Practical Ways to Live through Inflationary Times

July 7, 2021

Mish's Daily

By Mish Schneider

Co-Written by Mish and Forrest Crist-Ruiz

Whether we head into hyperinflation, stagflation, or recession, it is always good to be prepared for more of the same-rising commodity prices, low supply, high demand, and a low labor force wreaking havoc on your wallet.

Inflation especially hurts people on fixed incomes.

Wage growth can partially offset inflation as well, but not every job or industry will have the same response and the average wage growth can be skewed by big increases at the top.

Here are some tips on ways to help reduce the effect of inflation from practical ideas to investments to keep an eye on.

Check your inventory and draw up a shopping list before you go to the market. Make a list of items you need (try not to buy what you don’t need) and stick to the plan.  Never go grocery shopping on an empty stomach. Take hard cash instead of your credit card.

Tax advantages
Tax rules allow investors to adjust the cost of an asset to inflation during the holding period. Talk to your accountant.

Categorize everything into either variable rate or fixed rate.
Any debt with a variable rate has the potential to increase your payments in a period of higher rates.

Remind your boss that a 2% raise in a year with 3% inflation is not a real raise.

Precious metals
Once investors begin to worry about rising inflation, we can expect gold and silver to jump in price. Luckily, ETF’s such as (GLD) and (SLV) make the metals easy to own compared to buying them in physical form.

Food and soft commodities
We have been a fan of soft commodities throughout the pandemic as supply chains and industry bottlenecks plagued this sector. However, rising inflation brings a whole new light and reason to use them as a hedge.

By taking the Invesco Agricultural Fund (DBA), we can see if recent lows can hold as new support at $17.54. However, if soft commodities start to move, we can wait for a phase change over the 50-Day moving average at $18.50 to give a stronger trend signal.

Though DBA offers a good glace into this sector, we also watch individual commodities such as sugar (CANE), coffee (JO), corn (CORN), and more.

Take advantage of the low-interest rates NOW. Borrow as much as you can on real estate or any hard asset at these low rates and sit tight.

Debt also tends to benefit from inflation since the money you owe is not indexed to inflation, so you end up paying off the debt with less valuable dollars.

The general strategy for mitigating inflation is to have more assets that will tend to float with the overall increases in price levels. Equities, commodities, gold, real estate, or other hard assets. They may not all go up in sync, but will likely all go up with the overall price level.


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ETF Summary

S&P 500 (SPY) New highs.

Russell 2000 (IWM) Watching to hold 221.

Dow (DIA) support 341.82. Resistance 348.65.

Nasdaq (QQQ) Holding near highs.

KRE (Regional Banks) Needs to get back over 63.63.

SMH (Semiconductors) 245 main support area.

IYT (Transportation) 257.67 support.

IBB (Biotechnology) 159 support area.

XRT (Retail) Closed over the 50-DMA at 94.29.

Junk Bonds (JNK) Held the 10-DMA at 109.86.

XLU (Utilities) 63.41 support area.

SLV (Silver) 23.75 key support.

VBK (Small Cap Growth ETF) 279.61 support the 50-DMA.

TLT (iShares 20+ Year Treasuries) 140 support. 148.47 resistance.

USD (Dollar) Needs to hold over 92.30.

DBA (Agriculture) 17.54 next support.

GLD (Gold Trust) Inside day.

UNG (Natural Gas) 12.32 support from gap.

TAN (Solar Energy) 86.71 support.

USO (US Oil Fund) Next main support area the 50-DMA at 46.64.

XME (S&P Metals and Mining) 41.17 next support

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