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Assets to Own in Inflationary Times

Posted November 30, 2021

​​I painted the basement ceiling, walls, and trim over the weekend.  

My beautiful wife had ordered a couch in some prior epoch, but time has progressed as it is wont to do, and an email informed me that the couch would be showing up on Tuesday.

Furthermore, my wife managed to find a new Xbox for the kids (who are now adults), and there has also been talk of a pool table, but the soon-to-be billiard room was looking tired. It had, after all, served as a hangout for teens for about a decade.

I could have called Carlos and Juan, who are much better painters than I am, but I painted houses one summer in college and still pretend I'm a professional. But that was many, many years ago.

But still, perhaps we are a bit ornery here at the DeHaemer homestead and still have the desire to do stuff ourselves. Besides, there is something zen about painting. You don’t have to think much. Just follow the pattern and check back for drips.  

In many ways, it is much like life or investing. The way to make it is to avoid big mistakes. Don’t step in the roller pan or accidentally kick over the bucket. Use a drop cloth. Make sure the dogs stay upstairs. Stay away from the hard drugs. Marry well. Use a stop-loss.

Yes, Mr. Miyagi had it right. Up, down, up, down.

You have time to think when you are putting on a clean coat of bright ceiling white. Your mind drifts. And you think of inflation.

Back in 1989, I think I got about $5.50 an hour painting the college slums of Baltimore. Today, Carlos would ask for $20, and that would be cheap. His boss would ask for at least $1,000, if not $2,000.

They say inflation is always and everywhere a monetary problem. That seems right. If you have more dollars, they are worth less individually. In the case of painting labor, a dollar will get you about a quarter of what it would have 22 years ago.

The price of housing is also going up again. It boomed last year as people fled the city and bought up farmland. It died down a bit in the spring, but the numbers for October were outstanding, with a big jump from April, although they weren't up much from last year.

Retail sales are doing well. Ex-autos jumped 17%, and consumer sentiment is high. Mastercard is reporting that sales jumped 29% on Black Friday over last year.

But it's inflation that's really in an uptrend. The producer price index (PPI) jumped 12.86% last month and CPI rose 6.24%, while import prices rose more than 10%. Inflation hasn’t been this high in decades. It's been so long people have forgotten what it's like.

JP Morgan came out with a note yesterday that predicted oil would hit $150 a barrel.

Housing does well in inflationary times, and commodities are a nice bet. High-margin tech stocks tend to match pace. You'll want to stay away from high-paying dividend plays — they tend to get hammered when the real value of the dividend declines.

You also might want to check out the iShares TIPS bond ETF (TIP). TIP tracks the Bloomberg Barclays U.S. Treasury Inflation Protected Securities (TIPS) Index, which is composed of inflation-protected U.S. Treasury bonds. It's up about 4.51% this year.

And of course, there is that ancient relic that has held value for 5,000 years — gold.

All the best,

Christian DeHaemer Signature

Christian DeHaemer

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Since 1995, Christian DeHaemer has specialized in frontier market opportunities. He has traveled extensively and invested in places as varied as Cuba, Mongolia, and Kenya. Chris believes the best way to make money is to get there first with the most. Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor's page.

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