Subject: Re: REITs, 1970s/80s, stagflation
> "I agree with some and disagree with some of your quick study. To wit: high end offices? Yeah, could be trouble. High end stores? In this K shaped economy that’s the only segment doing well."

Hi goofyhoofy, thanks for the reply.

Just to be clear, I wasn't addressing the current economy, which I agree has problems, as well as hot/cold spots in real estate.

I was only reflecting on what was more likely to survive stagflation if it happens.

Stagflation is a fairly rare situation where you have a) economic stagnation, along with b) super high inflation that persists. It might look like:

a) full recession, or something barely short of recession.

b) e.g. persistent 8%+ inflation for many years.

occuring together.

In the past, stagflation has followed in the years after an oil crisis.

The US experienced stagflation for all of the period 1975-1985, and perhaps a few earlier years too, following an oil crisis in 1973 and 1979.

https://www.federalreservehist...

Right now, the US is not in stagflation, and not close to stagflation.

Inflation is at 2.4% (not high inflation) and growth at 2% (not recession or near-recession).

It's more like an economy that isn't firing on all gears, and has growing inequality.

You said that high end stores were the only segment doing well near you.

That got me wondering about whether rich people in the 1975-1985 era tried to conserve wealth, or had a 'spend it while you still have it' mindset.

Apparently in the 1980-1985 period, conspicuous consumption on all kinds of things and showing off became the norm among the wealthy.

In the earlier 1975-1980 period though, it seems it was more things like high-end jewellery and famous fine art, land, that might retain some resale value in a crisis.

Perhaps this is an example:

Tiffany & Co., a jewellery and fine goods store, saw sales jump 22% in 1977, and margins of 14%, before being sold to Avon in 1978.

Here are some articles from the new york times, in 1983 and 1984.

https://www.nytimes.com/1984/0...
https://www.nytimes.com/1983/1...
https://en.wikipedia.org/wiki/....

By 1984, margins at this famous high end store had collapsed from 14% to 3%, and sales were essentially stagnant over the 1977-1984 period, adjusting for inflation.

Debt-to-income rose for the rich throughout the period, but it seems that came from buying up hard assets that would go up with inflation, while the debt was eroded.

The cost of basics/essentials rose quickly, whereas the luxury goods CPI rose much more slowly. That apparently encouraged the rich to keep spending.

e.g. the value proposition on high end goods improved; that's probably part of why e.g. Tiffany saw their margins erode almost to zero in the example above.

So it seems that if stagflation does arrive, the high-end retail you are describing will probably continue to do very well, at first anyway, and should be able to keep paying the bills later too.

Thanks again for your post.

TRS