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Strategies & Market Trends : 50% Gains Investing
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To: Sober who wrote (72014)2/2/2009 5:25:15 PM
From: OblomovRead Replies (2) of 118717
 
IMO, the way to take advantage of what is coming (assuming that your income/employment is stable) is use your sterling credit to buy hard assets with low interest rate, fixed-rate debt (i.e. not credit cards) for which you can afford the payments under present conditions. And since the money is borrowed for investment purposes, you would be able to take a tax deduction on the interest paid.

If there is moderate or high inflation, you will be able to pay back the debt with depreciated dollars.

What sort of hard assets might be worth considering?

1) well-located residential real estate with a cap rate of 10%+
2) PMs
3) non-perishable consumer staples that can be easily stored and resold
4) maybe farmland or raw, timber-producing land (although these investments require deep knowledge and much skill, and it's easy for a novice to get shafted)

I have a good chunk of #2, and am seriously considering #1. Although real estate in general may fall further in price, good quality rental properties that can generate positive cash flow from the start may be an excellent long-term inflation hedge. It might do only OK in a hyperinflation, since rents are typically agreed to a year at a time. In any case, an asset is essentially worth the discounted cash flows that can be generated from it, and 10 years is a reasonably short recapitalization period. Note: One must have excellent credit and at least a 10-15% down payment for investment property right now.

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