If you do not buy a house and you have all your assets in stocks, bonds or cash aren’t you vulnerable in case inflation comes back like the 1970s ?
Thats a very open question. Depends of which one your talking about. Cash, yes your a loser. Stocks, depends on which ones. Some may do well if they are corrolated to businesses that can take advantage of inflationary items ie. energy, minerals, etc. Bonds I don’t feel are even keeping up with inflation and definitely not paying for the risk right now.
In Mozambique right now their market is doing fairly well even though they are experiencing hyper inflation. In the end the currency will be worthless (which is why they are trying to trade the currency for anything they can) so again here they will lose.
The key here is to pick which outcome we are likely to experience in my opinion. I’ll answer your last question on my belief we’ll experience stagflation (inflation in items we need ie food, energy, things and deflation in non-essential assets that have increased wildly based on debt inspired purchases, ie housing, cars, discretionary items.
So yes in nominal terms your loan amount decreases with inflation. The problem with your assumption is whether or not the assett will hold its value as well as whether or not your wage inflation will keep up your other living costs and debt servicing costs on non fixed items (normally interest rates rise in inflationary times).
If the stagflation morphs into hyperinflation or even deflation it will be tough as unemployment soars and servicing your debt becomes difficult.
There is much much more to all this. I think the majority of housing bears here inluding myself feel in the intermediate future it will pay to hold cash as the decline in debt fueled housing mania will provide a better return, purchasing later then now. I’m sure others here can say it better then I.
So where do you hide. For me precioius metals, energy, and foreign stocks.
