First, some definitions –
conflate – combine (two or more texts, ideas, etc.) into one. Example: conflating clip and magazine when they clearly are not the same thing.
As I sometimes mention market investments, and then segue into things like metals and tangibles, people bring up ‘preserving wealth’. And then they go on to say that [xxxx] is a bad investment. Ya gotta keep in mind, investment is not the same as wealth preservaiton, broadly speaking.
I have $2000 cash in my hands. Let’s say, for the sake of argument, that $2000 will buy me six months worth of groceries…or gasoline….or health insurance. As inflation works its erosive magic, the price of things go up. Next year, that $2000 buys me only five months of groceries, gas, or insurance. So, I need my $2000 to suddenly have the buying power of $2400, since it now takes $2400 to buy what $2000 bought last year. How can I do that?
Really, only one of two ways: either take the $2000 cash and ‘put it to work’ in such a way that in a year it is $2400. Investing is one way to do that. So is gambling. So is buying something for $2000 and trying to sell it for $2400 next year. Or buying something for $2000, renting it for $33 a month for a year, and then having $2000 and $400 worth of rental income. You get the idea. As inflation rises, you’ve gotta hit that blackjack table for higher and higher wins in order to purchase the same amount of goods as you did last year. Inflation is a sneaky bugger.
Plan B is to take the $2000 and turn it into something that will, very broadly speaking, always be worth what you paid for it across different currencies. Meaning: $2000 of gold today, buys what $2000 of cash will buy today next year. It ‘held its value’. There’s a very well-traveled (why doesn’t traveled have two L’s???) ‘fact’ about how a hundred years ago an ounce of gold would buy you [a new suit/a Colt pistol/etc.] and how an ounce of gold today would buy you those same things, thereby proving that gold ‘retains its value’ over time. I think there’s some truth to that, but it’s not a sure thing.
I invest in the market. When I want my money to make money, to grow, I go to the market. The market has never hit zero, and so far it has always bounced back from whatever the crisis du jour was. Does that mean it’ll never go to zero? Of course not. It just means that I have enough belief in the unlikeliness of a market-destroying event that I’m comfortable investing in it. However, I am not comfortable enough to put all my eggs in one basket. For some people, the idea of ‘letting it ride in the market’ is akin to betting it all on black at the roulette table. For some, their idea of investing is something like real estate or a vending machine business or something that puts their money (capital) in one place and it makes money by collecting rent or sales revenue. Thats great, and I do that too… but, honestly, I’d rather spend three hours a week on my keyboard with a brokerage wesbite than chase tenants and customers for money. But..suspenders-n-belt….I do both. I don’t buy gold/silver to increase a value, I buy it to retain a value…
I invest in the market, but I keep my critical money in in metals, property, tangibles, and some cash (even though the cash loses a bit to inflation I find it is pretty necessary to have a certain amount of liquidity in case things come up that require money in a hurry. I’m willing to expose some money to inflation by just having it sit in the bank for convenience.) As I’ve gotten older and more deliberate in financial matters, I know how much I need to keep inviolate and how much I can ‘play’ with and expose to various degrees of risk. If the market crashed to zero, today, right now, would it wipe me out? Nope. Would it hurt? Oh heck yeah. But I’d still have property, precious metals, food, guns, some cash, and, of course, mans basic survival tool. I’d take a hit alright, but I wouldn’t lose my lifestyle…I’d still have a house, hot water, a vehicle, electricity, and food. I wouldn’t have to start from zero.
I mention all of this because, as I said, it seems like when I drift into this topic many people conflate investing with wealth preservation. Investing adds to your purchase power, preserving keeps it at the current level. Big difference..especially in strategy and tactics.
Look, you will never, ever, ever go wrong by having ‘too much’ money. I hate to use that term because it implies that there is a ‘good’ amount of money to have and beyond that is simply ‘extra’. Thats the thinking of Bernie Sanders and his fellow travelers. But, broadly, when in doubt…add to your stack of cash/gold/property/investments.
I’m a cautious person, with some bad experiences, a fierce sense of self-preservation, a little bit of head-knowledge, and access to the internet….and it is my personal opinion that, yeah, we’re heading for inflation, maybe stagflation, and you can’t go wrong by being too ready for it. Weimar-esque inflation? Seems possible, of course, but I think it’s unlikely. I think what you’ll see is a drifting towards the economic situation we saw in the Carter years…maybe not a full-Carter economy, but certainly leaning towards it.
If I were a fixed-income type, living off pensions and that sort of thing, I’d probably very slowly start moving what I could towards inflation-resistant forms like metals while trying not to dip into principal to deeply. If reported inflation starts ticking up consistently I might want to think about accelerating things a bit. But thats me. You do you, man.
Anyway.. investments /= wealth preservation. The two are different enough that they call for different strategies and ways of thinking. Don’t conflate the two. Thats my inflation-adjusted $.02 worth.
ETA: If you want a dramatized but rather plausible (IMHO) of how inflation upsets your apple cart, pick up a copy of this book.
Apparently that particular area had taken a bit of damage at some point in its life and after a decade of constant contraction/expansion episodes as the seasonal temperatures fluctuated…it just split. The seepage of fuel over time is what ate he paint away.
