inflation hedges


G

Gallagher

besides property, what are other viable options are there today?
anyone experienced with gilts?
 
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G

GSV Three Minds in a Can

from the wonderful said:
besides property, what are other viable options are there today?
anyone experienced with gilts?
Index linked gilts, but no guarantee they will move exactly in line with
inflation. Index linked national savings certs track more closely, and
are tax free, but you have a limited amount you can invest in each
issue. Regular Gilts are not a sensible option - they promise to pay you
a fixed number of £ at some future date, regardless of what a pound
is/isn't worth by then.

Nor is there any reason to believe property is going to track inflation
any better than other asset classes .. I would guess that it'll do
worse, given where it is starting from.
 
J

Jonathan Bryce

Gallagher said:
besides property, what are other viable options are there today?
anyone experienced with gilts?
an LPI swap?
 
R

RobertL

an LPI swap?
historically don't the perpetual gilts, like 3.5% war loan and the
consolodated loan stocks keep up with inflation?

to quote from http://www.lindselltrain.com/p/fLTIT1.htm

"The 2½% Consolidated Loan Stock (Consol) is an irredeemable United
Kingdom Gilt, first issued in 1749. The gilt has no fixed life and
there is no promise of redemption at par, or issue price, as is the
case with more common, dated gilts. This perpetual characteristic of
the Consol means that its yield represents, at any point in time,
investors best estimate of the required running nominal yield to at
least preserve the purchasing power of Sterling for the foreseeable
future, because there is no stated end to the gilt's life. "


Robert
 
G

Gallagher

what about derivatives? of course get a professional to do it. i did however
read
that the returns, if you bet the correct direction, are almost 900% but get
it wrong the losses
are infinite. any truth to that?
 
J

Jonathan Bryce

RobertL said:
historically don't the perpetual gilts, like 3.5% war loan and the
consolodated loan stocks keep up with inflation?

to quote from http://www.lindselltrain.com/p/fLTIT1.htm

"The 2½% Consolidated Loan Stock (Consol) is an irredeemable United
Kingdom Gilt, first issued in 1749. The gilt has no fixed life and
there is no promise of redemption at par, or issue price, as is the
case with more common, dated gilts. This perpetual characteristic of
the Consol means that its yield represents, at any point in time,
investors best estimate of the required running nominal yield to at
least preserve the purchasing power of Sterling for the foreseeable
future, because there is no stated end to the gilt's life. "
No. They fluctuate around the £100 mark depending on movements in interest
rates above and below the respective nominal rates of the loan stocks.

They provide a hedge against movements in annuity rates as a result of
interest rate changes, so for that reason it is a good idea to shift your
pension money into them as you get closer to retirement, but they certainly
don't hedge against inflation.
 
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G

GSV Three Minds in a Can

from the said:
No. They fluctuate around the £100 mark depending on movements in interest
rates above and below the respective nominal rates of the loan stocks.

They provide a hedge against movements in annuity rates as a result of
interest rate changes, so for that reason it is a good idea to shift your
pension money into them as you get closer to retirement, but they certainly
don't hedge against inflation.
Or if you look at it another way, they cost £100 in 194x pounds, and you
can buy them now for £60 2007 pounds (I didn't look recently) which is
definitely not keeping up with inflation.
 
G

GSV Three Minds in a Can

from the wonderful person said:
what about derivatives? of course get a professional to do it. i did however
read
that the returns, if you bet the correct direction, are almost 900% but get
it wrong the losses
are infinite. any truth to that?
The losses could be very large, but not infinite. However if you don't
know what you are doing, don't event think about it. Getting 'a
professional' to do it for you just adds one more thing to go wrong. If
professional could win all the time they would do it with their money
not yours (actually they'd be lying on a beach in the Bahamas).

With your money, if they lose it all .. well there's another punter
along with more money tomorrow ..

Just trot down the casino and put it all on 13.
 
G

Gallagher

GSV Three Minds in a Can said:
The losses could be very large, but not infinite. However if you don't
know what you are doing, don't event think about it. Getting 'a
professional' to do it for you just adds one more thing to go wrong. If
professional could win all the time they would do it with their money
good point
 
R

RobertL

Or if you look at it another way, they cost £100 in 194x pounds, and you
can buy them now for £60 2007 pounds (I didn't look recently) which is
definitely not keeping up with inflation.

Ah yes, of course. the text I quoted (repeated below) means that their
actual yield (currently about 4.5% pa) is a barometer of what return
is needed to beat inflation at the moment, but that does not mean
their value will keep up with inflation. An importnat
misunderstanding on my part, sorry.

"This perpetual characteristic of

Robert
 
N

Nick

Gallagher said:
what about derivatives? of course get a professional to do it. i did however
read
that the returns, if you bet the correct direction, are almost 900% but get
it wrong the losses
are infinite. any truth to that?
Obviously losses aren't infinite any counterparty will want to check
your credit worthiness and ability to pay losses before entering into
any contract.

If you are just looking for leverage a standard mortgage gives you that.

If you want to short the market you could try put options where your
losses are limited to the amount you pay for the option but you can get
a lot if the market really plummets.

900% = how long is a piece of string.
 
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N

Nick

GSV said:
The losses could be very large, but not infinite. However if you don't
know what you are doing, don't event think about it. Getting 'a
professional' to do it for you just adds one more thing to go wrong. If
professional could win all the time they would do it with their money
not yours (actually they'd be lying on a beach in the Bahamas).
If you think of professionals as bookies.

They can offer you the best odds on a horse but they can't tell you
which one will win.
With your money, if they lose it all .. well there's another punter
along with more money tomorrow ..

Just trot down the casino and put it all on 13.
I presume you'll be taking a 5% cut for that advice.
 

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