 Good day fellow investors. It's very likely, even if nobody thinks about that, that there will be higher and higher inflation in the coming years and decades, because governments are going to print more and more money. And we have discussed in the last news how even if we don't see that much inflation in certain places, from financial assets, from healthcare, from education, there is a lot of inflation and much more than we would like. So inflation is a certainty in life. Governments have the goal to have an inflation rate from 2% to 4% so that it makes easier for them to repay that future obligations are much more easier. And it stimulates spending as if you know that your money is going to lose value, you are stimulated to spend it and invest it. So that's the theory. But let's now see how can we take advantage of the theory or at least protect ourselves from that, what's going on and will inevitably hit us. If you look at inflation, it has been really, really low over the past 10 years especially. But historically, inflation goes up and down. There are periods with low inflation, periods with high inflation and you have to be careful not to get caught in high inflation unprepared. Something very interesting from an article written by Professor Emeritus Edward McQuarrie from the Santa Clara University is the difference in stock market returns with and without inflation. So we have the blue line, which is the normal stock market return since 1927 and then the red line, which is adjusted for inflation. 10,000 investing in stocks at the peak of the 1920s bull market would have amounted to 9.3 million in 2009. However, if we omit inflation benefits and reinvested dividends, the return would be just 33,000. Without inflation and dividends, the compounded investing return declines from 9% to 1.5% per year. As the 1920s average dividend yield has been around 4%, 3.5% per year in returns is thanks to inflation. Therefore, just because we are in a period of low inflation, it doesn't mean we don't have to think about inflation, especially as monetary policies are tending towards monetary policy free or modern monetary policy. This chart shows it even better. If we look at the impact of inflation from 1929 to 2009, it is staggering. Inflation adjusted, SAP 500 returns are much, much lower if we look at inflation. So the SAP 500 inflation adjusted would be at 445 points in 1929 and then 885 points in 2009. So over 80 years, the SAP has just doubled at the bottom of the crisis. Now it's much better, but we are at the top of the market. It has quadrupled even inflation adjusted over the last, what, 10 years. So we might expect not so positive returns, inflation adjusted returns in the futures. On dividends, yes, some say on top of inflation you have dividends. Those were on average 4% over the last 150 years. However, now those are much, much lower. So not even the dividend yield will compensate for what might happen from stocks. Given that inflation is inevitable, at least I think so, and we have to prepare for it, we will discuss how there is inflation, the government just doesn't tell you, the dangers of inflation, how to invest with inflation and later current tricks for long-term gains on inflation. In the last stock market news, I borrowed a nice chart from Peter Barklin how there has been some significant inflation over the last years, especially in hospital services, college, tuition, textbooks, childcare, Medicare, etc. and not that much in toys, televisions, computer software and all those market-free things. And given that there is more debt, there will be more inflation, so let's see what are the dangers of inflation. The dangers of inflation are that it spikes fastly, that there is usually inflation is not linear, so it's low, low, low, low, low and then it spikes. When that happens, businesses cannot transfer price increases to customers that fast and a lot of businesses might get in trouble and then you have stock inflation, then the governments run sin to print more money to cover for the deficits, the debt and then you have a spiral that might or might not happen, but it is a big risk. If we look at inflation and compare it to the five-year treasury yield, we see that over the last 10, 15 years the actual real return on the five-year treasury has been zero or even negative when the inflation rate was above the yield. So we have a very interesting situation with low inflation and low yields. The best way to think about long-term inflationary protection because it's unlikely that this will go lower for longer term, especially if more money is printed. I'm just going to give you three simple steps that anybody can do to protect themselves over the long term from inflation. If currencies are going to lose value, one way is a mortgage with a fixed interest rate. You are practically short currencies when you have a mortgage because you get your money now, you buy something like a house, which should appreciate when it comes to inflation and your payments are equal for the next 30 years. So if the dollar loses 56% in value over the last 20 years, if that happens again, then your payment after 20 years will be 50% lower than now in real terms. Plus, if you're renting, your rent will go up alongside inflation but your fixed mortgage payment will stay fixed. So this is one of those decisions in life. You make it once, you change houses or so. But when you have such a thing, you are practically diversified because you are short the currency. The second thing is avoid bonds for the long term, especially now because if you look at the long-term interest yield on the 30-year treasury, it seems that, okay, it might go lower, that's always a speculation but given the high debt, it might also go much, much higher, especially if we see inflation and then there would be really a big loss of value like it was the case for bonds up to the 1980s. And then number three, don't get fooled by non-productive business assets like gold, other precious metals or cryptocurrencies. That must be part of a special strategy if you're going into but it's better to have productive assets over the long term because you get dividends, earnings, growth and everything. Which are the things you don't get in gold? Plus, if you invest in gold or you hold gold, you have to be a speculator and rebalance constantly depending on what the market tells you which is something not many can do. At least I prefer investing to speculate. If we look at inflation-adjusted gold prices on a log scale in this case, you can see huge volatility but not that much real value creation and there have been decades where the price of gold would just go down-down and down despite inflation. The key here is, okay, if you hold gold, you have to buy it when nobody wants it and sell it when everybody is crazy about it. It involves timing, market timing, you might do the wrong thing at the wrong time. You might buy at the wrong time, sell at the wrong time. It doesn't produce anything so you might get bored after five years and this is something you have to keep in mind when it comes to investing in such, let's say, inflation-protective assets that don't have a yield. On the contrary, if we look at productive assets, Berkshire Hathaway chart, from the 1980s, this is always the best production. If you have a great business, if you allocate capital smartly and you buy the bargains out there, the value investment bargains, this is, I really think, to being aggressive, going for the high returns, low risk because there is a margin of safety, but high volatility because it's the stock market, I think it is the best protection over the long-term. So conclusion, don't invest in currencies, be careful of fixed yielding long-term assets. Those could really kill you if you have two years of inflation at 8%. Invest in businesses and be careful on the non-producing assets. And of course, look for a mortgage and see how it fits your personal long-term finances and your lifestyle. Thank you for watching, I'll be seeing you in the next video.