold goes up in value 10%.


Who earned more money?


Trick question...nobody earned any money. 1 oz of gold still buys what it bought a year ago while the money market fund has 10% less purchasing power which means it lost 5% of its value.


You buy gold so when the SHTF, you can buy up things of value for cheap from desperate people who need money to buy food.
 
Quote from peilthetraveler:

5th grade math question.

Person A owns 1 oz of gold at $1600 per oz.

Person B owns a money market fund paying 5% dividend.

1 year later gold goes up in value 10%.


Who earned more money?


Trick question...nobody earned any money. 1 oz of gold still buys what it bought a year ago while the money market fund has 10% less purchasing power which means it lost 5% of its value.


You buy gold so when the SHTF, you can buy up things of value for cheap from desperate people who need money to buy food.
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If they're desperate and need food, who is going to buy your gold? The hungry can't eat gold. You've made an argument for farm land, not gold.
 
Quote from peilthetraveler:

You buy gold so when the SHTF, you can buy up things of value for cheap from desperate people who need money to buy food.
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You buy at least some gold now so that when other people realize they need gold to protect themselves from the world's printing presses, you will be able to sell to them.
 
Quote from sprstpd:

You buy at least some gold now so that when other people realize they need gold to protect themselves from the world's printing presses, you will be able to sell to them.
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I doubt any goldbug ever has or ever will sell gold for dollars
 
Quote from billyjoerob:

If they're desperate and need food, who is going to buy your gold? The hungry can't eat gold. You've made an argument for farm land, not gold.
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My friend, do you see now how indoctrinated you are that US dollars are real money and gold is not? It's the complete opposite.


Let me try to unindoctrinate you. :P I have gold, you are hungry and have no food, but you have a car. I give you half an oz of gold for your car. You take that half an oz of gold and go to the farmer and give it to him for a decent amount of food. The farmer wants gold because of the inflation. He will not take the US dollars because he knows they will be worth less next week while the gold will hold its value against his crops.
 
Quote from peilthetraveler:

My friend, do you see now how indoctrinated you are that US dollars are real money and gold is not? It's the complete opposite.


Let me try to unindoctrinate you. :P I have gold, you are hungry and have no food, but you have a car. I give you half an oz of gold for your car. You take that half an oz of gold and go to the farmer and give it to him for a decent amount of food. The farmer wants gold because of the inflation. He will not take the US dollars because he knows they will be worth less next week while the gold will hold its value against his crops.
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why doesn't the farmer just take the car?
 
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