So how do you hedge against a serious crash?
1. Short the indices.
2. buy gold - which doesn’t like interest rate increases but likes inflation, but often initially drops with a decrease in the indices but then rallies.
3. buy bitcoin - this could be a hedge but still very risky.
4. hold more cash - if you hold too long though with rising interest rates, your money looses value.
So what is your preference? How do you see and understand why gold moves as it does?
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I don’t see gold as a hedge against inflation, more a hedge against loss of confidence in the fiat system itself. I own a lot of Canadian gold miners for this reason- I hold commodities (base metals, ags) for inflation hedge.
1) I think shorting certain companies with vast amount of debt, small margins and limited ability to pay back debt would be a good strategy; £CLN was a perfect example and there are many companies similar.
2) A small allocation towards gold/precious metals could be good; I wouldn't allocate more than 10% personally. But I also think finding some good REITS that have quality holdings of Government backed or funded properties.
3) I see Bitcoin or cryptocurrency as more of a hedge against global financial collapse rather than inflation and it is a highly speculative one at the mercy of Governments Policies and legislation that could ultimately make it illegal.
I had a small holding of Monero, a private cryptocurrency - legislation passed by the FCA and as of 26th November Kraken exchange announced it was delisting Monero from its exchange (one of the few exchanges in the UK you can buy Monero from) this was in response to UK regulators.
FCA are already targeting cryptocurrency with regards to advertisements and India Government have called for a global response in tackling it. The FSCS doesn't protect you, as a lot of people have recently found out with ponzi schemes like PGI Global and a lot of people are also finding out now that they are now liable for paying capital gains tax.
Whats the famous saying "When you taxi driver starts giving you stock tips then it is time to leave the market?"
4) I agree, hold more cash for value opportunities but also for critical personal situations - that is if the financial seasons appear to be changing; sentiment would appear that way at least.
Interesting topic - Thanks, gmtrader
All the best,
GI
I agree that crypto is a good hedge against both the fiat system, and long term inflationary pressures (in the short term it has high beta like technology stocks). I think the key to enabling the hedge is buying those that are highly decentralised with good governance. I believe these two elements are overlooked by short term thinkers. The usage of centralised exchanges goes against this philosophy, so find those with operating decentralised exchanges (DEX) far superior. I personally look towards the more scientifically minded ones.
Goldman Sachs CEO recently stated that Crypto is happening and he wants a piece of it.
Buy companies with cashflow and some element of idiosyncratic growth potential (in the end everything has some macro cycle risk).
Only buy crypto if you plan on living in an alternative crypto enabled metaverse.
Why will we have accelerating inflation from already elevated base effects and reduced fiscal and monetary stimulus?
Mojo
Despite occasionally being a bit of a rascal and stirring up the Stock bulletin boards you strike me as someone who's on the money more often than not.
What would you see as the turning point for inflation my guess is when we are nearly twelve months into the higher rate around possible June/July time we are then re-basing from a higher figure rather than the manipulated 2% usual figure we have had for the last 5-10 years.
If then we start to see a slight tick down from 7% ish and word that there will only be three interest rate hikes rather than four, then whats worked for the last ten years re growth stocks would be back in play again.
Or would you disagree ?
Regards
Andy
