High inflation is followed by uncertainty and panic, making me wonder if it's time to liquidate my $200k portfolio, or maybe consider some defensive investments. I've heard analysts emphasize on value stocks performing good, what stocks exactly can be the ultimate hedge?
consider diversifying your portfolio with a mix of stocks and stable assets, seeking professional advice could also be valuable to navigate market uncertainties and grow your investments amid inflation
Agreed, getting the right financial services is invaluable, my portfolio is well-matched for every season of the market, and since early last year to date, has yielded 140% off $350k. I and my CFP are working on a 7-figure ballpark goal, tho this could take another year.
thanks for putting this out, just inputted ''Karen Lynne Chess'' on the web, spotted her consulting page at once and was able to schedule a call session, she seems impeccable!
Ben Felix is the only commentator/youtuber I am aware of that offers genuinely good and straight forward advice. These videos teach us what we should be learning in school from a young age and aren't taught.
They don’t teach any form of finance in school. For one, they could teach the basics of having a savings account and checking account and instilling a sense of responsibility in our children.
He's either not being honest or dosen't understand Dividen investing , also it's obvious he's oblivious about Golds proce in compared to the S&P 500 historically, and I barely have 20k in Gold, more in silver, but I've known millionaire's in their mid-40's that inherited and or bought gold when they were young, look at the historical price average.
@@Andformerthingshavepassedaway Anecdotal. I know people that purchased homes in 1965 for 12,000$ and are now worth 1.5 million. its meaningless and has no effect on my thinking about buying a home or not buying a home. Gold prices have fluctuated for years but the ceiling was in 1980, doubt you were even born or even close to it. What is the ceiling in stock and bond markets?? None so far. The millionaire people you know would have done way better investing in stocks and bonds. This is pretty simple math. Some millionaires have so many millions that they own all types of assets and investments including gold. But gold and other precious metals as a long term strategy with even a small proportion of your portfolio is an easy to verify lousy investment. Dividend investing is irrelevant for rather obvious reasons. You get a dividend, your share price goes down by same amount of the dividend pay out. Pretty much end of story. Math... no evidence to support that dividend paying companies out perform non-div companies.
@@BenFelixCSI by inflation do you mean CPI ? because it is true that money supply increase doesn't always increase the CPI but it will nest somewhere else. for instance , CPI didn't rise between 2010 and 2020 but all those printed money went to equity and housing markets.
The idea that the money supply and inflation are not related is patently absurd. Unfortunately it sounds like Ben actually believes that garbage. If the two were not related that also means that supply and demand are not a thing, nor are market based economies. Unfortunately it's that same idiotic viewpoint that has caused a large portion of our current inflation. You can't add that much money to the economy and not expect inflation, but unfortunately politicians, and Central bankers, and apparently Ben, all believe in that fairy tale where the amount of money in circulation means nothing. In that fantasy world you might as well give each household a trillion dollars, everyone will be fabulously wealthy, and will be able to buy anything they want. We know that's not actually the case, but it's an expansion of exactly that mindset that money supply and inflation are not related. Of course that's also the premise of UBI, what proponents of all these ridiculous ideas completely fail to grasp, is it goods and services are still limited, and that money itself has no actual value, money is only a medium of exchange, it's a method of exchanging one person's goods or services for another person's goods or services, having more of it is only relevant if it's in relation to other people's money, if everyone has more money the money itself just simply buys less. The important part is the underlying goods and services, not the money. I am really sad that even economics courses no longer teach basic economics. It does not bode well for the future
I lost everything in the last recession and learned from it. I made sure to live below my means and save every possible dollar. I also invested correctly and diversely instead of buying material things, restaurant meals, and expensive vacations. I've been waiting all these years for the next recession so I can capitalize on irresponsible debt. If this video is correct, it will be a very exciting investment shopping spree for me
Inflation begins when dollars are printed. Printed dollars are a data input to the CPI. The CPI print is the feedback loop from printed dollars. Keynesians have been trying for decades to print dollars to create inflation-used as a signal to show the stimulus is working. Then before inflation gets entrenched, deflate by destroying printed dollars. The problem here is the Fed didn’t remove the dollars it printed to stimulate. So the higher prices are here to stay for a while. The dollar strength is transitory. You will see a weak dollar once those bonds the fed has on its balance sheet become difficult to sell as higher yielding assets will be more desirable to investors.
Consider the economy as one huge engine that produces the life styles that humans live & prosper & create a healthy financially secure future for their families . Corruption, manipulation , creation of unhealthy political policy & diplomatic environments is a recipe for engine failure. People are equally losing money in the financial market in the midst of all these.
13:56 "the money supply and inflation are not related". this is an interesting statement that flies in the face of what i know. could you do a video on it? It is an important current topic
Well presented Ben. Truly the best finance educator and well presented historical data based on facts.. Thank you Ben and keep up the great work for your audience.
@@tman458 causation is different from correlation, there was a lot of stuff going on in 2020 that could explain inflation , not just QE. The pandemic , shocks to supple chains , war , large govt fiscal deficits. If you want to cherry pick this specific time in history to establish a correlation then you’re going to have to find an explanation for decades of QE in Japan , who actually had deflation. You also need to explain why qe has been ramping up in many countries since the gfc unaccompanied by significant inflation until now.
@@739jepthe effect of money supply on price levels is probably the best documented phenomenon in economics, both as time series and cross sectional; prices tend to follow money supply growth.
There are so may other ways how gov read inflation like reading from tea leaves, reading form move of birds, reading from clouds shapes. Pretty much as accurate and legit as mentioned in main comment.
I think an important distinction to make is that in the 70's "Value" companies had little debt, and were considered value because of their high book values relative to price, whereas growth companies often had more debt to fund their expansion, and thus were hit harder by rising rates. Today, due to a decade of low interest rates leading to unnecessary borrowing, most "Value" companies today have tremendous amounts of debt, but have good book values relative to price because they have a lot of assets that supposedly exceed the debt. If interest rates continue to rise as they did in the 70's an stay elevated for an extended period of time, this would put value stocks with high debt levels in a very difficult position, and force them to use cash flows to cover interest, reducing future cash flows. Lastly, price to book doesn't tell the full story of a stock like it used to. If you look at a company like Teladoc, they were trading below book value and were thus included in many value index funds. But in reality, their book value was inflated because of Goodwill associated with what they paid for acqusitions. Then you also have companies like Microsoft that have tremendously valuable software products they've built that produce tremendous profits, but because they were built in house, they are not reflected on the balance sheet. I had my portfolio tilted towards value due to my concerns of overpriced growth stocks(companies with no revenue trading at $100 Billion valuations was absurd to me), but I think with the recent correction in growth stocks, a market cap weighted index fund is much less risky than a value tilted portfolio.
Great video, if possible, can you do one on ETFs based on commodity swaps. I am wondering if they have a place in a diversified portfolio (and thus dampen the volatility problem that you described).
Nice video, as always, Ben. But I'm in doubt with one of your arguments, I think you didn't discuss it for the sake of not extending the video too much. Could you explain me or show me some material about why market supply is an outdated way to understand inflation? It makes much sense for me that increasing the market supply without creating wealth is adding demand for the same amount of wealth produced, so this products will raise up their price, leading to inflation.
Hello Ben! I love your content, but I'm having a really hard time following your videos. I don't know why, it could be just me. Maybe the presentation could use a bit of an update? I don't mean to criticize, just sharing my feelings.. thank you for your shared knowledge.
Inflation hits people a lot harder than a crashing stock or housing market as it directly affects people's cost of living that people immediately feel the impact of. It's not surprising negative market sentiment is so high now. We really need help to survive in this Economy.
thank god he's back,,man did i miss his video's ..other then Warren Buffet Ben Felix is my second favorite person to listen too when it comes to common sense investing
@Show "thank god he's back,,[.] man[,] did i miss his video's [videos]..other then [than] Warren Buffet [Buffett,] Ben Felix is my -second- favorite person to listen too [to] when it comes to common sense investing[.]" We say "Other than the billion people on the planet, you're my favorite." That's _first_ favorite, not billionth favorite, due to the use of "other than."
It’s not really throwing them away, it’s just that those theories have been improved upon since they were developed, economics has come along way since 2008 let alone Friedman Economics
You didn't talk about fixed interest debt. Surely debt is the perfect inflation hedge. If a HELOC for example was used to buy productive assets like stocks you would outperform unleveraged stock returns in inflationary periods since the value of your debt would decline faster than the interest rate.
@@bhok5228 that's an example of irresponsible debt. Most of those mortgages were taken out by people who could not afford the payments and many were adjustable rate or balloon mortgages. Sorta a different beast from what I'm talking about.
@@sandpiperbf9767 You're talking about taking a loan out against your house to invest in stocks. So who are the irresponsible mortgage debtors in your world?
@@CB-so8xd why is it irresponsible to take out debt against your house? That's literally what a mortgage IS. If you can afford the monthly payments and it's a fixed interest mortgage, the extra risk is basically that you're paying on your mortgage for some number of extra years. So... the same risk as being a renter? The risky investments taken out during 2008 were ninja loans where income wasn't verified, and arm loans with balloon payments (per my understanding at least). There a difference between taking out a mortgage you cannot afford chasing rising housing prices and taking out debt against your equity in a house as a portfolio allocation strategy. Don't do this of course if the payments on the debt would be financially unfeasible to your situation. It does add unique risks vs not leveraging at all, but housing loans are the cheapest loans out there and are not callable debt like margin loans. Low fixed interest debt is an inflation hedge, and the size of the loan can be scaled according to people's particular allocation goals.
Even taking out a mortgage on a house, then just investing future income into stocks instead of into paying down a mortgage early already reaps the benefits of this inflation hedge also. It's not necessary to take out a heloc against your equity, but it is a possible option.
Nice to see Ben emoting and moving his body in the more recent clips. He's come a long way from the stiff, wooden monotone delivery of old. Great stuff as always!
Ben's laugh when discussing gold made me laugh. Whenever some mentions gold as an investment I always think of the crazy uncle who rants about gold being a good investment.
It seems like the only perfect inflation hedge is some passive tangible asset that produces something you would otherwise have to pay to consume in the future. Like solar panels, improved insulation, or a magic bag that always has avocados inside. These things would have a real return, tax-free, in low or high inflation.
So a house seems like a rather good hedge against future rent consumptions, especially if you pay for it with dept. Even though one has to factor in the costs of maintanance which are of course impacted by inflation.
How about buying real estate with a mortgage before rates rise further. Won't inflation see the cost of debt reduced, and you lock in cheap financing today? Isn't that the best investment, also prices will increase in inflationary times, but as you've taken a mortgage it's a 4x leveraged trade
What about banking stocks? When inflation rises, interest rates typically also rise increasing banking profitability. And of course you also get the equity risk premium.
"the money supply and inflation are not related" - It would be super helpful if you could help explain this in more detail, as my simplistic view still thinks this way.
You know what probably would help a lot of people ? If you could provide the script of the video ! It’s seriously a lot of very important information which I’d love to collect because I just can’t keep it all after watching the videos couple of times. Especially when there are so many videos with important informations :D pls think about putting it in the description or as a link or something :)
Well, measuring anything based on year to date returns is short-sighted at best. For example, Exxon Mobil is up 42% YTD, whereas Nasdaq 100 is down 27% YTD. So clearly, oil & gas are the future, and tech’s best days are over, right?
I would consider a REIT fund an inflation hedge. The issue is that REITs are also quite volatile. While they mix well with stocks, enjoying a mostly low correlation over time and stock-like earnings, their benefit is over longer periods.
My guess: ACWI or VT. More inflation means people have more money to put into the stock market, so these stock prices will grow (or in real terms, remain the same). Plus, whilst individual companies are volatile, the stock market as a whole isn't. Another good hedge is an inflation-adjusted bond. But those are rare. Plus, it only works if CPI figures are accurate.
Because it’s wrong and this was so off the mark. When he said commodities are not a good inflation hedge when they’re almost literally what inflation (CPI) is measured in, he flew out of the tree of logic.
If central banks continue to raise rates, the market will crash though - so equity risk premium isn't there in the short-mid term- at the same time we have massive inflation, likely a "stagflationary" environment. It seems like there is no good way to position in this market...
9:02 - How can anyone read these graphs? Text is tiny and blurry on nearly all the charts. And it'd be great if they used more contrasting colors. Why are two of the three lines blue on this graph? Love Ben Felix videos for their in-depth discussions but please fix these graphs to make it easier for us plebs to follow along!
Why can't we have deflation, like Jeff Booth says in 'The Price of Tomorrow ' ? I've heard different reasons of why we need an inflationary economy, like so people don't hoard/hold onto money and actually spend it but these never really made sense to me..
There was never going to be a deflationary spiral. Now, unfortunately, the central banks are way behind on inflation. The world's central banks cannot just print covid money equivalent to 20% of the world's economic value and not expect inflation. Milton Friedman said it best, “Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.”
@@BenFelixCSI ... we will agree to disagree on that one. I stand on the empirical evidence contrary to your statement. The 1970s and today, with unabated persistent inflation in between.
@@tmcche7881 The funny part is that he’s right on Friedman being misguided for the most part but you/Friedman are also right about inflation being a monetary phenomenon. Friedman was wrong a lot but this was one area he got right. Austrian school got there way before him though so still not much credit.
The stock market is a way to hedge against inflation. Most notably amidst recession, investors need to understand where and how to allocate funds to hedge against inflation and still make profits.
Historically, the Great Depression and the 1970s, oil was the best "hedge" against inflation. My portfolio is 100% energy companies and I am up over 50% this year and over 100% in 18 months.
How is the graph at 1:47 correct? I have seen versions of this, where stocks bring 1000x more than bonds. What is the method for calculation for these returns?
Hey Ben, I always hear from people that deflation is much worse than inflation. But wouldn't a bit of deflate benefit us here in the US right now considering how high Inflation is right now? Or is there something much worse that I don't know about that comes with deflation?
I'm not an expert, but my understanding is that the basic rationale for deflation being bad is that if people know their money will be worth more in the future than it is now, they will stop spending it. That reduces demand, which forces prices to further drop, meaning that the deflation can quickly spiral out of control. The end result is companies going out of business, people losing their jobs, and economic collapse.
TMV is not a terrible one fund hedge, albeit you have to deal with terrible swap decay over longer periods. You can think of it like inflation insurance, the house has the likelihood to win, but it's a decent proxy for hedging inflation
Question - how come the rational reminder model portfolio only has a value tilt for small caps? Wouldn't it make sense to overweight value stocks on the large cap side as well?
Me: Opens Ben Felix video about how to hedge against inflation. Me: He better not just say "broad market index funds and time, he says that every time and he's always right"
How that money is used is what matters, banks can give out more loans thus increasing the money supply , but if those loans are used for increasing the productive capacity of the economy then it may not be inflationary. On a related note , central banks can implement expansionary monetary policy and bank lending may not even increase.
This is too confusing. I'm just gonna go all in on Dogecoin at 20x leverage.
Update: It's all gone
Bobby bones you can now buy Shiba Inu
20x leverage is guaranteed loss. Do 100x instead.
@@robertbones326 at least u tried
Finally someone speaking a language I understand
I love how no matter how many personal finance videos you watch, the best option is always to have a well diversified portfolio
Need to say it louder for all the people that DON'T listen to this lmao
yes
No, lmao. The best option is buying real estate. So many clueless people
@@charlesg7926 why can't that be part of a diversified portfolio?
@@charlesg7926 opinion
High inflation is followed by uncertainty and panic, making me wonder if it's time to liquidate my $200k portfolio, or maybe consider some defensive investments. I've heard analysts emphasize on value stocks performing good, what stocks exactly can be the ultimate hedge?
consider diversifying your portfolio with a mix of stocks and stable assets, seeking professional advice could also be valuable to navigate market uncertainties and grow your investments amid inflation
Agreed, getting the right financial services is invaluable, my portfolio is well-matched for every season of the market, and since early last year to date, has yielded 140% off $350k. I and my CFP are working on a 7-figure ballpark goal, tho this could take another year.
@@JamesWillock that’s some interesting numbers, mind revealing this person guding you ? he/she must be a seasoned advisor
Karen Lynne Chess is the licensed advisor I use. Just google the name. You’d find necessary details to work with and set up an appointment.
thanks for putting this out, just inputted ''Karen Lynne Chess'' on the web, spotted her consulting page at once and was able to schedule a call session, she seems impeccable!
Ben Felix is the only commentator/youtuber I am aware of that offers genuinely good and straight forward advice.
These videos teach us what we should be learning in school from a young age and aren't taught.
They don’t teach any form of finance in school. For one, they could teach the basics of having a savings account and checking account and instilling a sense of responsibility in our children.
He's either not being honest or dosen't understand Dividen investing , also it's obvious he's oblivious about Golds proce in compared to the S&P 500 historically, and I barely have 20k in Gold, more in silver, but I've known millionaire's in their mid-40's that inherited and or bought gold when they were young, look at the historical price average.
@@Andformerthingshavepassedaway Anecdotal. I know people that purchased homes in 1965 for 12,000$ and are now worth 1.5 million. its meaningless and has no effect on my thinking about buying a home or not buying a home. Gold prices have fluctuated for years but the ceiling was in 1980, doubt you were even born or even close to it. What is the ceiling in stock and bond markets?? None so far. The millionaire people you know would have done way better investing in stocks and bonds. This is pretty simple math. Some millionaires have so many millions that they own all types of assets and investments including gold. But gold and other precious metals as a long term strategy with even a small proportion of your portfolio is an easy to verify lousy investment.
Dividend investing is irrelevant for rather obvious reasons. You get a dividend, your share price goes down by same amount of the dividend pay out. Pretty much end of story. Math... no evidence to support that dividend paying companies out perform non-div companies.
Personal finance should be a requirement in high school and college.
There's plenty more...the Maverick of Wall St., David Lin, Data Dash,
My Wednesday is instantly improved
At some point CSI should have a whole episode dedicated to Fama, there’s not a single episode without one of his articles!
Kind of like this? ua-cam.com/video/LLbQux2OZjk/v-deo.html
@@BenFelixCSI ha
"The money supply and inflation are not related". I would love you to expand on this topic because I've heard otherwise many times recently.
I’m working on a project that will go into more detail on this.
@@BenFelixCSI by inflation do you mean CPI ? because it is true that money supply increase doesn't always increase the CPI but it will nest somewhere else. for instance , CPI didn't rise between 2010 and 2020 but all those printed money went to equity and housing markets.
@@BenFelixCSI I'd be very interested to see this as well
The idea that the money supply and inflation are not related is patently absurd. Unfortunately it sounds like Ben actually believes that garbage. If the two were not related that also means that supply and demand are not a thing, nor are market based economies. Unfortunately it's that same idiotic viewpoint that has caused a large portion of our current inflation. You can't add that much money to the economy and not expect inflation, but unfortunately politicians, and Central bankers, and apparently Ben, all believe in that fairy tale where the amount of money in circulation means nothing. In that fantasy world you might as well give each household a trillion dollars, everyone will be fabulously wealthy, and will be able to buy anything they want. We know that's not actually the case, but it's an expansion of exactly that mindset that money supply and inflation are not related. Of course that's also the premise of UBI, what proponents of all these ridiculous ideas completely fail to grasp, is it goods and services are still limited, and that money itself has no actual value, money is only a medium of exchange, it's a method of exchanging one person's goods or services for another person's goods or services, having more of it is only relevant if it's in relation to other people's money, if everyone has more money the money itself just simply buys less. The important part is the underlying goods and services, not the money.
I am really sad that even economics courses no longer teach basic economics. It does not bode well for the future
There's other factors, like how often a given dollar changes hands, how much of it is invested, and how much is stuffed under a mattress.
I lost everything in the last recession and learned from it. I made sure to live below my means and save every possible dollar. I also invested correctly and diversely instead of buying material things, restaurant meals, and expensive vacations. I've been waiting all these years for the next recession so I can capitalize on irresponsible debt. If this video is correct, it will be a very exciting investment shopping spree for me
Inflation begins when dollars are printed. Printed dollars are a data input to the CPI. The CPI print is the feedback loop from printed dollars. Keynesians have been trying for decades to print dollars to create inflation-used as a signal to show the stimulus is working. Then before inflation gets entrenched, deflate by destroying printed dollars. The problem here is the Fed didn’t remove the dollars it printed to stimulate. So the higher prices are here to stay for a while. The dollar strength is transitory. You will see a weak dollar once those bonds the fed has on its balance sheet become difficult to sell as higher yielding assets will be more desirable to investors.
Consider the economy as one huge engine that produces the life styles that humans live & prosper & create a healthy financially secure future for their families . Corruption, manipulation , creation of unhealthy political policy & diplomatic environments is a recipe for engine failure. People are equally losing money in the financial market in the midst of all these.
13:56 "the money supply and inflation are not related". this is an interesting statement that flies in the face of what i know. could you do a video on it? It is an important current topic
I would say that they are related, but that it's not the only factor contributing to inflation. So yeah I'd say he's wrong.
Well presented Ben. Truly the best finance educator and well presented historical data based on facts..
Thank you Ben and keep up the great work for your audience.
Wait, did he just say the money supply and inflation are not related?!
Yep and there’s sufficient evidence and a theoretical basis to support that position
Care to elaborate? 😂 😂 2020 record QE and resulting 40yr record high inflation seems to indicate some correlation between the two
@@tman458 causation is different from correlation, there was a lot of stuff going on in 2020 that could explain inflation , not just QE. The pandemic , shocks to supple chains , war , large govt fiscal deficits. If you want to cherry pick this specific time in history to establish a correlation then you’re going to have to find an explanation for decades of QE in Japan , who actually had deflation. You also need to explain why qe has been ramping up in many countries since the gfc unaccompanied by significant inflation until now.
While Dollar is global reserve-they can print to their hearts delight with no rise in inflation.
@@739jepthe effect of money supply on price levels is probably the best documented phenomenon in economics, both as time series and cross sectional; prices tend to follow money supply growth.
I love to see how Ben really enjoys himself when explaining all this. Keep up the good work!
kinky!
Shorting NASDAQ is quite good inflation hedge for me so far ;-)
I always appreciate your excellent data visualizations on these videos
I love how you always end each video with the diversified portfolio money shot.
Well, taking on higher debt / leverage is undoubtedly an inflation hedge !
Inflation is such a buzzword these days. There are so many ways to measure inflation. Core inflation, consumer price index etc.
Ya. I have another video on that coming.
@@BenFelixCSI awesome!!!
There are so may other ways how gov read inflation like reading from tea leaves, reading form move of birds, reading from clouds shapes. Pretty much as accurate and legit as mentioned in main comment.
I think an important distinction to make is that in the 70's "Value" companies had little debt, and were considered value because of their high book values relative to price, whereas growth companies often had more debt to fund their expansion, and thus were hit harder by rising rates.
Today, due to a decade of low interest rates leading to unnecessary borrowing, most "Value" companies today have tremendous amounts of debt, but have good book values relative to price because they have a lot of assets that supposedly exceed the debt.
If interest rates continue to rise as they did in the 70's an stay elevated for an extended period of time, this would put value stocks with high debt levels in a very difficult position, and force them to use cash flows to cover interest, reducing future cash flows.
Lastly, price to book doesn't tell the full story of a stock like it used to. If you look at a company like Teladoc, they were trading below book value and were thus included in many value index funds. But in reality, their book value was inflated because of Goodwill associated with what they paid for acqusitions.
Then you also have companies like Microsoft that have tremendously valuable software products they've built that produce tremendous profits, but because they were built in house, they are not reflected on the balance sheet.
I had my portfolio tilted towards value due to my concerns of overpriced growth stocks(companies with no revenue trading at $100 Billion valuations was absurd to me), but I think with the recent correction in growth stocks, a market cap weighted index fund is much less risky than a value tilted portfolio.
I want growth and value. Like buying a value stock with growth potential at 15 P/E and under.
IWQU is a good option. Its stocks have low leverage and high return on equity.
Great video, if possible, can you do one on ETFs based on commodity swaps. I am wondering if they have a place in a diversified portfolio (and thus dampen the volatility problem that you described).
Again another banger by the one and only! Thanks Ben for the informative easy to understand content
Nice video, as always, Ben.
But I'm in doubt with one of your arguments, I think you didn't discuss it for the sake of not extending the video too much.
Could you explain me or show me some material about why market supply is an outdated way to understand inflation? It makes much sense for me that increasing the market supply without creating wealth is adding demand for the same amount of wealth produced, so this products will raise up their price, leading to inflation.
Very informative. Always great videos from you Ben. Thank You. 😀
Very refreshing information, with low correlation to other finance UA-camrs!
I'd say a strong negative correlation to other fnance youtubers out there.
Boooom Ben Felix maths lesson ♥️
“At the time of filming: April 24th, 2022”. Interesting, I would have thought this was filmed this week
Hello Ben! I love your content, but I'm having a really hard time following your videos. I don't know why, it could be just me. Maybe the presentation could use a bit of an update? I don't mean to criticize, just sharing my feelings.. thank you for your shared knowledge.
Another remarkable video! I appreciate the end bit about your opinions and, as always, the strong academic basis for the videos.
Inflation hits people a lot harder than a crashing stock or housing market as it directly affects people's cost of living that people immediately feel the impact of. It's not surprising negative market sentiment is so high now. We really need help to survive in this Economy.
thank god he's back,,man did i miss his video's ..other then Warren Buffet Ben Felix is my second favorite person to listen too when it comes to common sense investing
@Show "thank god he's back,,[.] man[,] did i miss his video's [videos]..other then [than] Warren Buffet [Buffett,] Ben Felix is my -second- favorite person to listen too [to] when it comes to common sense investing[.]" We say "Other than the billion people on the planet, you're my favorite." That's _first_ favorite, not billionth favorite, due to the use of "other than."
OMG “money supply and inflation are not related”. You just throw away decades of economic theory worth several Nobel prizes
It’s not really throwing them away, it’s just that those theories have been improved upon since they were developed, economics has come along way since 2008 let alone Friedman Economics
probably the best personal finance channel, 🙏
You didn't talk about fixed interest debt. Surely debt is the perfect inflation hedge.
If a HELOC for example was used to buy productive assets like stocks you would outperform unleveraged stock returns in inflationary periods since the value of your debt would decline faster than the interest rate.
there are so much debt, debt is going to be hardly rebased, it is very dangerous, remember the ninja subprime crisis
@@bhok5228 that's an example of irresponsible debt. Most of those mortgages were taken out by people who could not afford the payments and many were adjustable rate or balloon mortgages. Sorta a different beast from what I'm talking about.
@@sandpiperbf9767 You're talking about taking a loan out against your house to invest in stocks. So who are the irresponsible mortgage debtors in your world?
@@CB-so8xd why is it irresponsible to take out debt against your house? That's literally what a mortgage IS. If you can afford the monthly payments and it's a fixed interest mortgage, the extra risk is basically that you're paying on your mortgage for some number of extra years. So... the same risk as being a renter?
The risky investments taken out during 2008 were ninja loans where income wasn't verified, and arm loans with balloon payments (per my understanding at least). There a difference between taking out a mortgage you cannot afford chasing rising housing prices and taking out debt against your equity in a house as a portfolio allocation strategy. Don't do this of course if the payments on the debt would be financially unfeasible to your situation.
It does add unique risks vs not leveraging at all, but housing loans are the cheapest loans out there and are not callable debt like margin loans. Low fixed interest debt is an inflation hedge, and the size of the loan can be scaled according to people's particular allocation goals.
Even taking out a mortgage on a house, then just investing future income into stocks instead of into paying down a mortgage early already reaps the benefits of this inflation hedge also. It's not necessary to take out a heloc against your equity, but it is a possible option.
Nice to see Ben emoting and moving his body in the more recent clips. He's come a long way from the stiff, wooden monotone delivery of old. Great stuff as always!
Ben's laugh when discussing gold made me laugh. Whenever some mentions gold as an investment I always think of the crazy uncle who rants about gold being a good investment.
As always you are an source of enlightenment. Thanks for the great info and date (and the chuckle when you mentioned gold)
The best inflation hedge - just be very rich
As always: thank you for this very good content. Please keep up the great work.
What about I-bonds from the Treasury?
It seems like the only perfect inflation hedge is some passive tangible asset that produces something you would otherwise have to pay to consume in the future. Like solar panels, improved insulation, or a magic bag that always has avocados inside. These things would have a real return, tax-free, in low or high inflation.
So a house seems like a rather good hedge against future rent consumptions, especially if you pay for it with dept. Even though one has to factor in the costs of maintanance which are of course impacted by inflation.
@@C4makesParty u
Please a video that explains why money supply and inflation are not correlated. I love you Felix.
What would be a better choice: MSCI World Small Cap Value or MSCI World Small Cap Value Weighted?
So, TLDR: Do the same as always: Invest in diversified low-cost index funds over the world?
Glad to hear that my portfolio of global stocks with small tilt to value is ideal 😎
How about buying real estate with a mortgage before rates rise further. Won't inflation see the cost of debt reduced, and you lock in cheap financing today?
Isn't that the best investment, also prices will increase in inflationary times, but as you've taken a mortgage it's a 4x leveraged trade
Great video as always! I have a question Ben - What about Real estate assets? Aren’t these supposed to be good for inflation?
I was looking for answer, and you have it. Thanks, Ben.
The GOAT! Well timed video and the most perfect breakdown as usual.
What about banking stocks? When inflation rises, interest rates typically also rise increasing banking profitability. And of course you also get the equity risk premium.
"the money supply and inflation are not related" - It would be super helpful if you could help explain this in more detail, as my simplistic view still thinks this way.
Why you never considered borrowed real estate property, I think it's a good hedge against unexpected inflation times.
You know what probably would help a lot of people ? If you could provide the script of the video ! It’s seriously a lot of very important information which I’d love to collect because I just can’t keep it all after watching the videos couple of times. Especially when there are so many videos with important informations :D pls think about putting it in the description or as a link or something :)
Properties are the best hedge against inflation
Is it me or is the volume on this video a lot more quiet than the usual?
Well, measuring anything based on year to date returns is short-sighted at best. For example, Exxon Mobil is up 42% YTD, whereas Nasdaq 100 is down 27% YTD. So clearly, oil & gas are the future, and tech’s best days are over, right?
I would consider a REIT fund an inflation hedge. The issue is that REITs are also quite volatile. While they mix well with stocks, enjoying a mostly low correlation over time and stock-like earnings, their benefit is over longer periods.
Volatility of gold has always been less than the one on sp500
This is just awesome, thank you so much for putting this video together!
My guess: ACWI or VT. More inflation means people have more money to put into the stock market, so these stock prices will grow (or in real terms, remain the same). Plus, whilst individual companies are volatile, the stock market as a whole isn't.
Another good hedge is an inflation-adjusted bond. But those are rare. Plus, it only works if CPI figures are accurate.
I’d love to see a discussion between you and Peter Schiff regarding gold ! :)
Great video as always but feel that it should discuss Dalio's All Weather portfolio.
“Money supply and inflation are not related”
Not at all? That seems counterintuitive.
Because it’s wrong and this was so off the mark. When he said commodities are not a good inflation hedge when they’re almost literally what inflation (CPI) is measured in, he flew out of the tree of logic.
Hmm domestic and international stocks ( check) , diverse stock portfolio (check) but no mention of real estate?
Excellent.
How about farmland?
If central banks continue to raise rates, the market will crash though - so equity risk premium isn't there in the short-mid term-
at the same time we have massive inflation, likely a "stagflationary" environment.
It seems like there is no good way to position in this market...
Ben Felix, I encourage you to add more complexity in this. Add some statistics and calculus please.
The information and value of this video is pure gold.... sorry for the pun....
He reminds me of Michael Schofield
Deflated recording volume on Ben Felix's video is the Ultimate Inflation Hedge!
Thank you so much again Ben! Amazing video!
9:02 - How can anyone read these graphs? Text is tiny and blurry on nearly all the charts. And it'd be great if they used more contrasting colors. Why are two of the three lines blue on this graph?
Love Ben Felix videos for their in-depth discussions but please fix these graphs to make it easier for us plebs to follow along!
very good fact-based presentation
Why can't we have deflation, like Jeff Booth says in 'The Price of Tomorrow ' ? I've heard different reasons of why we need an inflationary economy, like so people don't hoard/hold onto money and actually spend it but these never really made sense to me..
Inflation erodes debt. Without it interest would enslave everyone rather quickly. Interest demands an expansion in the money supply.
Wrong, this asset exists: commodity producing companies
Love the citations :) In the end, how does one prepare for the unexpected? Solid basics. It's true in life for most things.
Great video. Very good research references
There was never going to be a deflationary spiral.
Now, unfortunately, the central banks are way behind on inflation. The world's central banks cannot just print covid money equivalent to 20% of the world's economic value and not expect inflation. Milton Friedman said it best, “Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.”
Few people in history have been more wrong about money that Friedman.
@@BenFelixCSI ... we will agree to disagree on that one. I stand on the empirical evidence contrary to your statement. The 1970s and today, with unabated persistent inflation in between.
@@tmcche7881
The funny part is that he’s right on Friedman being misguided for the most part but you/Friedman are also right about inflation being a monetary phenomenon.
Friedman was wrong a lot but this was one area he got right. Austrian school got there way before him though so still not much credit.
Awesome video content! Next year I'm going to remember this video production especially gold🥇 laughing
Is it necessary for interest rates to be higher than inflation to bring inflation down?
Even though I know the ending recommendation with 100% certainty, I still watch the video to see how he will get there
The stock market is a way to hedge against inflation. Most notably amidst recession, investors need to understand where and how to allocate funds to hedge against inflation and still make profits.
A weak dollar can signal an economic downturn, I've overheard people say inflation is a money-eater thus worried about my savings around $200k
Historically, the Great Depression and the 1970s, oil was the best "hedge" against inflation. My portfolio is 100% energy companies and I am up over 50% this year and over 100% in 18 months.
Now tell us thr 5yr and 10 yr return of such a portfolio. That's the problem right there.
Hi, what's your idea on having some Commodities ETF such as DBC in the portfolio? Will it give protection against inflation?
How is the graph at 1:47 correct? I have seen versions of this, where stocks bring 1000x more than bonds. What is the method for calculation for these returns?
Hey Ben, I always hear from people that deflation is much worse than inflation. But wouldn't a bit of deflate benefit us here in the US right now considering how high Inflation is right now? Or is there something much worse that I don't know about that comes with deflation?
I'm not an expert, but my understanding is that the basic rationale for deflation being bad is that if people know their money will be worth more in the future than it is now, they will stop spending it. That reduces demand, which forces prices to further drop, meaning that the deflation can quickly spiral out of control. The end result is companies going out of business, people losing their jobs, and economic collapse.
TMV is not a terrible one fund hedge, albeit you have to deal with terrible swap decay over longer periods. You can think of it like inflation insurance, the house has the likelihood to win, but it's a decent proxy for hedging inflation
You mention that inflation and the money supply are not related (a possibly out-dated notion). Could you make a video explaining and proving this?
Yes.
And about the Real State market is a good hedge?
Great video
“The money supply and inflation are not related.” Is this still in relation to the quantity of money being the ‘only’ factor?
Question - how come the rational reminder model portfolio only has a value tilt for small caps? Wouldn't it make sense to overweight value stocks on the large cap side as well?
Ideally, yes, but it was done that way for simplicity and to minimize foreign withholding tax for Canadian investors.
I wonder how resourse stocks or gold miners etf do
Thanks Ben for this video. Any video planned on Monte carlo simulation to simulate alternate portfolio returns?
You know what they say, "All Roads lead to Value"
what do u think of buying VIX?
Me: Opens Ben Felix video about how to hedge against inflation.
Me: He better not just say "broad market index funds and time, he says that every time and he's always right"
Excellent content. Thank you
Isn't the Fed buying TIPS? Does that not change everything, and I mean everything?!
Where'd you get that hoodie?
I like what you say but the idea that "the money supply and inflation is not related" is just flat wrong.
How that money is used is what matters, banks can give out more loans thus increasing the money supply , but if those loans are used for increasing the productive capacity of the economy then it may not be inflationary.
On a related note , central banks can implement expansionary monetary policy and bank lending may not even increase.