Inflation erodes buying power over time. That’s why inflation-resistant investments like real estate and precious metals should be a part of everyone’s investment portfolio.
However, I see spreading your life across countries, currencies, and economies as an inflation hedge, as well.
If you were worth US$1 million in 1986, you’d have to have US$2.3 million today to be in the same net worth position factoring in U.S. inflation rates.
A million dollars just ain’t what it used to be… at least not in the United States.
Even with globalization and the same Samsung TV being available for basically the same price in the United States, France, and Panama, for example (ignoring import duties), certain things are cheaper one place versus another… especially depending on currency exchange rates relative to your operational currency.
My operational currency is the U.S. dollar… meaning the past several weeks in Europe I was spending strong. The dollar-euro exchange rate translates to enhanced buying power for dollar-holders in this part of the world.
Good French wines, cheeses, and every loaf of baguette we indulged in this visit were all cheaper for us in Paris than in Panama (where a baguette is about 15% more expensive in dollar terms and about 40% as good as the real thing).
During this extended trip, we took full advantage of that pricing arbitrage.
A Venezuelan rum that I like is expensive in Paris, but I saw a bottle in Portugal for 30% less when I was in Lagos a few weeks ago for our conference (not in duty free, but in a shop in town). Again, I took advantage of the pricing arbitrage. The bottle is now sitting on our bar in Paris.
I shop for clothes and shoes in the United States, where, even if I buy not on sale (painful for me), the cost is generally better than it would be in Paris or Panama. Plus, in U.S. men’s shops, I understand the sizes.
I bring A.1. to Paris with me from Panama or the United States because the steak sauce is about twice as expensive in France.
Of course, travel expenses offset some of my spending savings, but I’m traveling anyway for work and to scout and check on investments. Travel is part of my lifestyle… and makes playing these arbitrage games easy.
Inflation will always eat away at your purchasing power, but arbitraging an international lifestyle can improve your quality of life while making the cost of that better, richer life less.
You just have to keep your eyes open to the possibilities.
Lief Simon
