Inflation Is It Coming? Experts Tell Us Their Plans.
Having a little inflation, is like being a little pregnant.
Get ready for inflation.
This silent killer is CRITICAL to understand if you want to build wealth.
I like to explain it in this totally PC format. What is inflation? Well having a little inflation is kinda like being a “little” pregnant. 🤰 Once it starts accelerating it’s hard to stop.
Some of the greatest minds in our times have said it this way:
Inflation is taxation without legislation. - Milton Friedman
Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hit man. - Ronald Reagan
The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists. - Ernest Hemingway
Even John Maynard Keynes (who basically believed that government intervention is the key to stabilization of the economy) said:
By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens.
So in short, a standard inflation rate is normal, once it starts accelerating… it ain’t good.
So when the government started (or should I say continued) to print incredible sums of money with relative impunity I went looking for hedges. Do I know when inflation will come? No. No one is great at market timing over the long term. But a couple nerd graphs for you.
Milton Friedman taught us in economics to watch the M1 measure of money. It basically means the amount of money in circulation currently. Mention it in your next convo with buds for nerd brownie points. As you can see it looks like a Silicon Valley VC firm’s startup hockey stick chart wet dream.
And yet, it’s not usually great when the supply of money takes off faster than Zoom’s market cap in 2020. It means massive printing of money by the fed.
Here’s the other part to watch… velocity. This means how much and how fast is money moving.
Scenario 1: Government prints another $5T in stimulus and doesn’t decide to give it all away to their favorite pet projects but just sticks it in the basement of the White House.
Scenario 2: Government prints another $5T and gives it in $30k checks to Americans but you have to go spend it in a week.
What happens to the speed of money exchanging hands (velocity)? First one nothing. Second scenario - hyperinflation. That’s why Venezuela is a nightmare. It costs people more to hold on to money than to spend it. So while velocity is FAR from there yet. Let’s be prepared because inflation usually picks up faster than anyone thinks and the FED usually reacts slower than they need to.
That’s why I went out to a slew of my smartest, wealthiest friends and said, “Hey Buds, want to help a sister out? I kind of like keeping my money when I make it instead of leaking it everywhere. What ya got?”
Here’s a compilation of their responses, none of them investment advice, just what they are doing and what I might copy. As a side note, many of them requested to be quasi-anonymous, why? Finance has crazy regulations about what you can share and not. It’s probably the only industry where it’s better to get rich quietly, because these days people hate wealth and instead of being self-reliant and responsible for their own actions their litigious and sue everybody for their poor due diligence. Also - to be fair, there are a lot of charlatans. Ever watched those late night buy gold infomercials! Or the get rich quick Lamborghini driving, bikini babe hanging crew. But that’s another rant for another day…
Mike Dillard: Serial Entrepreneur, Host of Mike Dillard Show
Mike’s a new bud. What I love about him is the strength of his convictions, his unabashed sharing of them despite personal non-benefit and his contrarian approach to thinking. I like to do business with long term people, he’s been in the game for decades and builds in public.
Diversify your revenue streams.
Start an online business —> It can’t be shut down, you can earn in multi-countries and states instead of locally, and it’s easier to start than ever. He has a really valuable mentoring program to make that happen. I’ve applied more of his ideas and theories than I can count into our two online businesses.
Buy gold and crypto (he was VERY early on this trade).
Watch Nomad Capitalist (which I went deep into a rabbit hole on, so good) about how to maximize returns, minimize taxes and use geo-arbitrage.
While 10 years ago I would have thought this was crazy, these days. I’m not so sure.
Toby, my financial advisor who runs $1.5B+ in assets:
His thesis is in every market there are winners and losers. So don’t just try to fight inflation, also try to pick winners. He usually uses a mixture of individual stocks, ETFs and active funds.
Weakening dollar may mean focus on emerging markets, especially disruptions in local supply chains.
ESG (Environmental, Social, and Corporate Governance) may benefit hugely from Democrat government (I agree with him here). This is also probably why Pelosi did a $1MM bet on Tesla. Subsidies are coming.
Value likely to outperform growth in markets (FANG stocks).
Look at Secondary markets that support big supply chain and e-commerce (Box makers for Amazon, industrial distribution warehouses etc).
Look to buy structured notes (only on stock you wouldn’t mind owning or hybrid bonds). The benefits are a high % downside protection with a high % coupon. Here you can trade interest rate/high upside for downside protection of stock and treat it like a hedge. These are more complex, I’d talk to your financial advisor about them and here’s the opposite argument on them.
If going to do real estate do it in an outlier market, with growth prospects (Austin, Miami, Boise etc… but be careful, it’s getting expensive).
My friend who used to run a big fixed income fund, now runs his own money:
He’s so under the radar you can’t even find him on the internet. That’s probably the ultimate low-key flex.
He’s moving away from individual government bonds especially municipalities as their balance sheets are very debt heavy.
Amy - Former Bond Trader and Fund Manager
Amy’s worked for some of the largest asset managers in the world and is just as sniper like at playing poker as she is investing. Do not try to debate her on betting odds or bond yields, suicide wish.
Short end of the curve TIPs have some protection but not much.
She’s looking at stocks, with a focus on international, China and emerging markets overall I’m interested in due to their commodity rich resources.
Emerging market bonds may be interesting for the extra yield.
Overall, she’s diversifying and not greed buying or panic selling.
Specifically using index funds like Vanguard ETFs.
Pat Hiban - Real Estate Investor, Serial Entrepreneur & Early Retiree
When you meet people who understand wealth creation, they speak differently. Pat is one of those guys. Shares fully and openly his entire portfolio. He created a men’s mastermind I’ve spoken at a few times, and they’ve probably added a few 6 figures to my net worth through their ideas.
Here’s from Pat:
“In the past I’ve been close to 90% Real Estate. Although it’s still a “hard asset” and should rise with the tide, it feels like it’s already risen. I heard a Ray Dalio podcast where his funds seek to have 12 Non Correlated assets. It made me move to more… diversified assets like your firm (Cannabis), Gold (Europacific Capital - Peter Schiff’s company) and Crypto.”
Lisa Song Sutton - Serial Entrepreneur, Real Estate Investor
Pay attention people.
Inflation, tax changes and policy changes are all coming in 2021.
What am I doing with my portfolio?
Keeping it steady.
Staying the course.
Buying and holding.
Watch for Bankruptcies, in business chapter 11s and personal chapter 7s, to continue to rise towards Q3 of 2021 as forbearance’s end, interest rates creep up and the government stops handing out money. *On this note watch out for a whole CT on how to buy foreclosures. *
TLDR: stop buying sh*t you don’t need.
Here’s what you should take away from this article:
My biggest piece of takeaway DON’T DO NOTHING.
Spend 2 hours this weekend looking at your assets. Put a quarterly reminder to do it consistently.
Don’t rely on your advisors only…
Always read the fine print.
Luck favors the prepared.
NO ONE will care about your finances like you do. So pay attention.
How can you make or keep money if you don’t understand it?
Getting your money to work for you will change your life.
Believe no one, question everything and come up with your OWN investment thesis.
One of my favorite investment bankers said it best, “Spend in bull markets like you’re in bear markets and you’ll sleep better every night.”
Buckle up buds, it’s time to create our wealth and protect it.
Or you could just go play in the madness of the Gamestop world with your Robinhood rodeo pals. That’s a fun dumpster fire to watch.
LOVE YOUR HELP:
I went back through all the emails you all have sent to this address. F me was that ego inflating. You loving this newsletter makes me feel like a kid in middle school on Valentines Day. Remember when we all used to get Valentines day candy grams in grade school and it was like, “Ooooo who likes me.” As told through a piece of paper and 5cent sugar rush. “Oooo how many lollipops did I get?” You accumulated a 1997 version of IRL likes. Don’t @ me. You all know you loved that nonsense too. “Joe gave me a card and not you? Well he obviously loves me Sally and we’re getting married NBD.”
You make me squeak. Oh man. I’m definitely not buying that for the nonexistent children I don’t have. Really moms? Anywho - ok how to help me? I want to create a video of people who love Contrarian Thinking. Want to film one and email it to me? And I’ll love you forever and we can get married. By married, I actually mean I’ll spotlight you and your company on my NEW website lead page?? Pretty please.
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This is the be an adult section, not advice, just what I did. If you invest in any of these you are on your own, I can’t vet your deals, or take responsibility for them. Said otherwise: This article is presented for informational purposes only, is an opinion, and is not intended to recommend any investment, and is not an offer to sell or the solicitation of an offer to purchase an interest in any current or future investment vehicle managed or sponsored by Entourage Effect Capital, LLC, Codie Ventures, LLC or its affiliates.