Sooner is better than later
Preparing for Inflation
It's just my opinion, but it feels like the economy is getting better, albeit slowly. Home sales in my area are improving and some factories are calling people back to work. It might take quite a while before we see a full recovery, but it seems likely to me that we will also see a period of inflation arrive with the recovery. Given the amount of money infused into the economy, and barring unusual action by the Government, inflation seems a forgone conclusion.
It might be useful to start preparing now for the inflationary period. Here are some ideas I've thought of.
1. Avoid opening long term debt obligations like CDs or bonds right now. Stay with short term obligations. Interest rates are low now. If you lock-in today's interest rates, you will be stuck with low returns when interest rates and inflation increase.
2. Interest rates are low, so this would be the time to re-finance your home loan or to take out a car loan. (I would bet you could have quite a bit of leverage in a car negotiation now. We bought a car in December and the dealer was very flexible on the price.)
3. Commodity costs will be increasing. If you can, this would be the time to lock-in or hedge these costs. One idea I've used before to lock-in gasoline costs is to buy an exchange traded fund (ETF) that tracks the price of gas or oil, like UGA or USO. I buy them when the price of gas is low and they increase in value in approximately the same way as prices at the pump. I sell the ETFs off to buy gas. So it's like buying gas at a today's cost.
What do you think? I would love to hear your ideas.
It might be useful to start preparing now for the inflationary period. Here are some ideas I've thought of.
1. Avoid opening long term debt obligations like CDs or bonds right now. Stay with short term obligations. Interest rates are low now. If you lock-in today's interest rates, you will be stuck with low returns when interest rates and inflation increase.
2. Interest rates are low, so this would be the time to re-finance your home loan or to take out a car loan. (I would bet you could have quite a bit of leverage in a car negotiation now. We bought a car in December and the dealer was very flexible on the price.)
3. Commodity costs will be increasing. If you can, this would be the time to lock-in or hedge these costs. One idea I've used before to lock-in gasoline costs is to buy an exchange traded fund (ETF) that tracks the price of gas or oil, like UGA or USO. I buy them when the price of gas is low and they increase in value in approximately the same way as prices at the pump. I sell the ETFs off to buy gas. So it's like buying gas at a today's cost.
What do you think? I would love to hear your ideas.
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