Inflation - Hyper
When I come across people who brag about where they have lived for a decade and how much it costs now to buy a roof in their locality. I smile and ask- well can you add up and buy the house next to yours? Ideally, the answer is no. Well, that tells something about how inflation is a significant part of asset pricing.
"U.S. Inflation Is Highest in 13 Years as Prices Surge 5%" - WSJ
What can the Governments through Central banks do- almost nothing as of now. Most of the governments globally are tied up to their chairs. As any by-the-book measure to cool down the inflation will be counter-productive to all the efforts we have been putting in to help the economy revive.
So the spike in inflation is here to stay and might go further up.
Now, what does that mean to you as an investor -
1) The real rates across asset classes are going to tank. Each investor will now have to work harder- research more, be more patient and go more creative to make an extra buck on the invested capital.
2) The cost of acquiring the assets is going to go up. Hence all the assets may see a run-up inching further away from new or repeat investors. (Further reducing the potential returns.)
3) a) If not already, cash is trash. Sooner or later we will realize that the biggest mistake we have made is the extra cash in hand we had just to feel secure. b) Investors will now have to reposition their investments to dodge free cash flow assets. As reinvestment risk is no longer a theory but a matter of real concern.
4) Passive income will become a thing of the past. As fixed returns or risk-free returns will not be sufficient to feed an investor. Investors banking on pension products and schemes dependent investments will have to recalibrate their survival math at maturity.
For those of us who understand the currency value chain and the K curve know how critical it is for us to move and act in accordance with inflation and interest rates to ensure return on capital deployed. The break-even and the survival margins are more dynamic than they ever were and if we don't alter our process we might miss the zoom even after doing all the right things...
Image source - investing.com
Bitcoin Maxi who also understands solidity, react, rust, anchor. Currently learning about liquid, fedimint, nostr. Ex-Chairman ( Delhi NCR) at Blockchain & Emerging TechnologyPromotion Council of Robotics and Automation
3 年It had to happen Emmanuel, we are in the Ending of the Long Term Debt Cycle. New Monetary systems and Institutions will be Created/ Adopted This Decade. Asset Prices Appreciation (with intermediate shocks of Deflation) is here to stay alongwith a Possible Hyper Inflationary End Shock ( because Balance Sheets of Countries are so distorted now, and the problem is that they cannot go back to austerity even in the distant future, especially because Governments try to stop loss of Jobs in an already Technology enabled deflationary World and this will require Even more insaneand endless Money Printing ) . Debt to GDP ratios are over 150% for all of G7 + China. You can already see Currency Collapses in Iran happening ( as we Speak ) People with assets will survive and the ones without will Own Nothing and Stay Happy ( cynically) as per the New Report by World Economic Forum for 2030... So buy as many assets safely( without going bust yourselves) as you can ( even with Debt) ......