Inflation: What does 5% mean?

Inflation is back. Ringing in at a blazing 5% – its highest since the summer of 2008. 

Wages are up, goods are more expensive, and markets have responded dramatically.

… Just kidding, they’ve all but ignored inflation, brushing it off as a temporary distraction. 

Bonds, equities, and the FED are responding in kind, parroting the narrative that “inflation is transitory, short-lived and soon to subside.”

In the next two minutes I’m going to explain:

  1. Why this is wrong;

  2. Why inflation will be part of your life for the foreseeable future; and

  3. What you can do about it.

Why “Should” inflation subside?

From May 2019 to May 2020 Inflation was 1.7%

From May 2020 to May 2021 Inflation was 4.9%

Despite the steep rise over the past year, the annualized rate of inflation over a two-year period, May 2019 to May 2021 is only 2.5%. The Fed has been targeting 2% inflation for years, so coming in at 2.5% doesn’t sound too bad.

And, this is the point many commentators are making: The last year’s inflation is an anomalous blip brought on by a pandemic that is coming to an end. It’s back to business as usual. 

The problem is you can’t put the toothpaste back in the tube…

Why Inflation Is Here to Stay

McDonald’s, Coke, Pepsi, Chipotle.

It’s going to get harder to shove junk food down your throat because they’re ALL raising prices, primarily to offset wage increases and rising commodity prices.  

And we’re just getting started. 

Inflation will likely peak over the coming months, but that doesn’t mean we should expect it to abate. 

A sustained inflation rate between 2.5% and 3.5% is much higher than we’ve experienced over the past decade. Data-driven experts are touting 4% inflation by the end of the year according to the models.

Buy Baby Buy!

This is the investment equivalent of playing T-Ball.

It’s right there! 

In front of you! 

A generational buying opportunity and all we have to do is swing. 

Energy and metals stocks are trading at a +70% discount to the S&P 500.

Let me repeat: +70% DISCOUNT TO THE S&P 500.

Put differently: IT’S THE BIGGEST DISCOUNT WE’VE EVER SEEN. 

History has repeatedly shown us that during inflationary times you want to own energy and metals. Look at the stats below. Inflation is in green, energy and metals returns in blue, and the S&P 500 returns in tan. 

When inflation is above 2% energy/metals consistently outperform the S&P 500.

Today now the entire financial world is dismissing the current 5% inflation number as a one-off, we are not. 

The data is clear: getting long gold is a no-brainer. 

Look at the chart below.

Real yields are in black. (Reminder: Real Yield = Interest Rate – Inflation)

Yellow is annualized gold price. 

The takeaway is simple, gold prices should be surging higher very soon. By the looks of it, at least 20-40% higher.

How Are We Playing It?

I, alongside many Ri Members, invested in a gold deal last week that is currently trading 70% higher than my purchase price. 

The next Ri Deal goes live this week. It’s cheap, pre-IPO, and located in the most stable and prolific gold jurisdiction on the planet: Nevada.

If you’re an accredited investor and wish to invest alongside Resource Insider Members, send us an email. We have a few membership slots available.