Let's talk about inflation. Did you know there are two types? Find out what they are and the best ways to protect yourself from inflation in this week's Arista Advice.
Hello, welcome to Arista Advice! Question of the week is: "Paul, talk to me about inflation." Great question.
There's two types of inflation. There is pull inflation, and that occurs when there's not enough supply for the demand. So producers raise the price for the goods, which drives the value of the dollar down.
The second one is push inflation, and this occurs when there is a shortage in supply, for instance KN95 masks March and April of last year. This causes the producer to raise the price for goods, which also drives the value of the dollar down.
We also are hearing a lot about what's causing inflation - the expansion of the money supply, the Federal Reserve printing stimulus money to send out to taxpayers and businesses through lots of different credit facilities and programs.
Do you know what today's inflation is? It's 1.4. Do you know what it was 12 months ago? It was 2.4. So just as the government has been creating stimulus and adjusting monetary and fiscal policies, inflation has gone half, cut in half in the last 12 months.
Where was inflation over 3 years ago? It was 2.07, and where was it 5 years ago? 1.37, almost where we are today in the last 5 years.
There's two things that keep me up at night. I hate to say it, but these are the two things: inflation and our clients' longevity. They're living longer than expected. They are fighting the health, technology, and health revolution that's occurring out there by helping people live longer.
If you had $1,000 today, in 10 years it's only worth $781. In 15 years, it's worth $696, and 25 years from now, it's almost cut in half at $539. Inflation is real. Understand that there's pull and push inflation, and when you understand pull and push inflation and supply and demand, and also the importance of staying diversified and owning equities, that is the best hedge to inflation is owning equities.
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