Wednesday, March 29, 2017

Review: Inflation-Proof Your Portfolio

After so many year's of extremely low interest rates and low inflation, too many have been lulled into complacency that will always be the case. When browsing investing books last month I came across Inflation-Proof Your Portfolio by David Voda.  I have recently finished the eBook version available through my local public library (it is also available as a hard back printed book).  Here are my thoughts on the book.

The Main Messages

The key ideas of the book can be simply summarized:
  • Government debt is growing at an alarming rate (the book is written from a USA perspective, but the argument would hold for many countries including Canada).
  • It is argued that hyperinflation will result (not everyone agrees with this, and Jeffrey Dorfman argues that the high debt will keep interest rates low, the exact opposite of premise in this book). 
  • To help protect against hyperinflation 'exchange dollars for real things.'
  • Under hyperinflation remember that a dollar in the future is worth far less than a dollar now.
  • Since not all countries will simultaneously suffer inflation at the same time and rate, diversify across a number of currencies.
  • The final principle expressed in the book is 'prepare for the worst, but expect the best.'
Most experts would agree with some of the advice in the book, such as lock in your mortgage rate at a long term, low fixed rate. Some of the other advice, such as to buy gold and silver coins, mining companies, real estate, and other commodities, is less universally supported by financial writers.

The Good

It is right that we should be wary of increases in inflation and interest rates, and no reader could leave the book without concern about government debt.

The ideas of diversifying across currencies, holding more of your assets in 'real things', and think about the consequences of rapidly rising interest rates all ring true to me.

There is some good general financial advice (although it is often lost within the political hyperbole of the book).

Each chapter ends with a Key Points section.  I wish all financial books used this structure.

The eBook version has live web links to a large number of cited sources in each chapter.  This makes it easy to check out statements.  The quality of referenced material varies somewhat, from reports to articles of various depth.

The Bad

I found David Voda's writing style too alarmist and political in tone for my liking.

That is unfortunate, since, as indicated above, there are positives in the book. We should all be concerned about rising government and personal debt, particularly when that rise is high compared to the GDP change. There is a case for holding a portion of our portfolio in "real" assets to guard against inflation losses, and for some to consider investing outside the stock and bond market in real assets.

The main problem with the book is that despite the title, there is not much directly related to inflation proofing an investment portfolio in the book. Many opportunities to talk about the type of ETFs that are likely to hold up under inflation are missed. In fairness, the book does not claim to be investment advice.
"This book is neither an economic treatise nor specific investment advice."
I wish there had been more depth on actual inflation proofing portfolio ideas, and less political views and coverage of what I consider to be solutions that would appeal to only a few. Interestingly, the author is not a fan of TIPs and other inflation protected bonds, an obvious topic.

The most current edition of the book was published in 2012 by Wiley, and a more up to date treatment of some of the topics might have added to authenticity.

By wandering into areas that, in my humble opinion at least, have little relationship to the topic of the book (such as protecting your Facebook privacy and preparing to live off the grid if society breaks down), the focus of the book is lost.

So Who Wrote This?

I did not consider who had written the book until after I finished reading the book. Interestingly, their is no author biography on Amazon, unusual particularly for a book published by a major publisher like Wiley.  It does show other books by the author, including a couple on snowboarding, one on real estate, and a recent book on debt and financial planning. A bit of digging did find this biography on the Wiley site for the book.
"DAVID VODA is a writer, businessman, and investor currently living in Boulder, Colorado. He has written on business topics for the Los Angeles Times and the New York Times, was a realtor in Palm Springs, California, and buys and sells real estate for his own account. He was a principal in Yes Yes Productions, which produced the award-winning feature, The Secretary. Most recently, he was producer of PJTV's business and economics show, Front Page."
Some of the best investing books have been written by people with varied professional backgrounds, so I would not hold that against the author.  It is not obvious to me how widely read this book is. I was surprised that Amazon.ca had zero reviews of it.  It states that this second edition, published by Wiley, came after a wildly popular self-published first edition.

Final Thoughts

Early in the book, after a rant in favour of non-interventionist governments,  the author writes "But enough about politics."  Unfortunately, he did not follow his own advice in the rest of the book. This book should have had a title like "One Individual's Concern About Government Debt and Inflation."

Overall, I would certainly not place this book in the top 10 (or even the top 25) investment books that you should read. So, if you are just starting out in investing, don't start with this book!

But if looking to explore public finance and interest and inflation rate issues, this may be worth a quick read (it actually does not take long to go through the entire book).  Check if you can get the book at your local library. But read with a critical eye.

This posting is intended for education only and should not be considered investment advice. The reader is responsible for their own financial decisions.  The writer is not a professional financial planner or investment advisor. For major financial decisions it is always wise to consult skilled professionals. While an effort has been made to be accurate, any statements of fact should be independently checked if important to the reader.

Disclosure:  No compensation by any company, organization or individual has been offered, requested or received for writing this column.

Books for Review: I will not promise a positive, or even any, review, but if you wish to submit your investment book for me to consider, contact me rhawkes (at) chignecto.ca. I am particularly interested in Canadian books.

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