Inflation, Hyperinflation, and Transitory Inflation?…
What the heck, It can all be so confusing!
So many questions…
How to profit from inflation?
How to make money from hyperinflation?
My last post and video about inflation, hyperinflation, and the possibility of a total economic collapse was quite popular.
In fact, it was my most popular piece so far.
It doesn’t have more views than some of my other stuff but I never so so much interest right out of the gates.
So today, we’re going to unpack inflation and hyperinflation a little bit more… go in a little bit deeper.
It’s time to get out of the kiddie section and dive into the deep end of the pool when it comes to inflation and hyperinflation.
Specifically, let’s look at what the average person can do to not just survive inflation, but to thrive.
How to Profit from Inflation
What kind of investments or financial moves do you need to make in order to come out on the other side better than when you went in.
Going back to my pool analogy, I don’t want anybody to drown while we cover this, so let’s do a quick review of inflation and hyperinflation and even the feds new terminology… transitory inflation.
If you know this stuff already, stick with me, it will be quick.
Go grab another dew while you wait or fill up your coffee cup.
What is Inflation?
Okay, first there is inflation.
It feels like prices are going up and they may be going up a little, but what is really happening is the purchasing power of your money is going down.
So maybe that $200,000 house last year will now cost you $250,000.
What is Hyperinflation?
Hyperinflation is the same thing but, well… hyper.
What does it mean to be hyper-something?
If we call somebody hyper-emotional then they are super-emotional.
Hyper-sensitive means they are sensitive… but super-sensitive.
Same rules hold true for hyper-inflation.
You can think of it as super-inflation.
In means inflation has reached epic proportions.
Technically, it means…. well… economists aren’t completely agreed on what constitutes hyperinflation (or super-inflation) as opposed to regular inflation.
Investopedia says it’s hyperinflation when it reaches 50% per month, but in my house and my economy, I’ll consider it hyperinflation waayyyy before inflation is occurring at that rate.
Forget the number, just know that hyperinflation is fast…., it’s super-inflation and it tends to happen slowly at first and then very rapidly.
It can grow exponentially.
So it may hurt a little… and then a little more… and then a little more…. Before you know it, it’s too late.
What is Transitory Inflation?
We’ve all felt a little of the impact of a devaluing of our dollar.
The Federal reserve (or FED) likes to call what we’re going through, “transitory inflation”.
You know, it’s transitory… don’t worry about it.
This is the same federal reserve that told us in 2008 that there was no problem with the subprime mortgage industry… everything was going to be just fine.
I’m pretty sure transitory inflation is just a pretty phrase meant to help keep the masses from panicking.
But calling inflation “transitory” won’t change anything and it certainly won’t make it transitory.
Here’s the deal.
Let’s talk about boiling a frog to death.
It’s been said that if you throw a frog in hot water, it’ll immediately jump out.
But if you put it in a pot of water, let it get comfortable, and then heat it up slowly to boiling, that frog will sit there until he cooks to death.
Because the heat came slowly and frog didn’t realize what was happening.
In this situation, the Federal reserve is the chef, the pot is the economy or society, and we…. Well… unfortunately we are the frogs.
Some frogs are going to come to a slow boil until it’s too late.
But a few of us are going to see what’s coming, know that somebody’s gonna get burnt, and hop out of the pot.
Maybe if we play our cards right, we can even profit from this period of inflation and hyperinflation instead of just letting it run us over like a freight train.
So if you believe that this is certainly NOT transitory inflation (as the Fed would have you believe), then let’s explore what you can do to turn a profit in the next few years and come out on top after inflation has done it’s damage.
But before I get too far into this, I want to give this very clear disclaimer:
I Am NOT a Financial Advisor!
All information in this post is for entertainment purposes only and NOT financial advice.
Please consult with your financial advisor before making any financial decisions at all.
In one of my last posts, I told you to think of me as your buddy at the bar.
Well, today, think of me as your drunk buddy at the bar because everything I’m about to talk about is theory, conjecture, and speculation at best.
I have never lived through massive inflation, never been through hyperinflation, and let’s be honest, transitory inflation didn’t even exist before some wordsmith in Washington came up with that combination of words.
I guess what I’m saying is that I’m reminding you again… I’m only guessing AND speculating in this video.
Take everything I say with a grain of salt.
Some of the ideas I have could work, some could be total crap.
For every idea I have, I’m sure there are 10,000 scenarios I never thought of…
Great, now that we got that out of the way…. proceed at your own risk.
The good news is, I’m not a fat-cat rich bloke.
All the strategies I’m sharing are for the average person with average financial means.
I guess I’m like your BROKE drunk buddy at the bar, trying to figure out how to turn a profit not just from inflation but from scratch.
So without further ado, here’s how you can turn a profit during inflation or hyperinflation…
How to Make Money During Inflation
During inflation (and especially during hyperinflation), the worst thing to have is fiat money (without getting technical, fiat money is simply paper money) because fiat money is exactly what’s losing its value.
It’s better to invest that money into something that will (or could) retain it’s value.
So what are some options?
Some of it depends on how much cash you have available.
#1) Convert Your Cash to Real Estate
Get rid of your cash while you can.
Once everybody wants to dump it… it’s too late.
One of the best investments you can convert your cash to is real estate.
Regardless of how bad inflation gets or even if we enter into hyperinflation, people need a place to live.
As the owner of the real estate, you will benefit by the rise in market value both in terms of selling or renting, because the market value will rise with inflation.
Let’s suppose we have a year with a 100% inflation rate.
That means a year later everything costs double what it did before.
That also means the value of things other than cash has double.
So if you had a $150,000 in cash, a year later it would only have the purchasing power of about half that (or $75,000).
But if you bought a $150,000 house, a year later it would be worth double that (or $300,000).
The same type of thing happens with rent.
Let’s assume you have a house that rents for $1,500 dollars and we have the same inflation deal…. We have a year where the value of money declines by 100%.
Again, everything costs double.
If you’re renting out your investment house to a tenant, the new market rent would be $3,000 instead of $1,500.
As long as you bought that real estate with a fixed interest rate, your payment isn’t going to change that much.
It might go up some from year to year as your taxes increase, but that’s about it.
If you’ve ever heard people talking about wanting to inflate out of debt… that’s how it’s done and why inflation and semi-hyperinflation can be so powerful for people who have assets they still owe on.
As the money loses value and market rents increase, in can become easier and easier to pay that mortgage off early.
If you can completely pay it off as inflation increases it will be a cash cow once inflation settles.
I’m not expert on this, I only have 1 rental and it’s not paid off but I imagine during hyperinflation people would pay their rent before they pay for other debt.
Nobody wants to lose the roof above their head.
If you have a good nest egg or pile of cash, what you don’t want to do is to keep a bunch of cash on hand.
Inflation and hyperinflation will eat away at it until it’s worthless.
So convert it into real estate or some other hard asset that will retain it’s value.
I usually do NOT promote debt but if you like taking gambles, can stomach a little risk, and want to get really slick….
(before I say this, remember… this is just theory and my advice shouldn’t be taken seriously. Consult your financial advisor before making any financial decisions).
If you wanted to get really slick and you were convinced hyperinflation was coming, you could by as many houses as possible with as little down as possible and borrow the rest.
Let’s say you were able to put money down and buy two houses on a fixed rate, both worth $200,000.
As they rose with inflation, eventually one would be worth $400,000.
You could sell it and pay the other one off and then you’d be debt free on that house.
If you had lots of cash, you could do that with as many houses as possible.
Just buy pairs of houses knowing you will sell one as soon as the value is there to justify it.
Or you could buy 3 or 4 and sell multiple houses to pay off one.
#2) Buy Other Assets and Wait for Their Value to Increase
Okay, but maybe you’re like me and you just don’t have the cash to go do that and you’re not willing to take on extra debt to try to make it happen on a chance you’ll successfully game the system.
I get it.
I’ve already used up my FHA 3.5% loan on the house I’m living in.
No way I can quickly come up with the 20% down needed to buy an investment, especially in this real estate market.
So what do you do then?
If you have $3,000-$5,000, I would suggest buying undervalued land.
I’ve made lots of money buying and flipping land, even during non-inflationary periods because it’s not too difficult to find great land deals.
Let’s suppose you find a piece of land worth $10,000 but the owner needs some cash and will sell it for $5,000.
You now automatically have $5,000 in equity when you buy it.
Now let’s suppose inflation or hyperinflation pushes the value of that land to 20k, 30k, or $50,000 in the next few years… you still have the land.
If you had $5,000 sitting in an account, it would be virtually worthless at this point, BUT your land will still have value, it’s just that the numerical value of that land would change…
And it would change in a good way because it would rise with inflation.
You can do the same thing on a smaller scale here.
Let’s say you get the land deal I mentioned above for $5,000.
It’s already worth $10,000 because you’re buying it at a discount, right?
Now let’s suppose inflation or hyperinflation happens and in the next 5 years that land gets pushed to a value of 50k, 75k, or $100,000 dollars.
You could sell it and make a huge payment on your mortgage, student loans, car, or if you have other debt you could use it to wipe that out as well.
It’s a great little hack that wouldn’t be too risky.
You’d just have to park a little bit of money into the right piece of land and wait a little while and WA-LA!… you made some profit from inflation.
You can use it now to pay off some of your debt.
I hope that made sense.
#3) Buy Commodities (or Guns)
Okay, but what if you don’t want land or can’t find a deal but you have roughly the same amount of cash… $3,000 to $5,000?
In that case you could consider commodities like gold or silver (or guns).
I believe all those items will hold their value and rise with inflation.
They may even outpace inflation.
Gold holds its value.
We know this from history.
There is only a certain amount of gold in the world and it will always be valuable.
Silver holds its value, there is only so much of it, and it’s such a great conductor that it’s used in almost all electronics.
In fact, many would argue that silver is undervalued right now anyway and is a good investment even without inflation, but that’s a different topic for a different discussion.
If you’ve never bought any physical gold or silver it can be a little overwhelming and there are a ton of scams out there.
I bought my first physical gold and silver this past year and I had to ask a few of my buddies who I knew were into that sort of thing the best place to get it.
Guess what, it’s just like everything else.
You order it online and they ship it straight to you.
I know, it’s a little worrisome the first time around, but I’ve never had a shipment disappear or get swiped.
It’s shipped pretty low key.
If you’re looking for a place to order, I use APMEX.
I don’t know if they’re the cheapest per ounce, but they are legitimate and I know what’s coming from them is real.
#3.5) Investing in Guns
Now for the guns.
Guns, guns, guns.
We Americans like our guns.
You may be thinking why spend money on guns?
Well, if inflation and hyperinflation starts getting out of control and there’s even a minor breakdown in society, guns keep you, your stuff, and your family safe… well, at least safer.
Even if there is no immediate threat, guns can make you feel a bit safer.
In the event of hyperinflation, some things will lose value because people will stop spending money on them.
They aren’t a necessity or a legitimate investment.
But depending on the situation, guns could be a necessity.
Plus, you can’t protect your family with just anything.
A stick is good.
A slingshot is better.
A sword is even better.
But a gun beats ‘em all.
That means the value of things like gold, silver, land, and guns will rise as inflation does, so you’ll always be able to sell or trade them.
Plus if your neighbors forgot to get a gun, you can rob them of their garden vegetables fairly easily…
Just kidding… that wouldn’t be neighborly.
Okay, so we’ve discussed land, gold, silver, and guns.
What about stocks?
#4) Which Stocks to Buy During Inflation?
Before diving into this, I must remind you again I am just a lone soul trying to navigate this world the same as you.
Don’t take any of my advice unless you like to gamble or have a high tolerance for risk because you’re taking a risk just by listening to me.
I’m about to share how I am personally investing during this time.
My wife and I have 2 brokerage accounts- one for each of us.
They are both ROTH IRA’s so any gains we have we won’t be taxed on (as long as we don’t touch them until retirement).
She’s not into the stock market thing so I manage them both.
By having two accounts I can put in twice as much money to play with each year.
(Unfortunately, I have rarely taken advantage of that).
Let me start with what I used to do.
I used to be conservative, try to buy solid companies when they seemed to dip and hold them.
I’ve changed my tactics and I did this a few years before the pandemic hit.
Here’s the thing, after 15 years of having those accounts and playing it safe, they fluctuated and I was up some, maybe even double what I started with at different times.
But I don’t get excited about double my money in 15 years.
Especially with the ROI I make flipping land.
We aren’t wealthy. But we aren’t hurting, at least not right now.
We have a decent retirement plan aside from our Roth IRA’s and I think we’ll be just fine no matter what.
But I got to thinking, since these are completely tax free accounts, I should stop going for base hits and only go for home runs.
So that is what I’ve been doing the last few years and it’s much more exciting.
That being said, it’s also much riskier.
I’ve had stocks collapse and even had a OTC penny stock completely disappear (taking my money with it).
The key is that our ROTH IRA accounts don’t have to produce for us to be okay in our retirement.
Translation: We can lose it all and we’ll be just fine.
So a few years ago I sold out of everything safe.
Now I’m investing only in high-risk (but potentially super high growth) stocks.
Home runs… if you will.
Every single one of our investments is in one of the following areas and I’m sticking with my strategy even during inflation.
- Blockchain or blockchain technology companies
When banks started getting in on blockchain, I realized Bitcoin might go away or be banned, but blockchain technology is here to stay.
So I’ve invested some in industries developing blockchain technology or holding patents in blockchain technology.
- Cannabis related companies.
I don’t smoke it, I don’t promote it, and I don’t condone it.
But the fact is, it’s legal in some areas under different rules and regulations.
At this point, it’s a little baby industry because it’s still federally illegal.
At some point though, I believe it will become federally legal for recreational use.
When it does, institutional investors and hedge funds will be in a race to become the Budweiser of the marijuana industry.
They will be over-spending to try to make that happen because whomever becomes the brand for that industry will make billions.
You’ve heard of dotcom millionaires?
My belief is that when cannabis becomes federally legal, average Joes with money in the market (in the right stocks), will become rich overnight or at least very quickly.
Like the dot com boom, people will be getting rich of bad companies that shouldn’t be trading at such high prices… but they will be because it will be a frenzy.
That’s how human nature works, just look at some of the swings of cryptocurrency (which I might add is a product/industry nobody really understands).
The key is to have money already positioned in companies that are in the cannabis industry.
It could also be a beautiful thing if your money was invested in those companies through a tax free Roth IRA… I’m just sayin.
- Real estate connected to the Cannabis industry
I know technically, that is the same as cannabis related stock, but it’s a little different because it is real estate.
If you’re looking for something to protect you during inflation, a company that focuses on real estate would be a good choice.
If it happens to be focused on real estate for a growing sector of the economy, that is even better.
I suppose you could also invest in gold and silver related stocks or gun companies but personally if I’m investing in gold I’d rather have the hard asset.
#5) Buy a Car Now with a Fixed Interest Rate
Another option you may want to consider is getting a new car early and financing it with a fixed interest rate.
This goes back to the other hack I mentioned earlier about buying multiple houses and inflating out.
This is the first time I know of in my lifetime when a person’s used car might be worth more than they owe on it.
Cars are expensive right now, but if they dip in the near future, you feel inflation is coming, and you can afford it… it may not be a bad time to get another car.
If you have a car that’s paid off, keep it and later down the road when inflation drives it’s price up, you can sell it and pay off your new one.
What if nothing I’ve said so far resonates with you or you don’t have that much to spend, but you want to be prepared?
#6) When You Can’t Invest… Prepare
If you can’t profit from inflation, you can at least be prepared for it.
There are a bazillion ways to get prepared.
Consider stocking up on non-perishable foods and other non-perishable items you know you’ll need but don’t want to pay a higher price for later.
This can minimize the effects of inflation as it rises because you’ll have some things already pre-bought.
You can also prepare by learning a new skill that will be useful.
YouTube is a great place to start.
Start learning about animals, farming, canning, bread making, solar energy, gardening, or anything else that you can think of that would be beneficial.
Find something you want to learn about that you think would be beneficial during inflation or hyperinflation…. Then start learning that skill.
Feel free to share this to your social media or with a friend.
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Jason and Daniele
Prepare for inflation by starting a side hustle!