Kris’ note: In the Dispatch this week, we’ve set our sights on inflation. But not just from the purely academic or theoretical side. We’ve also looked at genuine investment solutions to help you combat ongoing rising prices.
Best-case scenarios from the Federal Reserve suggest prices could rise 2% for each of the next two years. Add on the 5% inflation over the past year… and that means prices will have risen by 9% from 2020 to 2023.
While that may not seem like much, it means in order to maintain your current lifestyle, you need to either spend less… earn more… or draw down on your savings.
What a choice! That’s why in today’s Dispatch, colleague Andrey Dashkov shares an inflation-beating idea that could make all the difference to your portfolio in the years ahead…
By Andrey Dashkov, analyst, Casey Research
We’re now past peak inflation fear.
At least, that’s what mainstream sources are reporting.
According to CNBC, a key indicator is showing that investors’ panic over rising inflation has abated significantly over the past month.
The five-year breakeven inflation rate measures what investors expect from inflation over a five-year period. Right now, it’s off its 10-year high.
Apparently, this means that markets see inflation falling in the long term.
But that’s counter to everything our experts see unfolding at Casey Research.
Because there’s another indicator many will miss that’s showing the exact opposite…
If this is your first time with us, welcome. If you’re a regular reader, welcome back.
At the Dispatch, we have two goals:
To introduce you to the most important investing themes of the day, and
To show you how to profit from them.
We do this by showcasing ideas from our in-house investing experts: Nick Giambruno, Dave Forest, and the founder of our business, Doug Casey.
Today’s topic is one we’ve been covering all week: inflation.
You’re likely seeing it all around you.
Over the past year, gas prices are up 56%.
And your trip to the grocery store is likely more expensive, too. The wheat price is up almost 40% compared to last year… corn 128%… and soybeans 92%.
But the Fed is undeterred. Its messaging has been clear and unmoving: inflation is transitory.
But we’ll show you why you should prepare for high inflation over the long haul… and the best way to protect your portfolio against it.
Inflation Is Rising Steadily
As I said above, there’s another key indicator many in the mainstream are missing. It’s called wage inflation. And the “smart money” is telling us it’s rising as we speak…
A survey of the CNBC Global CFO Council, whose members are chief financial officers at some of the largest public and private companies, shows that wages are rising.
Wage inflation is just as important as other indicators because wages are a fundamental component of a product’s price. Higher wages push prices up just as much, if not more than, the rising cost of raw materials.
So even though mainstream investors have decided that inflation is not going to be a problem, insiders have the opposite view.
A note by the Bank of America analysts confirms insiders’ fears. It compared inflation this year to long-term averages. This paints a picture that most investors are not prepared for.
If prices continue rising as they have this year, we’ll be looking at about 8% annualized inflation.
That’s nearly three times higher than the 100-year average.
But this analysis showed something else…
Inflation is here to stay. In fact, by 2025, annual inflation could reach 4%. That means 1/6th of your purchasing power could disappear.
That may not sound like a big deal. But remember, this compounds over time. If you have $10,000 dollars in your savings account, you’re looking at losing about $1,600 dollars in purchasing power by 2025.
Can you afford that?
Your Best Bet Against Inflation
Here at Casey Research, we’ve always said precious metals should have a place in everybody’s portfolio. It’s one of our favorite inflation hedges, thanks to its inherent monetary properties.
Regular readers will know founder Doug Casey’s five essential properties of money. As a refresher, here’s Doug…
Gold has been used as money for thousands of years because it has a unique combination of qualities. Let me spell it out very briefly:
It’s durable (almost indestructible – that’s why we don’t use food as money), divisible (each divided piece is valuable – that’s why we don’t use artwork as money), convenient (its unit value is very high – that’s why iron isn’t a good money), consistent (all .999 gold is identical – that’s why we don’t use real estate as money), and has value in and of itself (which is why we shouldn’t use paper as money).
Just as important, governments can’t create gold out of thin air. It’s the only financial asset that’s not simultaneously someone else’s liability.
It’s those fundamental properties that make gold such a great inflation hedge. It’s real money, and holds its purchasing power… as the dollar is losing it to inflation.
And it’s not too late to add gold to your portfolio.
The easiest way to do this is through an exchange-traded fund (ETF) like the SPDR Gold Trust (GLD). It is an exchange-traded fund whose shares are physically backed by gold bars.
But if you prefer a diversified portfolio of precious metals, there’s an option for you as well.
The Aberdeen Standard Physical Precious Metals Basket Shares ETF (GLTR) also holds physically backed silver, platinum, and palladium.
Instead of learning to live with inflation… we recommend taking these steps to combat it.
Analyst, Casey Research
P.S. Colleague Dave Forest at our Strategic Trader letter has another way to invest in gold… it’s also an incredible way to pad your portfolio against inflation.
He calls it “Gold Placements,” and it’s made his readers enormous returns. Learn more here.