 Good day, fellow investors. Hope you're doing great today. I had better days because I have a flu, so you won't be seeing me. But nevertheless, when you're sick, what's best to do? It's to take a nice book and go through it. So we're continuing with Graham's Intelligent Investor, Chapter 2, Inflation and the Investor. Let's immediately start. The book has been written at least the last edition in 1971, when inflation was a pretty big deal and especially in the following 10 years, from 1971 till 1982. That is why it's so interesting to read through the book now, because it shows how the best investors, Graham in this case, were thinking about it back then and underestimating what actually happened. When the book was written, inflation was at 5.8%, which is significant and many considered bond as terrible investments, where the only option were stocks. However, as Graham often points out, the Dow at 900 was crazy for him and it is exactly what happened later that shows how precious he was. The Dow didn't go anywhere between 1965, when it reached 900-1000 points the first time, till 1982-83. Also, when the book was written, it was still in the same limbo period. That is because not of inflation, not of anything else, because valuations were very very stretched. Back to inflation, Graham's looks at what was the case with inflation in the past and we can see on the table that there were periods with high inflation and long periods with low inflation. This doesn't tell us anything about what will happen, so we have to be prepared for anything that can happen. Something interesting that Graham writes and is something to keep in mind. I quote, There are some reasons to believe that the federal policies will be more effective in the future than in recent years. This statement shows how weak the Fed is and how things can get out of control and we should keep that always in mind in order to sleep well. This leads us to the question, are stocks the only and best inflation protection? Graham's answer is a definitive no, where he says that stocks might do better than in the past but might also do worse. Graham tells us that there is no correlation between stocks and inflation because from 1965 to 1917 cumulative inflation was 22% while stock prices and stock earnings had declined in the same period. When he digs deeper, he finds that there is no correlation between inflation and higher earnings. Something very interesting that he mentions in the book, we are talking 1971 but can be applied to the situation now is that from 1950 to 1969 corporate debt increased fivefold while corporate earnings only doubled. With higher interest rates and inflation, the debt becomes a bigger burden. Needless to say in the last 10 years US corporate debt doubled while SAP 500 earnings didn't increase at all. I will conclude with the most important thing that I got from chapter 2 which are the following two questions. What will happen over the long term future say 25 years and what will happen to the investor both financially and psychologically over the short or intermediate periods save five years or less. And here Graham says something extremely important about investors. I quote his frame of mind, his hopes and apprehensions, his satisfaction or disconnect with what he has done above all his decisions what to do next are all determined not in retrospect of a lifetime of investment but rather by his experience from year to year. Here Graham tells us to think about how we invest, are we influenced by what happened last year or do we take a 25 year long picture. My message is that investors should take a 25 year long picture which means that we might see much higher inflation in the future which means that we should protect ourselves and this will be the topic of tomorrow's video how am I protected how I protect myself from inflation so that I can sleep well. Thank you for listening. Looking forward to a comments and I'll see you in the next video.