The choice of assets to protect yourself changes month by month. What happens with each of the instruments and how they perform at the beginning of 2023
By Damian Di Pace – Economic Analyst
02/08/2023 – 1:00 p.m.
There is a popular saying that says “Money grows on the tree of patience”. In Argentina there is no context for patience. The inflation devours the value of money faster and faster. All is frugal and ephemeral in terms of decisions to preserve value and obtain returns. Saving and investment that requires time is increasingly difficult to put into practice.
What are the differences between saving and investing? Savings is the part of income that is not used in consumption so that it is later preserved for the future. Investment is the process by which income from savings is allocated for the purchase of assets in order to meet future needs. Both actions seek to avoid losing to the scourge of inflation.
Between January 2022 and January 2023, in the face of online inflation of 97.9%, the fixed term yields 75%, gold 95%, the blue dollar 86%, the CCL dollar 83%, and the MEP dollar 80%. That is, of the 5 options chosen, gold slightly approaches inflation.
However, only the fixed term UVA in that same period beat inflation with 98.9%. It is important to remember that this last instrument always tries to beat inflation by one percentage point, but that it has its direct counterpart in the time that the pesos have to be deposited in the bank. That is to say that for 3 months it yields a rate adjusted for inflation, but the money must be kept immobilized in the bank.
However, in the face of inflation that in the Consumer Price Index is below 6%, it begins to be once again convenient to invest in the traditional fixed term that yields 6.25% per month.
If we take as parameter December 2022we will see how the last exchange rate jump made the parallel dollar the best choice to face inflation with an 11% yield. It is then closely followed by the latest rise in gold with 8%, the CCL dollar with 6% and the fixed term with 6.25% (encouraging data, since months ago those who bet on this instrument were historically at below the price variation).
Gold, the winning investment of January 2023
Now, if we drag the analysis of these instruments to January of this year, we will see that the winning investment is gold with 12%, assuming the inflation data from private consultancies that estimate it at 5.6% for the first month of 2023.
The Swiss Investment Bank UBS projects a rebound in metal prices and says it will rise 13% this year. The firm forecasts that the ounce of gold will be located during all of 2023 and much of 2024 at $1,900.
Changes in the first week of February
Finally, in this tangled economy we will see that in the first week of February the same assets evaluated underwent another change.
The winning investment was the grape fixed term with 1.6% but very close to the traditional fixed term with 1.53%, the MEP dollar with 0.97%. For those who invested their income in digital wallet liquidity funds, they had a return of a rate of 0.27%. In the first week, those who invested in blue dollars or CCL had negative returns of -1.81% and -1.52%, respectively.
Choice of assets to hedge against inflation is changing
Without a doubt, this journey over a very short term shows how, in accordance with the ups and downs of the economy, the choice of assets to hedge against inflation is changing.
However, there is no clear trend about which asset should be accounted for over time. Benjamin Graham, considered the father of value investing, an investment strategy that he began teaching at Columbia Business School, said: “The investor’s main problem, and even his worst enemy, is probably himself.”
For an Argentine, the main problem of the investor has as its worst enemy a State that, government after government, has deteriorated our currency, generating the conditions for the rise in inflation as a mechanism for liquefying the fiscal deficit and financing its deficit. increasing the tax pressure and not giving it any type of legal, political and economic predictability.
In our country, the almost weekly and sometimes daily dynamics of permanent change regarding the predictability of decisions regarding savings and investment means that the decision made today is not the best tomorrow. The American investor Seth Klarman expresses: “Investment success cannot be explained in a mathematical equation or in a computer program, it’s an art“.
In times when robots with algorithmic programming try to project the best investments and where technical analysis in terms of investment swarms everywhere, perhaps Argentines are valued by a new “art” worldwide: How to invest and save with inflation and come out tied or winning in the attempt?
