Tag: commodities

Inflation Resistance: A Comprehensive List

Inflation Resistance: A Comprehensive List

“It does not do to leave a live dragon out of your calculations, if you live near one.” – J.R.R. Tolkien

Jordan Taylor Swaim is a social service worker, podcaster and producer out of Calgary, Alberta, where he resides with his wife Janelle, and son TJ. Check out his podcast, The Peaceful Way, and learn the concepts, ideas, and strategies behind making a more peaceful and nonviolent world.

This article was originally published on Medium.com. Read the original article.


The SARS-Cov-2 pandemic has skyrocketed international government spending and stimulus to unimaginable proportions. Dwarfing the 2008 financial crisis, worldwide government debt soared orders of magnitude higher in 2020 and shows no signs of slowing down in 2021. Nearly 24% of all dollars in existence in the US were printed in the year 2020 alone, while many other countries are well over that 20% mark. Fears over a sovereign debt crisis loom, while there is very little political appetite for austerity measures.

Anecdotally, I see evidence of the economic chickens already coming home to roost. All sorts of general consumer goods, from groceries to textiles, are rapidly rising in price. The stock market appears to be a stimulus-fuelled bubble, and stores of value like real estate and bitcoin are witnessing record levels of trading volume. Inflation, unlike the west has ever seen before, seems highly probable if not inevitable. Central banks globally are rushing to inject liquidity to artificially prop up the economy until it can become productive once again. As the meme lords so eloquently put it: “money printer go brrrr.”

So the question is, how do you protect yourself against it? Well, what I want to do here is create a comprehensive and routinely updated list of products, services, and ideas that can protect your financial situation from being eaten away by the falling value of your dollar. To be clear, this is not investment advice, merely a reference/resource, and there is certainly no silver bullet to protecting against inflation.

A disclaimer, this may not help you in a total economic collapse; in that case, you will need guns – lots of guns. Furthermore, for every example of an inflation hedge I give, there will always be an exception to the rule. Like everything in life, you are taking a risk.

Precious Metals

Let’s start with the most obvious hedges against inflation, precious metals. I am not covering every metal, but rather the most prominent ones.

Gold: The gold standard in stores value, literally. Used as currency for 5000+ years of civilization, it is hard to go wrong with the shiny yellow metal. It‘s difficult to imagine a future where gold would not hold its value, and if you have a decades-long time horizon, there are potential profits to be made.

Pros: – low volatility – valuable everywhere on earth – has industrial uses – a very small amount of gold can be very valuable, making it easy to store and transport – privacy.

Cons: – not easily divisible – you need to spend money on securing your gold either through a personal vault or holding it at a financial institution.

Silver: The little brother to gold, silver has been a humanity mainstay in terms of value for millennia. Industrial uses for the metal have skyrocketed over the last few years and only added to its demand and value. Many believe that the value of silver will leapfrog gold in terms of percentages over the next few years.

Pros: – low volatility – valuable everywhere on earth – much more affordable than gold but has a similar upside – industrial uses.

Cons: – not easily divisible – money spent on securing your silver – can get heavy and difficult to transport with even a modest investment – holds value everywhere.

Copper: Though neglected by many precious metal collectors, the price of copper has nearly doubled in the last year. Not only that, being the primary material used in electrical wiring, it’s here to stay. Commercial real estate landlords have even had problems with copper thieves pulling copper wiring out of their buildings in recent years.

Pros: – high industrial use – affordable – global demand is on the rise, which means its price could be on the rise

Cons: – heavy and difficult to store and transport substantial amounts.

Platinum: A bit cheaper than gold, platinum bullion is available to collect and use as a hedge against inflation. Platinum is a far more rare metal than gold or silver but also has fewer industrial uses. Primarily used in engines.

Pros: – low volatility – rare – a small amount can be very valuable, making it easier to store and transport.

Cons: – difficult to find retail vendors due to low trading volume – costs associated with security – fewer industrial uses than other precious metals.

Real Estate

Like precious metals, real estate is as close to a sure thing as you can get in terms of parking your money. Though there can be large market pullbacks every decade or two in the real estate market, it has always remained one of the most liquid markets in the world. For the purposes of this article, real estate is a longer-term hold, not house flipping or trying to buy low and sell high. You may not make a substantial profit in real estate, but on a long enough time horizon, you most likely aren’t going to lose money as you would to inflation. Though there are many categories of real estate, I am only going to cover two very broad ones:

Residential: People will always need a place to live. Residential real estate, particularly in big cities, tends to be a pretty safe bet. The other benefit is that you can live in and use your investment, so I like owning a home for the pure practicality of it.

Pros: – you can live in it – you can use it as an income property – statistically very good at retaining value.

Cons: – upkeep can be costly in terms of time and money – Can be a rather large commitment – is not a very flexible investment.

Commercial: Though a lot riskier than residential, commercial real estate can have huge upsides. The trick is picking an industry that will remain relatively stable for the long term; retailers and shopping malls are probably a bad bet. However, some commercial investments like RV parking and storage lots show a lot of future promise and have been a booming industry for years.

Pros: – potentially a high income earning asset – has some flexibility in terms of what kind of business can be operated (E.g., the old Kmart gets converted into a trampoline park.)

Cons: – more volatile than residential – upkeep can be costly in terms of time and money.

Cryptocurrency

If you haven’t been paying attention, the digital financial revolution is happening right under your nose. Starting in 2009, and in response to the 2008 financial crisis, the bitcoin white paper was unleashed into the world. A peer-to-peer permissionless currency that cannot be controlled by a cabal of central banks, governmental, and corporate interests. Whether or not BTC ends up the dominant blockchain token, in the end, remains to be seen, but what is a near certainty is that cryptocurrency is here to stay. As institutional investors pile on, the value continues to rise to new all-time highs. Some even believe Bitcoin to be replacing gold as a store of value. Though I doubt it will replace gold, it will certainly compete with it in that regard. 2020/21 seems to be an indicator of where people are putting their cash to protect against an onslaught of inflation. Though there are still detractors claiming it to be a scam, they will most likely be forgotten in the dustbin of history; there is no putting this cat back in the bag.

I will not be covering specific cryptos here (as there are thousands of them). I would recommend learning about Bitcoin, Ethereum, Litecoin, Bitcoin Cash, and XRP for those new to the topic.

Pros: – open distributed ledger making it impossible to forge or fudge numbers – Massive potential across hundreds of industries – easy to store on a computer or hardware wallet.

Cons: – highly volatile – it can be easy to lose your assets on a computer or hard drive.

Human Capital

A too often ignored aspect of fighting off the debasement of the currency is you. Building your own human capital can be one of the most effective tools to avoid the worst effects of a high inflationary environment. The way I like to define HC: it is the combination of your skills and knowledge, having both a theoretical and practical component to it. What you know and what you know how to do can be invaluable assets in bad economic times. There will always be some service or knowledge that other people will need and are willing to pay for that you can provide. It’s also never been easier to grow your human capital. You can learn how to change your oil by watching a youtube video, day trading through a Udemy.com class, and there are all kinds of online forums and communities that can give you free and usable advice on almost any topic or problem you can imagine. Personally, I try to constantly be reading as well as a goal to do one online class a month.

I would also add that physical and mental health are very important in terms of protecting your human capital. If you are sick or having a mental breakdown during a crisis, it can make economic problems exponentially worse for you and your family.

Pros: – relatively cheap – time flexibility (you can work on it at your own pace and convenience) – high upside – knowledge and skill go everywhere with you.

Cons: There is almost no downside to building human capital. The only word of caution would be not putting all your eggs in one basket in terms of what you can do and what you know. Spending your time learning to be a long-haul trucker, for example, maybe a bad time investment due to automation.

Okay, so now that we have covered the big ones, let’s talk about some more obscure stores of value that may not have immediately crossed your mind.

Guns & Ammo

It’s time to put a *pew pew* into that inflation killing your monetary gains. Firearms can be an excellent store of value. With a little bit of love and care, they can potentially be fully operational for decades and even centuries. Guns also track like a can of coke with inflation. They can also be fun toys and useful tools. Whether it’s for shooting at a range, hunting, or personal defense, there will always be a demand for guns.

The market for ammo fluctuates pretty drastically every few years, and a lot of private citizens will even stockpile ammo while it’s cheap and sell it when demand picks up. However, ammunition does not have the same shelf life as guns and can be damaged by rust or oxidization if not stored properly. They will still degrade even in the best of environments; though it could take years, it is going to be a much shorter time period than a firearm.

A final point on guns and ammo, depending on where you live, there can be extremely onerous regulations. This can make it very difficult, and in some cases impossible, to own guns. If your jurisdiction allows you to keep non-registered firearms, there is far less risk of losing them because of gun laws, though the financial risk is mitigated as most countries will do gun buybacks in the event of a ban.

Pros: – can last a very long time – always in demand – low volatility.

Cons: – difficult to store and transport (depending on where you live, there are storage requirement laws) – the risk of being regulated.

Honourable mentions: Compact bows, crossbows, and knives.

Collectibles

This category is vast and somewhat complicated in regards to being a hedge. Many collectibles fall in and out of favour over the years. If they become really popular like sports cards in the 90s, they get so mass-produced and plentiful that when demand dries up, they aren’t even worth the paper they are printed on. If you want to get into collectibles, you have to have very specific knowledge of the niche in which you are collecting; lukewarm investors will spend too much money on items that don’t have any long-term value. However, if you know what to look for, it can be extremely lucrative. Generally, when collecting, you are looking for pieces that have historical significance, like a signed Jackie Robinson card or a first issue of Action Comics.

Here is a list of examples of collectibles:

  • sports cards 
  • comic books
  • toys
  • retro video games
  • antiques (furniture, glassware, books, etc.)
  • sports memorabilia (signed ball, jerseys, etc.) 
  • cars
  • art
  • war artifacts
  • Coca-Cola collections

Pros: – fun and interesting for hobbyists – Great for displaying – preserves history/culture.

Cons: – risky investment with low information – many collectibles require expensive restoration or protection – vulnerable to theft, fire, and flood.

Musical Instruments

I got my first guitar when I was 14, a cherry red Fender Strat made in Mexico. It was purchased for under $500 CDN 18 years ago and now retails for anywhere between $750–$1000, tracking close with inflation. If kept in good condition, instruments of all kinds, from brass to wood to string, have great resale value. If you take care of them properly, they can easily last for decades, and it’s actually relatively simple to repair minor damage. Anytime I have had to get a guitar repaired, it always cost me under $100.

If you already play and love music, this one is a no-brainer but may not work for the non-musically inclined. As with all of these ideas, it’s optimal to find an inflation hedge that you can use and enjoy rather than just leave it to collect dust in an attic. And let’s not forget gear like pedals, cases, straps. These items can also solidly retain their value.

A caveat to this is old stand-up pianos. These instruments are hard to give away for free for the simple fact that they are abundant, hard to move, and take up a lot of space. Grand pianos and a Nord-Stage are safer bets.

Pros: – low volatility – high utility for musicians – minimal maintenance – stable demand.

Cons: – they take up space and may require storage – vulnerable to rapid climate changes and humidity levels – vulnerable to theft, fire, and flood.

Shure SM58

I thought about including this in the Musical Instruments section, but honestly, this mic is in a category all its own. If there was a fictional universe in which musicians controlled the monetary system, they would most definitely make the Shure SM58 Dynamic Microphone the reserve currency of the world. All your dollars would be backed by SM 58’s, and for good reason. This mic has hardly changed since its inception in the ’60s because there’s literally no reason to. It’s affordable, durable, and gives quality vocal and instrumental recording. I personally use SM 58’s for all podcasting and vocal needs. Is it the greatest mic in the world? No, but it does not need to be. You can find it in virtually every professional recording studio around the world, and almost all touring musicians have it in their repertoire. They last forever and are easy to repair. There are youtube videos of people using the mic as a hammer, baton, and even dropping it in water then using it with no issues. Purchase 20 of these mics, leave them in your basement for 30 years, and they will most certainly work perfectly. Not only that, you will be able to sell them for nearly what you bought them for (adjusted for inflation); try looking for them in used markets, and they are 10% less than retail at most.

Even if you know nothing about instruments or microphones, take it from me; you would not go wrong purchasing an SM 58.

Pros: – always in demand – very durable – easy to maintain.

Cons: – heavy – requires storage space.

Tools

This may be obscure, but power tools, and tools in general, hold their value exceptionally well. To be fair, you are probably never going to resell a tool and get what you paid for it. Still, as inflation rises, consumer goods like power tools will rise in price with them, so if you are looking to get rid of some extra cash, this is not a bad option. If you use or need tools, now may be a good time to invest in that table saw you have been humming and hawing about. If you get a good brand, it can last for years, perhaps even decades, and it can often take a beating. The motors in power tools are also fairly easy to fix. They use simple electrical schemes making soldering severed wires a relatively simple job.

It should be noted, I am talking about household tools, not work tools. The amount of mileage put on work tools will wear them out much faster. However, you will most likely use home tools a fraction of the amount you would use work tools, and therefore they should last orders of magnitude longer. A hammer you bought for ten dollars twenty years ago is probably as good as new and would cost you 20–30 dollars today. It will pay in the long run to spend a few hundred dollars getting high-quality tools that you would generally use around the house.

Pros: – always handy and useful – low volatility – a lot of upsides, and there is always a market for used tools if you ever needed to offload them.

Cons: – electric tools may not last more than 10 years – storage space required – theft risk – tools degrade faster in humid environments.

Livestock

As with many items on this list, this may not be for everyone; however, if you have an acreage or even a large enough yard, livestock holds their value very well. There is always a demand for them, or you can use them for your own consumption. Cattle and horses might be for more experienced ranchers and can be more expensive, but animals like sheep, goats, chickens, and even rabbits are relatively easy to raise and maintain. You can use their eggs, meat, milk, and fur. Depending on municipal regulations, you can sometimes get away with raising small game like chicken or rabbits.

Pros: – recurring resource – high utility – can be lucrative.

Cons: – high upfront costs in building habitat and purchasing animals – costs for food and medicine/veterinarian – high commitment.

Jordan S.