Investments and inflation — let’s see at a different angle

25 сентября, 2021 от fake Выкл

«Everything is relative»

(s) Rene Dekart

One of the most important enemies of the investor is inflation.

I would generally said that the investor is not so many enemies, but all of them are cunning and prospers. And most importantly, it is impossible to «kill» any of them.

Because the enemies of investment are such eternal phenomena as:

About each of these enemies can be written separate item.

Today we will talk only about one of the aspects of inflation — probably the most terrible of enemies.

When we

Even in the comments in that article, sensible readers offered a completely different approach to assessing the impact of inflation on shares, which does not imply a stupid and permanent «trusting» amounts proportional to inflation. But before me, apparently, as before the notorious giraffe, it reaches too long))

It is said that before hearing the answer, a person must be soaring — before this you can promptly tell him the right thoughts — they will not go to the head. So I like it was also an understanding that the shares should insure their owner from inflation, but the full picture in the head has not yet been evolved.

But now it has developed.

And see which interesting thing is obtained.

For those who have not read (or forgot)

Citizen honest working accumulated 11 million rubles. Inves them under 10% dividend income, while lived by 600 thousand rubles per year (50 thousand per month), and the remaining 500 thousand income (5% of capital) reinves every year so that inflation does not devour its capital.

So, wise people offered to look at inflation at a completely different angle that we will do now.

The look described above would be correct if it were about the deposit under 10% per annum. Then the logic would work exactly as described in the example above. But the action is capable of growing in price — and, therefore, play inflation.

Let’s consider this look at the situation.

We divide our arguments into several stages.

As in classical logic, we will build our arguments in stages: thesis, arguments, conclusion.

Thesis will be what —

Here is such a bold statement.

He himself is confident in it yet not one hundred percent — let’s discuss — ready to listen to your arguments from and against. In the meantime, I will give your arguments in the article.


Arguments in favor of this thesis.

Let’s start from afar from the simplest example.

The example is the first.

Suppose our novice investor began like everything — with his beloved people’s idea-utopia «I will buy odnushki, I will pass and I will live without worries.»

He bought odnushku and passed. We are not looking at the investor’s income — we are now interested only in inflation aspect. What do we assume in terms of inflation?

From the point of view of inflation, we assume that in the long perspective concreteometers still — it is not cut paper. There must be to rise, at least at the level of the same inflation — after all, to build the same odnushku need to buy land again, hire workers, buy building materials — in short, the apartment bought for normal money should be in the level of inflation in the historical perspective.

That is, it turns out that from the point of view of «playing» inflation, our investor does not need to buy more concreteometers — his apartment and so will play inflation. That is, it turns out that he can quietly «sit down», and the inflation will find the increase in the value of the asset. (I repeat once again — the profitability of the investment does not matter — we are discussing only the inflationary aspect).

Let’s go further.

An example of the second.

Our investor is tired of «without worries» to take an apartment.

Then the tenants do not want to pay, then the toilet break, then the neighbors flood, then they will not find new tenants — and the charter from such a «carefree life» he decided that it was better to buy shares.

And he invested his own apartment, he invested his hard money earned in the company’s promotions. Let’s call him PJSC «Odnushka-Moskvushka».

Our PJSC «Odnushka-Moskvushka» on a strange coincidence is just owning the same property: one-bedroom apartments in Moscow. And the business of this PJSC — well, who would have thought — the delivery of this property for rent (especially advanced in legal matters here can use the words «hiring residential premises», but the essence of the matter will not change).

It is rather obvious that the logic that worked with one apartment — works with many apartments. The current apartments (company property) «beat» inflation, and all the rental payments come in the form of dividends — you can safely publish.

It seems that in this example, an investor may not be afraid of inflation not to replenish the fixed capital. The requirement, as in the first example, is only not to sell fixed assets (in the first example — apartment, in the second example — stocks. And incoming incomes can be disposed of at its discretion).

Consider an example.

Example Third.

And what will change, if the company in which our investor will invest, does not own property (apartments, etc.) and provides, for example, services — medical, tourist, cleaning, banking, etc.

Maybe with inflation, the cost of shares will collapse?

Here logic seems to be less obvious than in the case of a company that owns real estate, but we can notice that, for example, prices for high-quality medical services are not lagging behind inflation, the same applies to almost all areas of business not related to significant cost fixed assets.

You understand that Yandex or Baid are so expensive because they own expensive real estate. And NKN, for example, is not very expensive than the book value of its «iron».

I think it is possible to reasonably suggest that the sustainability of shares to inflation is associated with the successful business model of the company to a greater extent than with the number of property from the company (we know examples of companies that are traded below the balance sheet estimate).

However, the nature of the shares itself is such that the resistance to inflation is part of their normal «healthy» entity. Any live business will raise prices for their products and their services as inflation — so if its products and services are in demand, then customers will inevitably have to «cover» inflation.

And if the business is not able to raise prices even on the inflation level — it will die.

So returning to the thesis «


If the company in which you have invened your money has a steady business model, generates a positive cash flow, it constantly has a net profit and shares this net profit in the form of dividends — it seems that you can spend the dividends received at your discretion without regardless of inflation . This will not cause the inflationary reduction in your fixed capital. And it does not hurt you on the way to become