Surﬁng the inﬂation tsunamiIt’s coming! Will you run, hide or learn to surf?
David Campbell Former high school band director Self-made multi-millionaire Professional investor Real estate developer Real estate broker Real estate & business advisor Financial mentorOver $500 million of real estate experience Houses, condo-conversion, multi-family, winery, Resort, ofﬁce, retail, California, Texas, North Carolina, Mexico, and Belize
What is Inﬂation and Quantitative Easing? Inﬂation is an increase in price as a result of the increase in the supply of currency and/ or the increase in the velocity of money. Quantitative easing is an increase in the supply of currency while attempting to keep prices low by reducing velocity.
THE PRESIDENTS AMERICAN RECOVERY AND REINVESTMENT PLAN ly ! years. p p Doubling the production of alternative energy in the next three s u e y Modernizing more than 75% of federal buildings and improve the energy efficiency of two million American homes, saving n consumers and taxpayers billions on our energy bills. o e m Making the immediate investments necessary to ensure that within ﬁve years, all of America’s medical records are computerized. a s re Equipping tens of thousands of schools, community colleges, and public universities with 21st century classrooms, labs, and In c libraries. #1 Expanding broadband across America, so that a small business in a rural town can connect and compete with their counterparts ob anywhere in the world.J Investing in the science, research, and technology that will lead to new medical breakthroughs, new discoveries, and entire new industries.
WHAT HAS INFLATION BEEN DOING IN THE UNITED STATES OVER 100 YEARS? WWI WWII VIETNAM IRAQ
FEBRUARY 21, 2009South Carolina Governor, Mark Sanford, thehead of the Republican GovernorsAssociation... fears that excessivegovernment borrowing to fund the stimuluscould lead to an inflationary spiral to rivalWeimar Germanys.
John Hathaway, Portfolio Manager and Senior Managing Director the Tocqueville Funds “The unstated objective of governmenteconomic stimulus would seem to be currencydevaluation. Success will be defined as inflationthat alleviates debt burdens to a degreesufficient to rekindle the appetite for risk in theprivate sector. Since nobody knows in advancehow much inflation is required, it is more thanlikely that policy makers will overshoot theirobjective. The results could well be ofWeimar proportions.”
N1923 TIO NI NF LA HIT O FI MA NY RA T E GE R ON THTHE R IMA 0% PER M WE 0 DAYS ,25 0,0 WO 3 00 YT EV ER BL ED SD OUPR ICE
Who beneﬁts from inﬂation? Borrowers Trade Deﬁcit Governments Deﬁcit Spending Governments Liberal Governments Arbitrage Lenders - Institutional Banks
Government advantages to inﬂationhidden form of taxation100% tax on interest income OR inﬂation?!?!?reduces real cost of government’s debtcreates short term / misguided feeling of prosperitygives government unlimited discretionary spending
Government disadvantages to deﬂationincreases real cost of government’s debtif it will cheaper to buy next month, no one will buygovernment spending power is limitedratio of government debt to GDP goes upprohibitively
ACTUAL INTEREST RATE - INFLATION RATETRUE COST OF BORROWING
INTEREST RATE FOR 5% BORROWERS-10% - INFLATION RATE-5% TRUE COST OF BORROWINGBORROWING TO MAKE A PROFIT ?!?!?!?
Who Loses from Inﬂation?SaversWorkersIncome Tax Avoiders
Consumer Price Index is a BIG LIE 3% CPI (inﬂation)??
How do you and your family protect and maybe proﬁt from Inﬂation?
THE EFFECTS OF INFLATION ON SAVINGS AND INVESTMENTSACTUAL EARNINGS RATE - INFLATION RATE TRUE EARNINGS RATE
0.60%HOW IS THAT RISK FREE? ACTUAL EARNINGS RATE 0.6% EARNINGS - INFLATION RATE - 3% INFLATION TRUE EARNINGS RATE 2.40% LOSS!!!
What if you took RATES ARE LOW BECAUSE OF SUBSIDIES NOT BECAUSE OF MARKET CONDITIONSout a 30 year ﬁxedmortgage in 2009? FORECAST FOR INFLATION IS VERY HIGH RATE OF INFLATION
Arbitrage into Cash Flow Vehicles Borrow at 5-9% to invest at 6-12%+ Strong Cash Flow Vehicles Deeds of Trust (notes) Mortgage Pools / Group Investments• $100,000 borrowed at 6% = $500 I/O• $100,000 invested at 12% = $1,000 Net Monthly Income = $500 (PROFIT)
GoldBonds / Treasuries Stock Market Real Estate Businesses
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