01438 741177         thewinesociety.com

Any excuse....Inflation

With inflation running at about 10% and some folks reckoning this could continue for 5 years, our life savings and pensions are quickly diminishing in value. The markets are flat, bonds wont give you more than a % or 2 interest, so could now be the time to throw caution to the wind and go mad with the credit card and buy, buy, buy…More wine of course.

2 Likes

Sadly I am one of the ‘I remember when inflation was over 15% and mortgage rates seemed to be increasing every month’ brigade.
I am one of that generation who had it easy, so my four children who have all been to university and are now paying for decent mortgages and bringing up their own kids, tell me!

Best look after what money you’ve got.

1 Like

If you went big on historic EP offers this might well save you from some price shocks to come.

The worse thing one can do now is hold on to cash.
Almost any decent investment is better than holding cash right now. Do your research and plan how to turn cash into assets.

1 Like

I always keep a £5 note in my wallet and 40p in change in case I need a toilet (sorry diuretics).

3 Likes

not a condition I suffer from

12 Likes

The problem is we all need some cash. The other thing which i wonder if anyone has noticed is that the Chancellor a few years back froze the personal tax allowance. In the past my income tax remained the same because my pension went up by the rate of inflation in september and my personal allowance also went up by the same rate of inflation. Now that the personnal allowance has been frozen my tax rate is going up and up .

2 Likes

I disagree.

My investments are 55% Silver (yikes! too early with a strong dollar acting as a wrecking ball), and 45% cash.

I’m not using the 45% cash for day to day expenses, but to purchase financial assets - which still haven’t bottomed. Once we have bottomed or are near, I plan to invest in commodities, producers and industrial metals.

I’d preferably short ECB short-term bonds if I could find a suitable vehicle to do so [SIPP].

I do not disagree that cash is poor over the long-term. In an environment of rapidly reducing liquidity [financial capacity], cash isn’t a bad place to be - even with inflation running at 9%/10%. Short-term, that is.

3 Likes

I am 55% Long John Silver and 45% Blind Pew

6 Likes

Agree on commodities and metals.

The crypto bubble will continue to burst imo, and scarce resources will be seen as more and more valuable.

Your view of holding cash for short term with the intention to invest is what I tried to summarise.
Yes you do need cash or assets with high liquidity to be able to make an investment.
I do have cash available but with the intention to invest within the coming months.
One rule I follow is once in the market never come out.

1 Like

Wow. That’s quite a big silver allocation.

I don’t aim to have any where near that investing alpha or market timing

I aim for a bit of diversification and would be happy with beta/passive returns

This asset class return stuff is quite useful BlackRock Return Map | BlackRock Investment Institute

That said I have also been reallocating some stuff to cash.

Good luck. Hope your ready for both the ups and the downs!

1 Like

As I am 77 and my ancestors were not long lived death is the next big event . So i am not bothered personally by inflation. My superanuation is guaranteed by law to rise by inflation each year. Clearly it is a problem for society as a whole and i am concerned by that.

1 Like

Well apart from your government OAP, you’d be very lucky to have a private pension go up by the current levels of inflation. I’m going to start taking my 15 years worth of DB in August and it’s indexed to inflation or 3% whichever is the lower. So with inflation nearing 10% the spending power of my monthly pension is going to devalue by 7% each year.
Regarding my DC pot, that’s recently dropped almost 10% in the last year, even though it’s been moved to a low risk fund to protect it against stock market losses prior to retirement. I did write to them about that but just got a load of boilerplate bullsh*t back from them.
Decisions to be made about to whether to take the 25% tax free lump sum from my DB fund and what to do with it, along with other savings, to try and get a better growth than 3%.
Is it time to get stuck into hard assets…Silver does seem to be touted as one of the better options with the reconing that it’s underpriced in comparison to it’s usefulness as an electrical conductor.
I’ve got some gold and silver coins that I inherited last year and have dabbled with gold in the past. Problem is, you have to pay 20% VAT on coins and bars made from silver which I expect you wont get back when you come to sell it.
To buy a 1oz silver coin today costs about £22 when the bullion price is only £17.
When I enquired how much I’d get from the Royal Mint for my gold coins I was quoted 97% of the bullion price. You can buy a Kruggerand for only 2% above the bullion price giving a total spread of 5% buying and selling.
Is there a way of buying silver and not have to pay the VAT.

My father worked for the same company for 43 years until he retired in 1983. A good part of his pension would increase with inflation or by 5%, whichever was the higher! By the time he died in 2020 he was doing very nicely thank you. How times have changed.

1 Like

Dead right. I think my generation has been identified as the first generation to be worse off than our parents.
Sadly I don 't think it’s going to stop at that. I dread to think of the mess the next 2 generations are going to inherit, even if you ignore global warming.

1 Like

My personal preference is Gold but, to answer your query, there are a couple of options available to you.

Firstly, you can buy VAT free Silver and have it stored in a vault in, for instance, Zurich. But this is subject to annual storage costs, much like Members Reserves. VAT (and other fees) would be due if you ever take physical delivery. Bullionvault is probably the cheapest way to do this.

Secondly, you can try to acquire secondhand Silver, only paying VAT on the dealers margin.

I recommend the Chards and Bullionvault websites for more information on both options.

1 Like

Three (slightly connected) inflation related thoughts:

Wine: if you have the spare cash buy now - it’s only going to get more expensive AND less affordable. Maybe I’m wrong… but a full wine rack is reassuring.

Pension: (and I’m 61, self employed, money-purchase pension pot) has dropped by around 20% since this time last year. In theory it will rebound if one takes the long view, however this severely limits my hopes to retire at 63 ish. So working past 65 seems likely.

Inflation: will further erode the value of said pension. Thank god I have a reasonable amount there in the first place.

So… time for a glass of Moulin a vent!

5 Likes

Interesting. Can you sell it without ever taking delivery of it and avoid the VAT altogether?

Your point about wine becoming more expensive and less affordable was the reason I started the thread.
At 10% inflation money halves in value every 7 years.
So buy a £20 bottle today and 7 years later that bottle would cost you £40, plus the other gains in price due to storeage and increasing rarity.
If your income and investments are able to keep pace with inflation then this doesn’t matter. But if inflation gets away from you then you’ll loose out. I’m sure there are some clever people out there who will be able to even out pace 10% inflation. But personally I’m not that confident that I can.
So chucking a lump of my hard earnt at some nice wines seems a positive move to me right now.

1 Like