Trust me, I am trying hard to choose a better way to start this post, but I can’t find any other than the punch line and cliché “We are living unprecedented times”.
It is true that the last time the world faced a pandemic was during the years of the Spanish Flu, but it is also true that the government class made certain maneuvers and decisions that are going to leave a scar for decades.
If their egos told them to do something extreme to leave a legacy and be always remembered, well … Mission Accomplished.
One cannot help but ended with a huge sense of disappointment when we see world leaders of economic organizations printing nonsensical amounts of money without a solid counterpart in goods and services, and months latter when they have no other option than to say that inflation it’s not temporary, they claim that the impact caught them by surprise.
Now what we have in front of us is a huge mess. Entire generations are going to witness how their hard-earned retirement money are going to be flushed down the drain thanks to the crippling inflation.
The book (the same that told them not to print more money that is required), also says that the quickest way to combat inflation is to raise the interest rate types. If they think that doing that is not going to cause a bigger problem than the one we have in front of us, I don’t think they are competent to hold office.
To add insult to injury, the serious problems in the supply chain caused by the larger concentration of production in one nation as a result of years of neglect and low wages in the industry, making that nobody wants to work on it will simply add more fuel (no pun intended) to the issue.
Here is where the title of my post starts to make sense.
We can’t fight the battles of the future with the weapons of the past.
How smart investors can protect themselves and their portfolios against the Inflation? Well with asset classes that provide such protection.
Definitely, the same old same old types are not going to make the cut. The current fixed income portfolios are going to lose value beyond belief, the shares in companies are going to take a hit as well because the net present value is going to decrease as well due to lower discounted cash flows thanks to higher discount rates.
Real Estate? Only if you have all the required liquidity to make the investment, or have the negotiation power to force the bank to give you a favorable rate fixed for five years or more.
Fortunately, we do have a new kind of weapon at our disposal. A new asset class with a volatility capable of eclipsing inflationary effects in a short period of time.
I am talking about Crypto Assets.
Even with the high correlations that we are experiencing with the shares markets, the crypto assets have the capacity of providing asset managers with an infrastructure that if is managed properly, can quarantine the value of the principal over the time and in parallel offer high inflation and risk adjusted returns.
And last but not least, I would like to briefly mention Tokenized Real Estate.
Liquidity boosted Real Property via the subdivision of value into smaller and faster to trade pieces via a well thought tokenization strategy.
Blockchain based financial products are the new and very effective weapon to fight the problems caused by the old school and traditional thinkers.
Get in touch and let’s kick start the discussion on how an active managed portfolio can provide you with Alpha.