 Good day, fellow investors. Now, for the past eight years, inflation has been very, very low and nobody talks about inflation now. Nobody even considers inflation when calculating investing returns or any other thing. However, even if inflation is low, it has an impact on our investments and our returns and should be considered. Further, it is very important to see what will happen with inflation in the next five, ten years. I'm sure it won't be the same as it was the case in the last eight years. In this video, we'll explain more about inflation through analyzing the situation in the world now, seeing what's going on and seeing what will and what can happen in order to find the best way to position ourselves to how inflation might affect the financial world as we know it and as it is now. As we all know, in the past eight years, inflation has been volatile but never extreme. It has been even negative in Japan for a long period of time. And in Europe and in the US, it has been, let's say, around 2%. Mostly below 2% with the goal of central banks to reach 2%, which we have been getting close to in the last few months. So the situation is improving on that field. Inflation in China is also close to 2% and has been moving in line with the other countries that we have just mentioned. However, there is one big difference with China. The Chinese interest rate is at 4%, which is double the inflation rate. However, the Fed's interest rate is 1.25%, below the inflation rate, ECB zero, below inflation rate. Bank of Japan is also below inflation rate. So that's a big, big difference. Nevertheless, if we look at the global inflation map, we can see that the US, Europe, China, Australia have been having very, very low inflation. Russia, Africa, South America have been seeing higher inflation rates. This means that the currencies of these developed countries are keeping their strength and the supply coming from all around the world with high investments coming from low interest rates, a lot of liquidity that keep prices low and thus inflation low. And as you have the capital you can buy at low prices, thus inflation is low. In addition, unemployment in Europe was very high, is still high, unemployment in the US 5, 8, 7 years ago was very, very high. Now it's getting lower, so there was no real pressure on inflation. But things are about to change. First, let's look at the composition of the consumer price index, which is used to measure inflation. In the US 2016, 8.6% is for food and beverages, 6.7% energy, 30% housing and 30% for other services. So, if we take a look at the long-term food price index, we can see that it spiked in the 2000s, then it was volatile, dropped significantly in the last 7 years and now in the last year, year and a half has started to slowly recover. This is very important, higher food prices, higher inflation. Similar situation has been in energy, high commodity prices have led to extreme investments that have created oversupply and that have lowered the energy index. Lower energy, lower costs, lower inflation. That situation has also been changing slowly in the last year. Further, one of the biggest factors when calculating inflation, housing, has also been on a very positive trend for a while now. However, you have to also calculate rents in there. House prices might have gone up, but it is also important to see how rents are going up. And rents haven't been going up that fast as home prices, because rents have been going up alongside inflation. As for the services part of inflation, where services use labor, we can see that the unemployment rate has been going nothing but down. At some point, this unemployment rate will hit the natural unemployment rate, above which wages have to significantly increase, which should put more pressure on the services part of the inflation measurement. Thus, again, everything looks like we will see higher inflation somewhere, especially if things continue as is. Another thing that I see having a big impact on inflation over the long term, short-term volatility is always normal. High investments, as I said, led to oversupply in raw materials, commodities, oil and a lot of other things all over the world. But sooner or later, there will be no profits there, low profits, no investments. Thus, there will be under supply, which will lead to higher prices. And then, when oil goes up, when commodities go up, everything becomes more expensive, because you use those things to make other products. Similarly, as there is more demand, more demand for services, also wages go up, real estate prices go up, a long inflation and so on. However, there is one trend that's very, very important, and I have mentioned it already a few times here. The global middle class is about to explode thanks to the economic growth in China, India and all the Asian countries. And that will add a huge amount of demand on the global economy. So, I think that inflation in the next decade and significant inflation is unavoidable. The middle class will be spending double of what is spending now by 2040. 2040 is not that far away. It's just 14 years. And that spending will make one third of the global economy. People will be buying whatever you need to have a middle class life. And that will create huge pressure on commodities, oil, cars, products, whatever, whatever is in limited supply will see higher prices. Also, food, if they don't invent a way to produce more and more and more by using less resources. So, that's also a very interesting story. So, the impact on our portfolios. The Fed has started slowly increasing interest rates to prevent higher inflation and to prepare itself for what is coming. The ECB, they are still buying bonds, negative interest rates, Bank of Japan similarly, both Europe and Japan are doomed. So, the US will save itself because it's working ahead of what will come. The ECB, nobody would like to make turmoil there in Europe. So, as long as things go well, don't touch it. That's a terrible, terrible attitude. So, I'm sorry for Europe. Nevertheless, what has been going on? The Fed has been raising interest rates, which means the dollar is getting stronger. And if the Fed continues to raise interest rates, there is a possibility that the dollar gets even stronger and stronger. So, that's one way of looking at things, especially if there will be turmoil in Europe. I see the dollar much stronger than the euro over the next 5-10 years. The US has also its own issues. So, I'm not saying that the dollar won't have its issues, but I see it as a stronger currency than the euro. Now, what worries me a lot is that on the recent International Bank Examiner held in Washington back in October, Janet Yellen, the Fed chairwoman, has mentioned a new normal. She said that while asset valuations today are high in historical terms, that may reflect investors' expectations of a new normal, of lower interest rates for the foreseeable future than in the earlier decades. So, when somebody mentions a new normal, 1929, we know what happened, 1990s, we know what happened with .com bubble. So, when somebody mentions a new normal, I get scared. And she just did that. So, there won't be a new normal, because there never has been a new normal in economics. Things always move in unforeseen ways. So, if you look at investing for the long term, and you have the option to choose between a stock that can transfer higher input prices to the customers and a stock that can't do that because it is in high competition, I would now choose the stock that can transfer prices. Further, if you have a stock with strong book values and a stock that has no book value and a lot of depth, I would again choose the one with book values, because that book value, tangible book value, will appreciate alongside inflation. So, really start thinking about just positioning yourself a little bit towards being protected from inflation, because what's going on, we have seen higher inflation rates, higher input costs, higher commodity prices, huge demand coming from Asia that might ignite high inflation over the next decade. Something similar to what we have seen in 2006-2007 and the first Asian boom. So, this is about portfolio positioning, not jumping into gold or something like that. Gold, as I mentioned, always is just a hedge. So, think about portfolio positioning, how to lower your risk and increase your returns. Thank you for watching, looking forward to your comments, I'm sure they will be very interesting and I'll see you in the next video.