In Search of the Ultimate Inflation Hedge
ฝัง
- เผยแพร่เมื่อ 30 พ.ค. 2024
- When stuff and services get more expensive, your dollars can buy less of them. That’s called inflation, and it’s a problem because investors want to fund future consumption; if stuff gets more expensive you need to save more, spend less, or earn higher investment returns to meet your objectives.
Referenced in this video:
US Inflation and Global Asset Returns: papers.ssrn.com/sol3/papers.c...
The Best Strategies for Inflationary Times: jpm.pm-research.com/content/4...
Value and Interest Rates: Are Rates to Blame for Value’s Torments?: jpm.pm-research.com/content/4...
Duration-Driven Returns: papers.ssrn.com/sol3/papers.c...
Inflation Hedging with International Equities: jpm.pm-research.com/content/4...
The Golden Dilemma: chrome-extension://efaidnbmnnnibpcajpcglclefindmkaj/www.nber.org/system/files/wor...
Gold, the Golden Constant, COVID-19, 'Massive Passives' and Déjà Vu: papers.ssrn.com/sol3/papers.c...
------------------
Follow Ben Felix on
- Twitter: / benjaminwfelix
- LinkedIn: / benjaminwfelix
Visit Rational Reminder: rationalreminder.ca/
Follow the Rational Reminder on:
- Twitter: / rationalremind
Visit PWL Capital: www.pwlcapital.com/teams/pass...
Follow PWL Capital on:
- Twitter: / pwlcapital
- Facebook: / pwlcapital
- LinkedIn: / pwl-capital
You can find the Rational Reminder podcast on
Google Podcasts:
www.google.com/podcasts?feed=...
Apple Podcasts:
itunes.apple.com/ca/podcast/t...
Spotify Podcasts:
open.spotify.com/show/6RHWTH9...
------------------
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!
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
My Wednesday is instantly improved
The U.S. dollar index (dxy indes) will drop from 103 to 74 as hyperinflation rages. Don't get suckered in because they'll claim inflation is falling coming into the midterm elections only to have it reaccelerate into hyperinflation in 2023.
You aren't tested until a company you own and believe in is down 30-40-50% from its highs. You will question your conviction, your strategy, your process. The market has a way of finding your breaking point. Nothing tests your conviction like falling stock prices. The key is knowing what you own and getting the best price possible. Falling prices give you the opportunity to lower your average cost. It’s a gift.
Reading this in 2024. Biden fucked your country lol
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
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'm enjoying the consistent uploads again. I appreciate the great information, thanks! If you're taking requests I'd really enjoy a video exploring your comment regarding the lack of relationship between money supply and inflation.
I'd be interested in that too.
I remember binge watching all of his videos. His channel truly is a gold mine.
Yes, a video about MV = PY, please!!
Yes, would be great to have a video on this point
You guys do know that males zero sense right?
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,
"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.
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? th-cam.com/video/LLbQux2OZjk/w-d-xo.html
@@BenFelixCSI ha
Oil and energy commodities having high inflation returns makes sense given that they drive a very large share (directly and indirectly) of CPI. Hence, you're buying positively correlated exposure to the CPI index.
This man delivers the best financial content on youtube. No one is even close.
Plain bagel
I love to see how Ben really enjoys himself when explaining all this. Keep up the good work!
kinky!
I always appreciate your excellent data visualizations on these videos
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.
I love how you always end each video with the diversified portfolio money shot.
Another remarkable video! I appreciate the end bit about your opinions and, as always, the strong academic basis for the videos.
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.
Very informative. Always great videos from you Ben. Thank You. 😀
Once again, thanks Ben for this video.
I am amazed to see how comments on gold diverge from a professional to another.
As always you are an source of enlightenment. Thanks for the great info and date (and the chuckle when you mentioned gold)
As always: thank you for this very good content. Please keep up the great work.
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).
Your videos and podcasts are the best financial advice that exists on the internet.
This is just awesome, thank you so much for putting this video together!
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.
The GOAT! Well timed video and the most perfect breakdown as usual.
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.
I was looking for answer, and you have it. Thanks, Ben.
Great video as always! I have a question Ben - What about Real estate assets? Aren’t these supposed to be good for inflation?
As always, awesome video. What I love about the videos is everything is backed by data, not opinion. I'd love to get your take on whether investing in property or shares is better. I've seen some information on it, but would love to see what the data says. Keep up the great work.
Shorting NASDAQ is quite good inflation hedge for me so far ;-)
I can't share this enough. Great content as always!
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!
Love the citations :) In the end, how does one prepare for the unexpected? Solid basics. It's true in life for most things.
Thank you so much again Ben! Amazing video!
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.
Very refreshing information, with low correlation to other finance TH-camrs!
I'd say a strong negative correlation to other fnance youtubers out there.
Thank you, Ben!
probably the best personal finance channel, 🙏
Awesome video content! Next year I'm going to remember this video production especially gold🥇 laughing
superb as always
Dude! You do fantastic work!!
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 :)
Great video. Very good research references
Another fantastic video, Ben! Thank you!
If you're looking for another video topic, I think it would be fascinating if you would make a video analyzing Chris Cole's "dragon portfolio" and the thesis underlying it, please.
Thanks Ben!
“At the time of filming: April 24th, 2022”. Interesting, I would have thought this was filmed this week
Great info. Thanks, Ben!
Great video... is there a differentiation between cost push and demand pull inflation in any studies?
Thank you for your high quality content
Excellent content. Thank you
Boooom Ben Felix maths lesson ♥️
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.
Please a video that explains why money supply and inflation are not correlated. I love you Felix.
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."
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.
Hey Ben, great video as always. Would you possibly do a video about the 'deflationary spiral' you mentioned? I don't see why that would be a bad thing, for the currency to deflate.
Yes that is possible. I’m working on a bunch of stuff on crypto and this is part of it.
@@BenFelixCSI love it, thanks for all the videos you put out. Has really helped me in my investing journey. 👍
The last time America went through a deflation was during the Great Depression of the 1930s. People are incentivized to save and not to spend when they believe prices will fall (since they don’t want to buy when they believe goods are relatively expensive.) The problem is that since consumption is aggregate demand/gdp, the economy tanks. Deflation is horrible.
I'm not an economist or have any formal finance, banking, economics etc, however I can usually walk away with some a reasonable understanding. Today was an exception as I was non the wiser at the end!
The information and value of this video is pure gold.... sorry for the pun....
Glad to hear that my portfolio of global stocks with small tilt to value is ideal 😎
What would be a better choice: MSCI World Small Cap Value or MSCI World Small Cap Value Weighted?
I’d love to see a discussion between you and Peter Schiff regarding gold ! :)
1:19 your answer
Thanks Ben for this video. Any video planned on Monte carlo simulation to simulate alternate portfolio returns?
Hi, what's your idea on having some Commodities ETF such as DBC in the portfolio? Will it give protection against inflation?
Excellent.
Ben I don’t understand, in the paper Best strategies for inflationary times they conclude that Managed Futures Trend is the most robust inflation hedge and also has a positive carry during non inflationary times. Why did you not include that in your video? This view of managed futures is widely accepted in academic finance. Genuinely curious why you skipped over it?
Great content, thank you!
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.
Fantastic stuff Ben. Thanks for being the best financial-content creator on TH-cam.
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.
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.
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.
Great 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!
Hi, Can you cover private and venture capital type stocks?, also things to look for when buying preferred stocks, fixed , fixed to floating etc. as these seem to be a source of higher dividends than average ?
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
Great video as always but feel that it should discuss Dalio's All Weather portfolio.
Could you make a video about investment horizons and bond maturity. Seems like it is more nuanced than it sounds
Clear, concise, spectacular
How do you feel about consumer staples etfs like vdc?
Appreciated.
Thank you for the video
I’ve seen others comment this as well
But would owning your primary residence (or a rental or two) help hedge inflation
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.
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?
Ben, I hope you do one on tactical asset allocation(I'm not into it, just want your opinion on it).
"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.
Deflated recording volume on Ben Felix's video is the Ultimate Inflation Hedge!
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.
How and where does one buy inflation protected bonds in Canada?
Very interesting. Do typical global ETFs have ‘value stocks’?
What about I-bonds from the Treasury?
very good fact-based presentation
I just stumbled upon I-series bonds ...Are they too good to be true?
So again the answer is to have a diverse portfolio. In today’s case a heaping bucket of I Bonds would be nice.
Is it me or is the volume on this video a lot more quiet than the usual?
Wisdom Tree and others have zero duration bonds- not sure exactly how they work but there is some kind of duration hedge. I have never used but I am intellectually curious if they are anything worth reviewing. The still will suffer during inflation but will not go down much as interest rate rises.
What about Series I as an inflation hedge??