Viable stores of purchasing power. Ideas?

Finance
1

This topic is prompted by a post I did over on the “off topic” board. I wrote there about an old wristwatch I found. It turned out to be quite valuable.

I think many participants here would agree with the following:

It’s not how many dollars you have, not the size of your nestegg measured in dollars, that matters. Instead, what’s important is the purchasing power of your nestegg.

The economy is picking up a bit. There is talk of inflation once again after some very good years in that regard under President Obama. In order to be a viable store of purchasing power, non-monetary options need IMO to possess high valuation density. To wit:

Gold, and other precious metals (e.g. platinum), occupy only a small amount of volume relative to their worth, facilitating storage. Also, precious metals do not “eat” (more on that in a moment).

Contrast that with, for example, expensive classic automobiles. Classic autos are relatively large and are subject to deterioration if not stored properly. They “eat” because it costs money for proper storage and maintenance. Ditto land and/or real estate. Those things “eat” because you must pay real estate taxes on them, a situation which could go on for years before time comes to cash in.

The wristwatch I found, OTOH, is small, valuable, and unless used regularly or abused is unlikely to fail. Other low maintenance, high valuation density items would include gems . . diamonds for example or even precious stones, e.g., emeralds.

OK, so I mentioned some of the obvious stuff. Do you have any more creative and innovative ideas for viable non-cash stores of purchasing power? The way things are going now we all might benefit from having a portion of our nest egg invested in such things.

3 Likes
2

This is an automatically-generated Wiki post for this new topic. Any member can edit this post and use it as a summary of the topic’s highlights.

3

Gold, classic cars, collector watches, are all subject to market value fluctuations that could end up costing you.

Real estate is another obvious store of purchasing power.

An alternative is investing in things that reduce your expenses in the future, e.g. solar panels

3 Likes
4

Inflation-indexed bonds? Or are you excluding financial instruments?

Good thread!

3 Likes
5

Lifetime memberships to things you use. Rent controlled apartments.

1 Like
6

Similar : Inflation adjusted annuity

7

Heck, no! Any and all ideas are most welcome!! This is a very tough nut to crack . . . . . . . at least it is for me.

8

I bonds, TIPS, short term CDs (or longer term ones with low penalties or reset features), cash in the mattress…

For inflation generally, typically real assets will rise with inflation. So for non-explicitly inflation linked assets, you can just buy stocks or real estate or gold or bitcoin. These have a lot of other risks to them of course, and many are volatile.

For fixed income assets, they are typically priced for current inflation expectations. You can lose purchasing power in bonds if inflation is higher than expected during the maturity of your bonds*. Keeping with the shorter duration / reinvestment risks, you might consider fixed term bond funds like those Bulletshares or similar ETFs where they mature on a known date instead of generic bond funds that keep rolling intermediate bonds continually.

/* if you think inflation is say 2% currently, it’s also possible that you’re losing money to inflation even in a cash or CD type investment, since after paying taxes you may not get a net 2%+ after tax return to offset inflation. In this sense, real risk free rates can be negative but that’s a separate risk (known loss of purchasing power) than the risk of an additional increase in inflation (unexpected loss of purchasing power). Inflation linked securities protect against the latter; nothing protects against the former.

1 Like
9

In other words, things that are expected to appreciate at the rate of inflation without ongoing costs?

10

Expected? Not certain I would use that exact word, though maybe it is OK. I would probably say “hoped” instead. Regardless, you’re on the right track.

Couple of things I did not mention in the OP . . . . not saying these are great ideas because both have negative aspects. Anyway:

I have done pretty well with vintage camera lenses. This even though it is for me more of a hobby than an effort to preserve buying power. But my lens collection (I have several hundred of them) has certainly appreciated in value, way beyond any expectations I ever had.

Second new item I can offer is prospective land. This takes work and knowledge of the industry to ferret out. It also helps if you know a little geology. You have to front run the land men, or at least be in and leasing, or even buying, early in the game alongside them. But there is profit potential if you have good fortune.

11

RE: Watches; it depends on the watch. Rolex in general has been a fantastic brand. They typically raise prices according to inflation, and their stores typically don’t offer discounts. If you are able to buy the watches at a discount (with boxes and papers) and wait a few years you will come out ahead.

I have a couple of Rolexes purchased about 2 years ago and pricing has already gone up in the second hand market.

The trouble with these types of things though, is how to cash them out. You get the most money selling them online but risk getting scammed which could wipe you out. If you do a deal in person you may not get as much as you could have, and still risk getting scammed. If you sell it to a dealer you will get hosed.

12

The Fed can’t even meet their 2% target inflation rate. We may no longer be in a deflationary spiral, but we still have disinflation. That “talk” is premature.

13

Or shot:

AJC

1 Like