How To Profit From Inflation.

May 21, 2021  How to invest for inflation, How to profit from inflation, inflation proof investments, property development, property investment

How To Profit From Inflation.

 

Unless you have been living under a rock for the last few weeks, you will have seen that the markets have been spoked by the prospects of higher inflation. This has come about due to the post Covid bounce we predicted back in January, in our Roaring 20s article. https://willowrivers.com/the-roaring-20s-are-back/ This latest article looks at how to profit from inflation.

Just in case you don’t know what inflation is. I have borrowed a definition from Robbert Kiyosakis website: The simple definition of inflation is when prices rise and the purchasing power of a currency drops. It means that you can buy less with your money than you used to be able to. Simple!

So we are all getting poorer. Our money goes less far and this is bad news unless our income is linked to inflation.

Luckily there are ways of beating this. Some assets perform better than others in an inflationary environment and we are lucky enough to have a number of these on our books here at Willow Rivers Wealth Ltd.

How to profit from inflation
How to profit from inflation

Long-term (since 1950) correlation between inflation & various financial/real assets.

So lets first look at what not to do!

The worse thing you can do, is hold all your net worth in cash in an inflationary environment. You are effectively making a negative return. With some analyst stating inflation could pass 5% this is a very real threat.

The boom on the back of the rapid vaccine rollout is starting to take shape and many assets and commodities are getting swept up in the rapid recovery. None more so than in the construction industry:

https://www.constructionnews.co.uk/supply-chain/construction-materials-shortage-5-key-items-in-short-supply-17-05-2021/

https://www.theconstructionindex.co.uk/news/view/developers-urged-to-start-now-to-beat-build-inflation

Inflation in building materials will lead to higher prices for construction and thus higher property prices down the line. Added to this, demand for property is rising as people come out of look down and look to improve their living standards.

Fuel prices are also rising rapidly as we get back on the roads and start to fly again. Expect $100 oil in the not too distant future. https://financialpost.com/commodities/energy/oil-gas/peak-demand-more-like-a-supply-crisis-propelling-oil-to-us100

So how do we beat and profit from inflation?

How to profit from inflation

  • Property Investment

So the first and most obvious place to look when trying to beat inflation in the property market. Inflation is also a good time to use leverage. One can buy a property with a buy-to-let mortgage and buy an appreciating asset with a 25% deposit but see capital appreciation on the full value of the property. If you fix in your mortgage rate for several years you should be able to see steady capital appreciation and rental growth, while your fixed interest costs remain the same. A very crude example of this would be a if a 100,000 pound flat appreciates by 10% and you have invested 25,000 you have made a paper profit of 40%. (10,000/25,000 x100) comfortably beating inflation. There are obviously other costs to take into account but even when these are added you should still be well clear of any inflation.

  • Property development.

Buy developing houses and projects now, you can build at the current prices and sell at the new rate of inflation in 6 to 12 months time. We offer a number of property developments around the county all with market beating returns of 15%+. We use a JCT contract https://corporate.jctltd.co.uk/products/about-our-contracts/ which fixes the price of the build at the front end and avoids any uncomfortable surprises for the investor. Get in touch to find out about our latest development opportunities around the county. More details at www.willowrivers.com

 

  • Commodities

You can trade commodities on all the usual platforms such as Etoro and IG. Oil Copper and Timber are already showing excessive growth, but just about any commodity used in the building process will see substantial growth over the next couple of years.

 

  • Renewable energy with inflation linked returns.

We have been developing renewable energy projects for over ten years now. Feed-in-tariffs linked to inflation are a thing of the past now, however we are still building private projects with a Power Purchase Agreement (PPA). The power generated from wind, solar or geothermal is sold back to the business below and the contract is fixed for 20 to 30 years with an inflation linked kickder to the price. We are able to generate 10% to 15% pa returns which will rise in line with inflation. Get in touch to find out what projects we have available for investors. Projects start from 20,000 pounds to 25m. www.willowrivers.com

  • Farmland and Forestry

UK Farmland will also appreciate again. The combination of the security land ownership offers, zero inheritance tax and yields linked to commodity prices will attract both UK and international investors alike. We work closely with a number of UK land companies and can help with forestry and agricultural land investment.

Conclusion

Don’t just take our word for it, hedge fund manager Michael Burry made famous in the the movie Big Short is also investing for inflation. https://moguldom.com/338484/famous-big-short-investor-michael-burry-warns-weimar-like-hyperinflation-is-coming-to-america/

Now is the time to get your house in order and profit from what is likely to be a bumpy road ahead.

If you have any questions about building an inflation proof portfolio, do get in touch and we can discuss some strategies.

Additional resources on inflation:

 

Institute of International Monetary Research has produced a good video on their inflation expectations over the next couple of years.

 

Good video here on why we can expect higher inflation of the next couple of years.

https://www.youtube.com/watch?v=0y6zXwZpeFc&list=PLudZPVEs3S82lh5QYlWNegc0hEOzg2hH7&index=2

https://www.theguardian.com/business/2021/may/15/the-fear-that-haunts-markets-is-inflation-coming-back

https://www.marketwatch.com/story/the-biggest-inflation-scare-in-40-years-is-coming-what-stock-market-investors-need-to-know-11617846712

https://www.wsj.com/articles/if-inflation-is-coming-here-is-what-to-do-about-it-11620694235

The Roaring 20s are back

January 26, 2021  biotech, bitcoin, blockchain, cryptomining, energystorage, FinTech, Green Technology, GreenTech, Investment Ideas, Investments, meditech, property development, PropTech, Smart grid, Solar

The Roaring 20s are back

Whats happening in 2021?

Three weeks into 2021 and it seems like a good time to take stock and have a look at what’s happening in the world of investments and wealth management this year.

With Christmas being a very low-key affair and people not being allowed to travel, things seemed to go back to normal much earlier than usual.

Brexit was finally put to bed without too much disruption and the virus continues to burn like a smouldering peat bog, flaring up each season. But with a vaccine on horizon for most and the worst fears of Brexit out the way, business confidence is definitely on the rise. Are the Roaring 20s are back ?

Roaring 20s are back
Roaring 20s are back

Property

We have seen an electric start to our property developments in Kent and Cambridge.
Our first offering, a small 2 bedroom timber framed house was funded in the first week of the year and it looks like we have secured 3 investors for our larger development of 4 terrace houses.

We have secured two more projects, another Kent and one in Sussex. Due to the fast nature of these deals they rarely make it to the website. So if you are interest in development opportunities, please get in touch and we will add you to the list. They are all very straight forward. We secure projects with full planning and developer finance in place. All we require is the equity to close the deal. We manage all contractors and you receive 15% pa during the build. Your security is a second charge against the asset after the bank. The average project length is 8-12 months.

Biomedical

The Cambridge biomedical sector goes form strength to strength as the AstraZeneca vaccine gets a global roll out. This has really highlighted how important the Cambridge Biomedical Campus is and our Cambridge biomedical fund is perfectly positioned to make the most of this over the next few years, click here to find out more and request a brochure.  The fund has full HMRC approval so can be used for tax planning under the EIS and SEIS schemes.

Renewable Energy

We are still seeing lots of interest in our renewable energy opportunities. Our Geothermal project in Hungary continues to perform year after year and generates a genuine 12% net PA for our investors. Click here for more details. We are also working on new solar and gas CHP projects throughout the UK. If you are looking for renewable energy assets do let us know as we can source just about all asset types including energy storage.

Crypto

We saw considerable increases in the price of all major crypto assts over the Christmas period as predicted here back in November. Bitcoin got a bit crazy towards the start of the year and some of that froth has since blown off. The price has stabilised around the $30k mark and will likely start to increase again once the new US government makes its stance clear on crypto assets. You can’t stop people investing in crypto but you can certainly make it more difficult. The UK recently banned leveraged investments in crypto for retail investors and its not impossible other countries will follow suit. That doesn’t meant to say demand is falling, just slowing down for a bit. Large corporate entities such as Greyscale continue to accumulate very rapidly and we expect this trend to continue and prices to rise due to the finite supply of bitcoins.

Now is not a bad time to be buying the dip before the next move higher later this year.

Along with our FPGA mining rigs we will also be offering GPU mining to profit from the rising price price of Ethereum and the demand for DeFi (Decentralised Finance) https://blog.coinbase.com/a-beginners-guide-to-decentralized-finance-defi-574c68ff43c4 .

DeFi is set to transform the finance and banking sector over the next few years. I wont go into too much detail here, but expect to hear a lot more about this space in the coming months.

Artificial Intelligence (AI)

For those looking for more explosive growth potential in the technology sector, our AI Fund is just the ticket. Achieving 214% over the past 4 years this collection of the 42 most exciting AI stocks globally, is chosen using AI then approved by a panel of AI experts. Click here to find out more and request a brochure.

 

Predictions

So to conclude, 2021 is going to be a very busy year, we see exceptional opportunities in the property development sector due to pent up demand form Covid-19. Crypto and DeFi will change the way we do business and finance. The UK will be one of the early winners from it”s advanced biomedical sector and the rapid rollout of the vaccine.

We see a great many positives in 2021 and we hope you will join Willow Rivers Wealth for the ride during the return of the ‘’Roaring 20s’’.

 

Ben Jefferis

Director

Roaring 20s are back

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