Profiting from inflation

DoctorStrange

With all this QE I can't help but feel we're going to see inflation increase in the years ahead

To profit from this, I'm thinking of borrowing to invest, and BTL seems the obvious way to do that. 

I appreciate it's becoming more expensive to profit from BTL, but if the aim is to let inflation eat away at the debt and the rent is essentially index- linked, then it does start to look more of a good inflation play.

What do you folks think?

How would you try to profit from inflation?

jamei305

Buy assets now in currencies that don't have such inflationary prospects e.g. JPY, and then sell them after inflation in GBP has peaked, thus getting more GBP for your JPY than you paid for them.

kuratowski

Personally, I am rather hoping that my investments in equities funds will outperform inflation, but I know full well there are no guarantees, and that's one reason I don't leverage up and invest the additional borrowing.  Bearing in mind numerous central banks have been trying (and failing) to increase inflation for over 10 years now, I'm not holding my breath.

Some other potential things that are sometimes suggested when inflation is discussed are gold, silver and the cryptocurrencies.  Personally, however, there is no bargepole long enough.

sevenhills

Household savings have risen substantially since the start of the Covid-19, which could cause short-term inflation. Maybe the Government can keep some of it under control, if they want to. Do they want to?

https://www.bankofengland.co.uk/bank-overground/2020/how-has-covid-affected-household-savings

cattom

When I was furloughed the pound had hit rock bottom, or so I thought. so on the basis of buy low sell high, I bought extra premium bonds several k. I also bought a savings bond with m&s. all ready both have more than payed for themselves. fortune favours the brave.

maxsteam

Inflation would bring a rise in interest rates which would make mortgages more expensive. The argument that inflation would "eat away at the debt" is flawed. Having said that, there's nothing wrong with taking on a small BTL. It might work for you, it might not. I certainly would not advise borrowing to the limit to do it though.

Albermarle

cattom said:

When I was furloughed the pound had hit rock bottom, or so I thought. so on the basis of buy low sell high, I bought extra premium bonds several k. I also bought a savings bond with m&s. all ready both have more than payed for themselves. fortune favours the brave.

When buying PB's or savings bond in GBP , it's exchange rate with other currencies is irrelevant .

eskbanker

cattom said:

When I was furloughed the pound had hit rock bottom, or so I thought. so on the basis of buy low sell high, I bought extra premium bonds several k. I also bought a savings bond with m&s. all ready both have more than payed for themselves. fortune favours the brave.

When you say "both have more than payed (sic) for themselves", you could conceivably have won more than 100% of your PB holdings but that's obviously not going to apply for a savings bond, or do you just mean that you've had above-inflation returns so far?

coyrls

cattom said:

When I was furloughed the pound had hit rock bottom, or so I thought. so on the basis of buy low sell high, I bought extra premium bonds several k. I also bought a savings bond with m&s. all ready both have more than payed for themselves. fortune favours the brave.

Premium Bonds and a Savings Bond with M&S are pretty low on the bravery scale.

cattom

eskbanker said:

cattom said:

When I was furloughed the pound had hit rock bottom, or so I thought. so on the basis of buy low sell high, I bought extra premium bonds several k. I also bought a savings bond with m&s. all ready both have more than payed for themselves. fortune favours the brave.

When you say "both have more than payed (sic) for themselves", you could conceivably have won more than 100% of your PB holdings but that's obviously not going to apply for a savings bond, or do you just mean that you've had above-inflation returns so far?

yes you are correct. what I mean is both are worth considerably more now, after just 12 months. thanks for the correction.

Mr.Saver

DoctorStrange said:

With all this QE I can't help but feel we're going to see inflation increase in the years ahead

The OBR and BoE both disagree with you.

OBR: https://obr.uk/efo/economic-and-fiscal-outlook-march-2021/ Economic and fiscal outlook – March 2021 Executive summary 1.28

CPI inflation has fallen well below target, reaching 0.5 per cent in the fourth quarter of
2020, largely driven by falls in fuel and utility prices (Table 1.1). Over the remainder of
2021 and 2022, we expect CPI inflation to remain a little below the MPC’s 2 per cent
target, as the rise in unemployment dampens wage growth, outweighing the effects of
higher oil prices. Thereafter, CPI inflation rises gradually back to target by 2025 as the
economy recovers. Whole economy (GDP deflator) inflation remains volatile in the short
term, driven by sharp movements in the implied price of government output.

BoE: https://www.bankofengland.co.uk/monetary-policy-report/2021/february-2021 Monetary Policy Report - February 2021 1.2: The MPC’s projections Table 1.A: Forecast summary

Projections | 2021 Q1 | 2022 Q1 | 2023 Q1 | 2024 Q1
CPI inflation | 0.8 (0.7) | 2.1 (2.1) | 2.1 (2.0) | 2.0