Inflation will clobber “entitled generation”, BlackRock president says
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I've got a job with good income. I save a little monthly and invest in whole market index funds. I contribute decently to my pension, also in index funds.
What should I be doing to be best prepared for the next few years of inflation?
Should investments be moved towards real estate as that seems likely to grow with inflation? Or something else? What types of investments will do best under high inflation?
For pensions, again, is there something I should do there to best hold their value?
(I know the answer depends on how far away retirement is. For me it's still quite a way off, but I'm sure others closer to retirement will value advice for the situation where they need to start drawing down soon)
Lots of strategies. Gold, Crypto/nft, hypercars, paintings/art, stocks, land. You want to own something that measures its value in the thing inflating. Debt locked in at rates below inflation.
>I've got a job with good income. I save a little monthly and invest in whole market index funds. I contribute decently to my pension, also in index funds.
Nothing at all wrong with that plan.
>What should I be doing to be best prepared for the next few years of inflation?
Seems you're already doing it well enough. Front loading investment and not paying debt is a risky strat to try as well.
>Should investments be moved towards real estate as that seems likely to grow with inflation?
Real estate is typically really bad to invest in while rates are increasing; but that's true only when real estate rates are above inflation. There's certainly going to be a short period where this play works well. You dont want to be holding when that changes, worse yet... when will it? You can definitely see when, you'll see tons of articles saying its time to but reits.
Think as well in terms of sacrifice. Starbucks will be sacrificed. Food cant be. Consumer staples is rock solid.
Forex and commodities might be a play. I'm not super knowledgeable on that.
There's also hedged bets. Businesses who are explicitly trying to do what you want. This is a big berkshire hathaway time.
>For pensions, again, is there something I should do there to best hold their value?
I assume you mean pensions where you get to pick 1 of 3 options. Low, medium, high risk. This depends on your age as well dont forget; but HIGH RISK ALL THE WAY. Those terrible funds are often not truly high risk, it just means they hold stocks instead of bonds.
Can you expand a little bit on why real estate is bad during times of inflation? And why only when RE rates are higher?
"Debt locked in at rates below inflation" seems to tie into real estate. You could get a 2% ish mortgage right now, even though inflation's running at 6-8% Seems a great way to devalue the debt quickly, provided you've bought something that holds its value with the money you've borrowed. With inflation high it seems rents are likely to go up so your mortgage payments become a decreasing percentage of your rental income.
Pensions: not just low, medium, high. My pension lets me pick specific funds, so I've always picked things categorised as "high risk" equity index funds that aim to track things like FTSE all share or S&P. Is that still just the best option? Do we still just assume that over a decent timeline the general market is still going to go up, so keeping in the market is better than messing around, even if there are down periods. And pound cost averaging means you get some benefits from the dips too.
Real estate is great during times of high inflation, if you can lock in the interest rate below inflation. If interest rates and so are your loans, then real estate sucks; do you want to buy a new house when rates are 20%? What will that do to the real estate market?
The problem with real estate is even the time as it's increasing. The stock market is about it's future cash flows. With rates increasing, that's lower profitability, and reduced projects.
Flipside, it seems the north american governments aren't willing for houses to crash again. The last time was bad enough? Did we really fix the debt problem from last time though?
>"Debt locked in at rates below inflation" seems to tie into real estate. You could get a 2% ish mortgage right now, even though inflation's running at 6-8% Seems a great way to devalue the debt quickly, provided you've bought something that holds its value with the money you've borrowed.
There's your problem. As rates increase, housing typically decreases because the central banks are pretty bad at this prediction thing. Not so transitory inflation now is it. Modern Monetary Theory is now a hypothesis, it's an attempted theory that blew up. So which way does things move? Currency probably going to be running much hotter than any downward pressure by them raising rates.
>"With inflation high it seems rents are likely to go up so your mortgage payments become a decreasing percentage of your rental income."
Oh ya, this is going to be a thing. Dont forget all the immigration coming and has been happening. Canada for example is likely to receive significant numbers of ukrainian refugees. It doesnt seem popular at all to be anti immigration. A ton of people suddenly want to live in north america and I don't blame them.
>Pensions: not just low, medium, high. My pension lets me pick specific funds, so I've always picked things categorised as "high risk" equity index funds that aim to track things like FTSE all share or S&P. Is that still just the best option?
Sounds good to me, but I'll throw it out there. The gamestop situation is a thing. The USA has a rather unique situation that is being exploited bigtime. You cant deny that it is, https://www.sec.gov/news/statement/shedding-light-on-dark-po...
The damage will be mostly contained to the USA when this goes off, but are you in the USA or invest in US stocks? or through proxy of your stocks become exposed to this? Also what happens if it just never breaks? Obviously the banks can't afford to give infinity money. What happens if the banks win? They will win won't they... oh shit.
>Is that still just the best option? Do we still just assume that over a decent timeline the general market is still going to go up, so keeping in the market is better than messing around, even if there are down periods. And pound cost averaging means you get some benefits from the dips too.
Not at all. Here's a plausible scenario that goes down in december/january.
USA goes to vote at midterms and they vote like 70% republican. The entire map is red. Day 1 they appoint Trump as speaker of the house. Day2 they impeach Biden, Day 3 they impeach Harris. American civil war 2022-2023 starts. The democrats thought Trump cheated first time around. Trump thought Biden cheated(he did admit this in a "gaffe" - https://www.snopes.com/fact-check/biden-admit-voter-fraud/ feel free to watch the video that they link right there) and then republicans in 49 states submitted bills to make changes to how they vote which the democrats called restricting people's right to vote. It's war right... there's no way around it.
What do you think your stocks, even if you have absolutely minimal exposure to the use, will do? The global economy craps and we all hurt.
Investing in agriculture, energy, and commodities.
I set aside a certain amount of money and buy a little gold/silver each month.
At some point I need to have the cost-of-living raise conversation with my employer, though they are clearly planning for a slow down in business at the moment, so I'm not sure wages are going to keep up with inflation once the recession is in full swing.
https://finance.yahoo.com/quote/GME/holders?p=GME
Vanguard and blackrock are holding heavy long positions into gamestop. This president knows that he's doing this.
Let's not forget Blackrock is buying heavy into houses with expectation the bond market will die and USD to inflate quite a bit more: https://www.vox.com/22524829/wall-street-housing-market-blac...
He knows the implications of all this and the 'entitled generation' arent who will ultimately pay here at all.
As the USD collapses to accommodate their play, the entitled generation are who will be able to beat inflation with jumping jobs and demanding raises. Generational wealth warfare doesnt work exactly because of this.
Inflation is paid ultimately by who? The people whose investments are held in the currency. Retirees holding bonds with negative real yields are where the money comes from. It's the boomers who eventually pay here. It's the boomers who thought they could retire but can't anymore because their retirement funds are worth less and less each year. Its the boomers who hurt when there's a 2030 worker shortage that's set in stone.
No, the blackrock president knows this. He picked his words very carefully.
Yes, the homelanders will have some sacrificing to make. Hell the name of their generation explains one sacrifice.
Flipside, basically every homelander will be a millionaire. It wont mean the same thing. the language will evolve.
Only people like our Blackrock president here will be insulated from this.
Welcome to Stagflation.