Wednesday, Dec 1, 2021

Coping With Inflation and Supply Chain Shortages

So, the writing is on the proverbial wall – inflation and supply chain shortages are here.  The news is covering it, and there is a lot of chatter..

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So, the writing is on the proverbial wall – inflation and supply chain shortages are here.  The news is covering it, and there is a lot of chatter about it in online forums.



The media is reporting that we’re likely to have a few more months of shortages and price increases.  At this point, the Federal government is doing their best, but they’ve got a lot on their plate. So, a quick fix to these inflation/supply chain issues is likely not going to be forthcoming.  Inflation and shortages are atypical in the recent American experience, and as a result most people don’t really know what to do about it.

So,  for DINKS, here are four pro-active suggestions that might be helpful:

1. Stock Up:

Inflationary cycles tend to take a while to settle out – in some cases a couple of years.  So this means that its likely there will be several months of inflation in the future.  This will probably impact grocery and consumer staples prices.  So, a rational response to this would be to buy a couple of weeks worth of consumer staples, like toilet paper, dry food (rice, beans etc.).

To illustrate, here are some US based inflation numbers from the last sixty years.  The high inflation of the 1970s and 1980s didn’t recede for several months after their peak.


inflation and supply chain issues

Source: St Louis Fed.

An excellent write up of inflation, and how long it takes to settle, is here.

2. Stay Positive and Build Community:

The country is an digital age, however people who are part of tight in-person supportive communities do better when times are hard.  Strong mutually supportive social ties almost always help in the long run.  So if you’re not part of a community, you should consider thinking about strengthening your ties.  Get involved with a religious community or join some clubs, or business associations.   At the least, pick up the phone and make plans to meet friends.

The Mayo Clinic has some more solid advice on building resiliency.

3. Buy Inflation Resistant Assets:

Another way to deal with inflation and supply chain shortages is to buy assets that are inflation resistant.  If this appeals to you, there are a couple of options you could consider. These are:

  1. Buying stocks
  2. Buying TIPS or I-Bonds
  3. Buying precious metals.

If you’re going to buy stock, be sure you’re buying quality companies that have competitive advantages, pricing power, and cash flow consistency.  Treasury Inflation Protected Securities or TIPs, and I-Bonds are bonds sold by the US treasury that pay interest based on the Consumer Price Index.  So if inflation is high, they pay more interest.  Lastly, precious metals (gold and silver) usually hold their value over time.

4. Keep A Eye Out For Opportunity:

There are always opportunities to build wealth in environments with inflation and supply chain challenges, even in inflationary environments.  For example, now would be an excellent time to start a California compliant US based trucking company.  And short term changes in interest rates can present opportunities if you’re alert.

For example, during the 1980s interest rates peaked at over 17%.  That would have been an excellent time to purchase 30 year treasury bonds.



 

For more reading, consider the following:

This Saving Advice Forum’s Discussion on Supply Chains and Inflation.

The Equpped.org shortages thread.

Here is a Bloomberg article on global nature of the phenomenon.

The post Coping With Inflation and Supply Chain Shortages appeared first on Dinks Finance.

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By: James Hendrickson
Title: Coping With Inflation and Supply Chain Shortages
Sourced From: feedproxy.google.com/~r/blogger/mELS/~3/osurApF_PDk/
Published Date: Tue, 19 Oct 2021 19:48:56 +0000

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