Winter is coming and truly it is shaping up to be a winter of deep discontent. The last 18 months were some of the most challenging for global economies largely owing to the challenges brought on by the COVID-19 pandemic.
Whilst the corona crisis may have subsided (at least for now), the world is now facing up to the arguably much more serious problem of inflation – rising prices of commodities, property, and amenities.
Why So High?
The causes of this worrying trend are many and complex and even financial experts cannot agree on the exact cause. Some analysts point out that extensive quantitative easing programs to get through the COVID-19 pandemic have not come home to roost – remember that the US dollar remains the global currency so if the value of the dollar drops (as it does when supply increases), it has impacts on pretty much everybody else.
However, the opposing point of view is simply that there are genuine worldwide supply and logistical problems. For example, COVID lockdown measures severely impacted global productivity meaningless goods were created leading to an unsatiated demand for a smaller supply – hence inflation of prices! Let’s remember that at the peak of the pandemic crops were left rotting in the field as workers were unable to pick them.
Another unlikely contributor was the Suez Canal crisis of 2021 when the Evergreen supertanker blocked the strait up for nearly a week setting in motion an unprecedented backlog in worldwide shipping and logistics.
Finally, as the days grow colder and the nights draw in, a rise in global gas supplies is hitting consumer energy prices hard, potentially forcing societies poorest into a chilly winter of fuel poverty.
What’s This All Gotta Do With The Price of Bread?
Whatever your opinion on the causes, you will definitely have found that the price of your grocery basket is rising. Whilst world banks and the FED Chair are hoping that the rises are temporary and will soon plateau, the historically minded or simply older amongst us cannot help but recall the “Great Inflation” of the 1970s or even the catastrophic and dangerous hyperinflation of the Weimar Republic which led to World War II.
Let’s put it like this, whilst burying your head and hoping for the best is very tempting, it is simply not a fiscally savvy approach. The more financially astute amongst is are already taking tentative steps to guard against inflation. And remember, if you have cash reserves sitting in banks, the interest rates are still at an all-time low meaning the value of your savings is now declining fast and in real terms and real-time.
So what can be done about this? Holding large cash assets right now is simply not a good strategy and the time has come to look at investing or diversifying asset bases. Let’s take a look at some options.
A truly tried and tested strategy of asset diversifying is investing in precious metals. Gold is, of course, perhaps the oldest currency in the world and its value seems pretty much eternal. Whilst gold prices do rise and fall (it has recently dipped by 4%), the value is generally fairly steady and it rarely ever falls completely out of fashion. Other advantages of gold are that it can be stored at home (do use a safe) or carried with you if you ever need to move.
Whilst gold is the “classic” precious metal, any of the “big 9” (iridium, rhenium, ruthenium, rhodium, palladium, osmium, platinum, silver, and gold) represent a sound investment.
Whilst initially dismissed as either a joke, a con, or a fad at best, it seems that the time has finally come for cryptocurrency. When Bitcoin was launched in 2009 you could easily have bought a few hundred of them for a dollar and when it finally hit 1 BTC – $1USD in 2011, even some Bitcoin enthusiasts felt that it had peaked. Well fast forward to 2021 and one Bitcoin is now valued at around $65,000 making it without any doubt, the single best-performing asset of the 21st century.
The Chinese government has plans in place to launch its one digital currency and it seems inevitable that other national banks will follow suit. When this happens, cryptocurrency will finally attain the legitimacy it has always promised.
Whilst crypto markets are extremely volatile, most wise investors have at least some form of a portfolio. Bitcoin may be rising too high for some of you so instead check out Ethirium (Bitcoins nearest competitors), Solana, and Ava.
Inflation Friendly Stocks
Whilst inflation is generally bad news for Wall Street and the world stock exchanges, there are some stocks that are inflation resilient. In fact, there are stocks that thrive in inflation if you can choose carefully.
For example, rising wholesale energy prices have so far driven some gas and electricity companies into bankruptcy wiping out their shares, but the ones that can weather the storm will reap the benefits from both higher consumer prices and an enlarged customer base from picking up the slack from their failed competitors. Energy giants like Chevron, Devon Energy, and Europe’s EON have large enough cash reserves to get them through the winter and will probably come out of this cycle stronger than ever.
Some financial advisors also maintain that even bank stocks can benefit from the inflation cycle but personally, I still remember the crash of 2008 so will be looking elsewhere.