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As price levels continue to soar, the Fed no longer uses the term “transient” to describe inflation.
U.S. consumer prices rose 8.6% in May from a year earlier, the fastest pace since December 1981. That could give the Fed even more reason to keep raising rates — which has cast a huge shadow over the stock market.
It’s a vicious cycle that has been criticized by many investment veterans. Rich Dad, Poor Dad author Robert Kiyosaki is one of the latest experts to sound the alarm.
“When inflation rises, we’re going to wipe out 50 percent of the U.S. population,” he told Stansberry Research earlier this year.
Let’s take a closer look at what Kiyosaki means.
Kiyosaki isn’t entirely happy with the state of the U.S. economy.
“The U.S. has stopped making products, and we’re creating bubbles,” he said, adding that we now have bubbles in the housing market, the stock market, and the bond market.
The author also criticized President Joe Biden’s decision to halt the Keystone XL pipeline, which he believes is the main reason energy prices are so high.
This doesn’t bode well for the average Joe.
“The average American doesn’t have $1,000,” Kiyosaki said. A recent survey of bank rates showed that most Americans don’t have enough money to cover an unexpected $1,000 expense.
It also brings trouble for those who want to enjoy their golden years. When the bubble bursts, the stock market crashes, Kiyosaki said. So, cheers to those who rely on 401(k) plans.
“We have no superannuation, our superannuation is bankrupt.”
It’s time to protect yourself
Given his grim outlook, it’s no surprise that Kiyosaki is a fan of safe-haven assets like gold and silver. Precious metals cannot be printed out of thin air like fiat currencies, and they have helped investors maintain their purchasing power for centuries.
Gold prices are up about 8% year to date. Russia’s invasion of Ukraine has given investors a new reason to check gold.
While Kiyosaki owns gold — he first bought it in 1972 — he prefers silver in today’s economic climate.
In a tweet in March, Kiyosaki revealed that he had purchased 2,500 American Silver Eagle Gold coins and made a bullish case for doing so.
“Gold has risen. Bitcoin is still too high,” the tweet said. “Silver is 50% below its all-time high. Silver is an industrial metal like the dollar.”
Bubbles tend to burst — eventually. When they did, many saw their fortunes take a major hit. But the sharp drop also created an opportunity for those willing to buy the dip.
“The great thing about bubbles is that when they burst, everything is on sale,” Kiyosaki said.
During the 2008 financial crisis, the author began to “buy a house at a low price”. How much real estate prices have risen since then, it’s a drastic move to say the least.
fine art as an investment
Stocks can be volatile, cryptocurrencies can swing wildly on either side, and even gold is not immune to market ups and downs.
That’s why if you’re looking for the ultimate hedge, it might be worth checking out a real but overlooked asset: fine art.
Contemporary art has outperformed the S&P 500 by 174% over the past 25 years, according to the Citi Global Art Market Chart.
It’s becoming a popular way to diversify because it’s a real physical asset with little correlation to the stock market.
On a scale of -1 to +1, where 0 represents no connection at all, Citi found a correlation between contemporary art and the S&P 500 of just 0.12 over the past 25 years.
Earlier this year, Michael Harnett, head of investment at Bank of America, listed art as an important way to outperform the market over the next decade — largely because of the asset’s track record as an inflation hedge.
The likes of Banksy and Andy Warhol investing in art were once only an option for the super-rich. But with a new investment platform, you can invest in iconic art like Jeff Bezos and Bill Gates.
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