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Inflation Is Rising Once Again

Sep 26, 2023

I'm going to ask you to perform a thought experiment with me today. Imagine yourself in early 2020 asking me, “Philip, what do I need to do to prepare my retirement portfolio for a long period of low inflation? How can I protect and grow my wealth?” Let's say I respond, “Why would you do that? Plan for a long period of low inflation?”

Well, you might reply, “Look at the record. We've had 30 years of low inflation. 30 years. I want my portfolio tuned for that kind of an economic environment.” My response to you would be, “Don't build a portfolio assuming the future will look like the past. Hedge your bets.”

Now, if you came to me today and said, “Philip, what do I need to do to prepare my portfolio for a long period of high inflation?” I might say, “Why would you want to do that? Why would you plan for a long period of high inflation?” And you might say, “Look at the record. We've had two years of high inflation. I want my portfolio tuned for that kind of an environment.” And my response would be the same as it was before. After 30 years of low inflation, don't build a portfolio assuming the future will look like the past. Hedge your bets.

This is why a balanced portfolio is so important. We don't know what the future holds except for the fact that things will change. In early 2020, we didn't know that a pandemic would first crush the global economy and then ignite two years of high inflation worldwide. We also didn't know Russia would invade Ukraine and the Western sanctions on Russia would deepen the disruptions and inflationary spiral caused by Covid-19. None of us can be expected to anticipate events like these. But what we can do is be humble enough to recognize that we cannot predict the future with certainty. Just because inflation is high today doesn't mean it will be a year from now, much less five years from now.

My point is that our financial plans need to recognize our expectations might be wrong. For example, like in 2020, after 30 years of low inflation, we might be confident that more years of low inflation lie ahead. But we need to bear in mind that something else might be in store for us, and include that possibility in our preparations.

Inflation has been high the last two years. It's come down recently, but it's remained stubbornly high. I expect it to stay stubborn. Thanks to OPEC squeezing oil consumers for every dime it can get. But I know this, the world is a complex place and I could be wrong. And since I might be wrong, I want to hedge my bets and not put all my money on the high inflation horse.

Gold is an excellent way to hedge your bets. It could perform well in good times, as it often did when the economy was strong over the last 20 plus years. But gold is a standout in hard times, consistently outperforming most other asset classes, offsetting losses elsewhere in a portfolio. Here at U.S. Money Reserve, we refer to gold as wealth insurance, a way to secure your future, come what may. And what remarkable insurance it is.

What other insurance retains its value increases in value like gold does. What other insurance or asset of any kind has the track record of gold, a ubiquitous store of value, worldwide, over a few thousand years? Nothing comes close. So my advice is don't build a portfolio, assuming the future will look like the past. Leave room for surprises. Gold is excellent protection against the unpredictable.

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