Larry is asking Shanna what stocks are best if inflation is really bad. And I guess just as a kind of a follow-up to that, what are some of the best ways to invest that offer protection against inflation, Shanna? Yeah. Well, of course, our partner strategy is sort of our secret sauce here. So to find out the exact stocks that we like, you’ll have to become a partner and take a look at the buy list because we think inflation is going to be a problem going forward. We formulate a lot of our picks with that in mind and how to stay ahead of inflation. So to answer the question specifically, you have to be a partner to check out our buy list. But in general, the asset classes that have traditionally thrived during times of high inflation include gold, although gold is not something that is on our actual buy list at the time. There are stocks related to that which capitalize on that trend, real estate—we have real estate investment trusts on our buy list right now. We have other companies that are homebuilders and deal with the land needed to build homes. And then there are commodities, think food and energy. We have food companies on our list that we think are going to do a good job keeping up with inflation and staying ahead and, of course, energy companies as well. There are other trends that support some of our picks as well, but inflation is certainly a theme that we talk about every week. To stay ahead of inflation, you have to invest in assets that make more than inflation. It’s just that simple. Stocks, if you look at a very long-term historical average, have averaged a 9% return over a long period of time. Bonds, on the other hand, or fixed-income investments, have averaged a 5% return over the long run—not really close to that 5% number in the last couple of decades until just recently. But for the most part, nobody is 100% in equities and nobody is 100% in bonds. Most people are somewhere in the middle because we believe in diversification. So let’s say you adopt a strategy. It’s not necessarily our strategy, but let’s say you adopt a 60-40 portfolio: 60% in equities, 40% in fixed income. If you use those two long-term numbers to get a weighted average, your expectation for a balanced portfolio would be an average return of around 7.4%. So what does inflation look like? Over the last 20 years, inflation has averaged 2.5%. Now, over the last five years, inflation has averaged 4%. Are we going back to the Fed’s target of 2%? I don’t think so. The Fed seems to think they’ve conquered inflation, but if you look at what’s really happening in the economy, you’ll see our government can’t manage their lunch money—can’t balance a budget. I think the most recent number for the budget this year is a $1.8 trillion deficit. That’s not a slight miss; it’s a bad miss. In corporate America, you’d be fired. In fact, you’d probably be banned from the industry. So over the last five years, with inflation averaging 4%, if you’ve had a 60-40 portfolio with a weighted average of 7.4%, your real rate of return in the last five years has declined from 5% to 3.5%. It’s not just about inflation. For people who make it into retirement and are using their portfolios to supplement retirement income, let’s assume they’re taking a 4% drawdown. If you’re in that situation, inflation takes 4%, you’re taking another 4%, you have to get an 8% rate of return to stay ahead of inflation. So what do you do? You either have to draw down your principal and hope you have enough to last the rest of your life, or you have to try to get a higher rate of return, and that involves taking more risk. So it’s a tough situation that retirees are put in these days. Shanna, that’s really helpful there. How about this: Is there any hope that inflation might die down in the near future, or is it time for us to accept it’s a normal part of financial life? Like you say, taxes are always going to be there, and they’re probably going to be higher in the future than they are now. Do we just assume inflation is going to keep building? Well, if you listen to the Fed, you might be hopeful and think we’re going to reach that 2% target again soon, but I’m not there. Not unless Congress and we the people get ahold of Congress and convince them they can no longer spend money they don’t have. They have to figure out how to balance a budget, do some hard things, and start being fiscally responsible. But neither Trump nor Kamala are fiscal conservatives. If you listen to the campaign rhetoric right now, they’re just trying to outdo each other in how much money they can give away. No taxes on tips, no taxes on Social Security, giving tax credits for this, giving away that; they’re going to build three million homes? That sounds really expensive. The only person I’ve heard talking about reducing is Trump, who said he’d like to give Elon Musk the job of cutting out some government fat. I hope he wins, personally—this is me speaking, not the ministry—but I hope we see the policies of a Trump administration come to fruition. But I would add, hire Elon, bring him in. Let him bring the kitchen sink, just like he did on his first day at Twitter and figure out how to turn the ship around. Definitely. And then just the last question, Shanna: How does our strategy offer partners the opportunity for protection against inflation? Well, as I said in the first part of the question, we look at the assets that have traditionally done well during times of high inflation. We’re incorporating that into our strategy. We look at other long-term trends. Agree with it or not, AI is a trend that’s going to unfold. So we’re looking in and around companies, not just the Nvidia of the world; there’s more to AI than just Nvidia. If you look through our list and read the descriptions of the companies, you’ll see if you know what AI is and what it’s going to take—all the energy it’s going to take—you’ll get an idea of where we’re going. We try to create asset allocation models that stay ahead of your distributions, taxes, and inflation. That’s why we don’t have a 60-40 portfolio. I wish we could minimize risk in that way, but the real risk now is inflation.
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