Rampant Inflation: Are Domains A Hedge?

Jan 18 2011

I don’t ususually get into economic discussions as there are many people more informed and intelligent than I am.  But I do pay attention. I have the fortunate position of dealing with commodities and input materials in my every day business as a plant grower/farmer.  I am here to say, inflation is coming to a US city near you. The monetary base in the US has exploded over the last year due to the cheap price of money to those who can still get it.  Consumers aren’t seeing all the money due to the fact banks are building up reserves and the government borrowing.

We’ve all seen the commodity prices lately and they are almost all at record highs.  Those are inevitably going to be passed down to the consumer.  Corn, grain, basic materials, all go into the products we consume. Companies have been eating those costs to avoid raising prices in such a tough economy but that’s about to all change.

As a buyer of comodities for my business and a tracker of the meat markets, I’ve seen a huge increase this winter in prices.  A calf that I bought last year at market to raise for meat went for $400.  This weekend to buy that same calf?  $675.  Add to that the higher price of corn and butchering and the price of a quarter steer just went up 50%.  Now it may sound over simplified to use my meat rasing to judge an entire economy but I have been right more often than I’ve wrong.  I call it the sustainability factor.

The sustainability factor is the ability to sustain activity at their current levels.  I could see it on the credit front. I could see it on the cash rent prices of farm land.  Now I can see it in the grocery store.  Prices are about to take off.   Here are the price increases in 2010 going into fall

*Agricultural Raw Materials: 24%

*Industrial Inputs Index: 25%

*Metals Price Index: 26%

*Coffee: 45%

*Barley: 32%

*Oranges: 35%

*Beef: 23%

*Pork: 68%

*Salmon: 30%

*Sugar: 24%

*Wool: 20%

*Cotton: 40%

*Palm Oil: 26%

*Hides: 25%

*Rubber: 62%

*Iron Ore: 103% (source)

It’s hard to believe these prices won’t come through to you and I.  With the dollar falling, wages stagnant, and commodities soaring, it’s something that can’t be avoided much longer.  One positive is the lowering costs of electronics. Items that aren’t  necessary in life yet most consumers are buying them anyway, namely electronics such as phones, tvs, and computers.  Of course, you can’t eat electronics.
So what does that mean for domains?  I view domains as another investment.  An investment that will help offset inflation.  While I don’t think the average Joe will want to put his money into domains., it certainly gives me something that keeps up more than money in the bank.  Some of the reason I’ve invested in NNNN.com is the Chinese yuan has always been kept artificially low by their government but if they don’t ,the value of the yuan will skyrocket and Chinese will have more money to spend on their favorite domains.
While I don’t fear inflation, it’s all part of an economic cycle, I fear for the people that caught up in the middle of prices rising and wages rising.  Unfortunately prices will rise first in this scenario. Only when the consumer can no longer keep their lifestyle will the wage pressures be put on companies.  My plan is simple.  Refinanced my house down to 3.5% which I feel is the lowest rate I’ll ever see again.  Bought more real estate and land. A little in Gold, a little in stocks, some reverse treasury EFTs, and a lot of domains.  Inflation, I fear ye not.
So
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Outsmarting the Dumb, Outworking the Smart

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2 comments

  1. Leonard Britt

    I noticed Publix last year shrank their yogurts from 8 ounces to 6 ounces without lowering the price. Then last week I was looking for a one-pound pack of sliced turkey meat normally $3.99 to $4.49. The price went up to $5.49!!! Bananas for years were $0.33 to $0.49 a pound now $0.69 so yes I see inflation in the grocery store. I don’t yet see price inflation with domains…

  2. Louise

    Do you think it is the higher price of fuel, trickling through to capital goods? What about the price of pasta a couple years ago, that set the Italians to protesting? Maybe we’re finally feeling it here.

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