SM Monthly Letter [Summary]: Some Clear Thinking and Actionable Steps for an Inflationary Environment

Gold has been the ultimate hedge against inflation for over 5,000 years - and as of May 2021, it's one of the only assets not trading at all-time highs.

Sovereign Man: Blueprint and Confidential members benefit from our Monthly Letter series, covering a range of mission-critical topics to safeguard your future.

Each Monthly Letter contains actionable strategies for gaining more freedom, more opportunity and more prosperity, and mitigating the risks that threaten your financial future.

In today’s Knowledge Series mailer, we give you a taste of what to expect from these Monthly Letters…

SM Monthly Letter [Summary]: Some Clear Thinking and Actionable Steps for an Inflationary Environment

The dreaded “I” word has returned…

Inflation. If you can’t see the inflation, you’re clearly not paying attention. Or visiting the grocery store. Or the gas station.

After a year of lockdowns, pent-up demand, coupled with trillions of freshly conjured dollars — has created a perfect storm of inflation. And it’s unlikely that government spending will slow down anytime soon.

This adds up to further devaluation of the US dollar.

But we’re not focused on hedging against the dollar. We’re focused on hedging against fiscal and monetary chaos, including much higher inflation.

In this month’s Sovereign Man Monthly Letter, we shared how best to approach this new environment, along with some strategies for hedging against inflation…

The Federal Reserve is printing extraordinary sums of money right now… and that’s quite a statement, given how much money they’ve printed over the past decade.

Prior to the 2008 financial crisis, the Fed’s balance sheet was valued at roughly $850 billion. Now it’s nearly $8 trillion.

Yet the Fed insists there will be no consequences.

Of course, that’s not what history teaches us: Every episode throughout history where a government or central bank has dispensed with restraint invariably has led to financial ruin.

Right now, if you make your living in US dollars, then unless you’re diversified, your entire livelihood may rest on the Fed’s ability to sweep all negative consequences under the rug and keep them under control.

The Fed’s primary tool to fight off financial and economic problems is adjusting interest rates.

But at this point, with interest rates this low, they have nearly no leverage left.

The US economy is so addicted to cheap money and 0% financing that raising interest rates in a meaningful way (in order to prevent rampant inflation) could cause a major recession, as well as a potential crash of asset prices.

And inflation is already here.

Yes, it’s possible that some of these inflationary forces are temporary. But the best we can realistically hope for is a permanently higher plateau of prices.

Because of this, we want to have an in-depth discussion about planning for inflation…

But first up, a solution that you can put in place today

Considering the One Asset Class That’s Still Undervalued: Precious Metals

Since hitting an all-time high of $2,058 per ounce in August 2020, gold remains down.

It’s one of the few assets that’s not at an all-time high. The same goes for silver, which is nearly 50% down from its all-time high of $50 per ounce set in April 2011.

Over the past few years, we’ve kept subscribers on the right side of the precious metals market.

Prior to the precious metals run-up in 2020, we made a case for a significant increase in gold and silver prices. And then, of course, prices did surge.

We also published research in April 2020 on how to pay a 1.5% premium or less for physical silver (at a time when physical silver premiums were 30%+, so our subscribers saved a lot of money).

And frankly, we think that pricing is one of the things that makes gold really attractive right now; it’s one of the only major assets that’s NOT at an all-time high.

However, we’re not primarily focused on the short-term price movements of precious metals.

Holding physical gold and silver — either in your possession or at a secure vault — should be a long-term decision. It’s like an insurance policy. If the proverbial ever hits the fan, you won’t be any worse off to own an asset with a 5,000-year history of value and marketability.

Despite the trillions of dollars printed since late last year, it’s amazing that you can still trade your dollars for gold and silver at these low prices.

But this opportunity won’t last forever.

So, consider adding to your stash of physical precious metals — the original inflation hedge.

Covered in-depth in the rest of the Monthly Letter for May:

Revisiting Alternative Currencies to the US Dollar as a hedge against inflation:

  1. The Hong Kong Dollar
  2. The Norwegian Krone

Inflation Exists in Different Forms: For starters, we outline the differences between consumer price inflation, “shrinkflation” (AKA value deflation), and stagflation.

Why the government is wrong in saying that inflation is not a problem: Clue: Warren Buffett, Coca-Cola, Procter & Gamble and Bank of America Global Research all agree that it IS, in fact, a problem.

Some clear thinking for a very different world: If there’s been one certainty over the past 14 months, it’s that you can’t rely on the US Treasury and the Fed to protect the purchasing power of your savings.

This means having to take matters into your own hands, by:

  1. Acknowledging That the World Has Fundamentally Changed: We explore the environmental risks and factors that have led to the current inflationary environment.
  2. Having a Global Perspective: If 100% of your net worth is denominated in a single fiat currency, consider some fresh thinking. We provide an introduction to international investment diversification. Value investing, in particular, can potentially help you beat inflation — or even the market.
  3. Not Making Bad Investments Just to Protect Against Inflation: We highlight some of the more obvious pitfalls investors fall into, and highlight the risks of insufficient diversification — and why Treasury Inflation Protected Securities (TIPS) don’t make sense.
  4. Targeting Specific, Scarce Assets, Not Asset Classes as a Whole: Boom times, fueled by either organic growth or a Fed-induced frenzy, create mediocre, overpriced assets. Look no further than today’s assets.

    When bad times hit, the worst investments and speculations can wash away very quickly. Quality investments survive. We unpack the one trait that all quality assets have in common: scarcity.

(NOTE: The full Monthly Letter covers these, and numerous other topics, in far greater detail. Join Sovereign Man: Blueprint or Confidential to start receiving these Monthly Letters, and gain access to all previously published ones.)

Parting thoughts

After this week’s CPI release, higher inflation shouldn’t be a surprise. Still, many investors will listen to the “leaders” who dismiss this inflationary wave as just transitory.

But intelligent, rational people think differently.

They have a Plan B in place.

And in our view, inflation hedges should absolutely be part of any robust Plan B, especially now.

Ready to protect your wealth against inflation and other threats? Join Sovereign Man: Blueprint or Confidential today

If you’re just setting out on your Plan B creation journey… Sovereign Man: Blueprint is an excellent start. Packed with all the key concepts and steps you can take today, Sovereign Man Blueprint puts you in the driver’s seat to start securing your future.

If you’re already reaching the execution stages of your Plan B… Sovereign Man: Confidential — our flagship intelligence and diversification service — is the next logical step.


Until soon.

Team Sovereign Man

PS: Knowledge is power. Be sure to forward this article to a friend or family member who needs to see this.

About the author

Andre Bothma

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