How can we beat inflation?
For sheer entertainment purposes, I wanted to present my newest series: Gym Rat Logic. Please don't take this as financial advice! Taking financial advice from a gym rat in Weatherford, TX is most likely folly.
However, you may find this information interesting and who knows you might learn a thing or two from a lifelong gym rat. We are going to take real-world problems and mix it with a little barbell math, some curls, and who knows maybe this potent combination could lead to wisdom, or possibly logic. If not, no harm, no foul.
This leads us to the one of the hottest topics of all right now: Inflation. Who's with me? Let's roll!
What is inflation and how does it impact you?
Well, I think there are lots of types of inflation. If you eat too many hamburgers, too often you could very well experience inflation in your belt line. If a dude doubles his bench he will see inflation in his pec muscles. Wow, inflation really is all around! Wait what? That's the gym rat talking. That's not the big issue everyone is talking about?
You see the "inflation" everyone is roaring about has to do with finances. Basically, in a nutshell, a currency can and will erode in value year over year (YoY) until it is basically worthless.
An example:
A can of soda in 1950 was roughly $0.05.
Today same soda is $1.00 minimum.
Where did the 95 cents go? To the tooth fairy's cousin?
It's like when you do a heavy squat cycle and get your squat up to a respectable number and you are feeling good about yourself. Then you get distracted and skip some workouts and say where did the 95 pounds go? Inflation equals weakness.
A gym rat should welcome inflation because we could all twist our numbers for the better. Even Uncle Instagram might be impressed. You can bench 300 pounds sprinkle in a little inflation on poundages and whammy! Now you bench 505 in a cutoff T-shirt.
So what gives? If money is going to pot what would a wise gym rat do?
Sets of 3-5 of 5 to 15 reps would be step one on compound movements like the Squat/Leg Press, Bench variations, and Deadlift variations. Can a stronger power clean snuff out inflation? Ask the all-knowing economists. Sounds viable to me.
Possible Inflation Outcomes
Outcome #1: ANARCHY (Least likely to happen)
In this outcome, currency is more worthless than fire ants and grass burrs in the summer. People take to the streets fighting for survival. The doomsday people rejoice and gloat: I TOLD YOU SO! People form into so-called protected mobs, but in reality it's all dog-eat-dog. We get to find out if the "most people are good" claim is true. Buckle up! I have a Certified Gym Rat answer, but it's a doozy. Stay tuned.
Outcome #2: HIGH PRICE TAGS
Everything rises in value faster than the normal 3% per year continually for the long term. Ouch! Your normal expenses grow silently. People who partied a little too hard and didn't plan for retirement start pondering canned food flavors. Monday: A little alpo chicken flavor, Tuesday: Try a little meow mix beef and see what happens. We all know beef builds! In this scenario, the defense is easy as you will see.
Outcome #3: THE NEW NORMAL (Most likely to happen)
The good news here is I am not going to spray you with a laundry list of the latest conspiracy theories. It's always a good idea to think in probabilities based on rational logic and not listen to misleading fairy tales.
A LOT of strange factors have played into our society and financial system the past 5 years. A pension crisis, debt crisis, labor crisis, obesity crisis, liquidity concerns, geo-political tensions, a new war, weak biceps, supply chain issues, and my dog Soko passed away (not to mention the Special Kitty fiasco).
I like the word "crisis" as you can tell. It moves people. Am I missing anything? I feel there is another crisis I am forgetting. I am sure of it, but we will move on for now. I am convinced if you want a job on the BOO tube broadcasting the news master the following words: crisis, controversy, and unprecedented.
All of these factors, can wreck havoc on inflation from so many angles. It's no wonder food, gas, and all other prices have gone up substantially. Will it get worse and worse forever and ever? It's possible, but not likely. "Transitory," "reversion to the mean," and "normalize" come to mind.
If I had to bet, which I do not gamble or drink alcohol, I would say that the most probable outcome is that inflation will normalize once people around the globe can live more normal lives after the pandemic. Bingo! The forgotten crisis.
With all that said, how do we prepare and/or invest for inflation?
Inflation is caused by a dislocation in supply and demand. Basically, too many buyers with money (household debt mainly: https://www.reuters.com/business/us-household-debt-increased-by-1-trillion-2021-most-since-2007-2022-02-08/ ) coupled with low inventory levels. This potent high demand / low inventory combo leads to much higher prices due to increased competition amongst buyers. The opposite happens with regularity (2008) when sellers have to compete by radically lowering prices to hopefully drag in a buyer.
Our powers to be are taming inflation by raising interest rates. This makes sense. People use interest-bearing loans from banks to buy big ticket items like homes, new cars, financial assets (look at current margin debt levels) and fancy furniture. You don't usually use an interest-bearing loan to buy a carton of eggs and tuna to grow muscle.
Rising interest rates work like gravity on asset prices and bring them back down. This not the gym rat logic. I am paraphrasing Warren Buffett one of the richest people on the planet.
Finally.. The Best Investment For Inflation
Lock the door and let me tell you the best investment for all scenarios and outcomes for these bumpy inflationary times...
The magical investment for inflation sure to soar is ticker symbol: YOU
I should start selling newsletters! I kid.
Now before you rush out and buy 1,000 shares of Clear Secure, Inc (Their ticker symbol is "YOU" oddly enough) I am talking about investing in yourself.
Invest in yourself by getting closer to God, taking a class, learning a new skill, advancing in your career, starting a new side business, or the like. If stuff costs more, why not improve your earning power along with it? In true gym rat fashion, I would be foolish to not mention investing heavily in your health and happiness for inflation. Inflation, like cockroaches, is here to stay. Have you ever danced with a roach?
A healthy, strong body coupled with an intelligent mind will thrive in all 3 outcomes, even anarchy. I have to quote Mr. Rippetoe from Wichita Falls of all places...
"Strong people are harder to kill than weak people and more useful in general."
That sums it up quite well. Go all-in and double down if it drops on yourself. Eat good food, smile a lot, lift big weights, laugh a lot, work hard, get fitter than ever, learn new skills, read the BBB blog, and make time for your family and your favorite hobbies.
Give inflation a big hug and let him in on the bad news...
Sorry Inflation, you cannot take away my faith, health and happiness.
-Beau
留言