In today’s Exponential Investor

  • Sure… no one saw it coming, right?
  • $700,000 a week just wasn’t enough
  • Gold smashed like bitcoin

Editor’s note: We hope you had an enjoyable and festive Christmas. If you don’t do Christmas, we hope you had a nice weekend.

Either way, this time of the year means here at Southbank Investment Research a lot of the team are away enjoying some time with family and friends.

In light of this, this week we’ll be revisiting some of our most popular editorial pieces here in Exponential Investor from 2021.

We call it our “Best of 2021” and all week we’re going to review some of our best pieces.

Starting below, you’ll see a piece from me from 11 August, outlining that it was pretty clear that inflation was going to be a problem this year. The idea of it being transitory is nonsense. You only need to look to the Premier League to see that.


Transitory my a***

Earlier this year the Bank of England (BoE) forecast that inflation would top out at 2.5%.

I know people who know next to nothing about monetary policy that could see that that was ridiculous.

I mean if the BoE couldn’t see that inflation was about to run away, then we really would have to question if the current policymakers are fit for the job.

Here at Exponential Investor we even devoted a whole week to tackling issues around inflation and ways to beat it.

And I wrote to you on 17 May that “… inflation is set in, here to stay and something you better get used to and get ready for.”

And then on 14 June I said, “There’s a very good chance that inflation will be more than the BoE forecasts and it will last longer than it expects.”

I’m not claiming to be a foreseer of the economy, more that it was blindingly obvious that inflation would ramp up. And it is. The BoE has already bumped its forecast to 4%.

Doesn’t seem like much. Except when you realise the BoE missed the mark by 60%.

Had it been a test, it would have failed miserably! But the financial powers that be would have you believe it’s all “transitory”. Just a blip on the radar.

Really? Well let’s just see about that.

He “really wanted” to stay

Nonetheless, any wonders about how much inflation is kicking in can be answered by looking around you. More specifically looking to the football pitch.

In the last couple of weeks, Manchester City, the English Premier League team, bought Aston Villa player Jack Grealish. He’s a good player. But is he worth the £100 million (£75 million upfront with £25 million add-ons) they paid for him?

Is anyone worth £100 million in sport? That is a subjective topic to be debated over the ages. But it’s no coincidence that over the last 13 years football transfer fee records have continued to get smashed year on year.

Or cast your eye across the channel to the European mainland. Arguably one of the greatest players of all time, Lionel Messi, is (finally) leaving Barcelona.

Of course he really, “wanted to stay”.

I mean, clearly their five-year deal which would have seen him play until he was 39 with around $700,000 a week would have any normal human stay put.

But for whatever reason (Barcelona’s billion euros of debt may be something to do with it) he’s off to French mega club Paris Saint-Germain for a rumoured £25 million after tax per year.

And of course there’s the rumoured transfer of Harry Kane from Tottenham to [insert name of rich club of choice here] for around £100 million too.

Where does all this money come from? Imagine if you could have invested in Grealish and Kane a few years ago, the multiples they’re going for now and you’d be rich too.

Not as rich as them, or their agents, but close enough.

Alas, players aren’t stocks (yet). But those figures are real. And that money doesn’t just come from thin air…

Oh actually, yes it does. It comes from the thin air of the money printers of central banks. Where the money printing flows down into corporate coffers, into oil rich nations, into their sporting clubs and into the massive global transfer market.

It is of course far more complex, convoluted and… (what’s the other c-word I’m looking for?).

Anyway, it’s really trickle-down economics – good for the wealthy, or at least good for the average Joe, Jack, Harry or Lionel.

Inflation? What inflation? Three football players with combined transfer fees of around a quarter of a billion pounds.

Ok, the BoE, US Federal Reserve and European Central Bank… you can call it “transitory” if you want. The truth is that this is what inflation looks like and it’s here to stay.

What if gold is “nuked”

Now for an investor, of course, investing in gold is one of the ways in which you can fight inflation.

The original “hard money” has been a staple for investors looking to beat off inflation with a (shiny, metallic gold) stick for decades.

And if inflation is ramping up, you’d expect that gold would be the place to see the benefits of a diversified, inflationary protected portfolio.

That is good in theory.

But what happens if your inflation hedge doesn’t work as hoped? What if its price is “nuked” instead of rising?

That’s what happened to the price of gold on Monday morning. When you look at the price candles, it was red, deep and almost resembling a crypto market dump.

Why did the gold price fall so hard?

Well it’s hard to know for sure. But it certainly feels like in the broad scheme of things a temporary blip. A bottom perhaps. And maybe, likely, gold is still also a pretty fantastic way to beat inflation.

However, like all asset classes, gold is not the proverbial silver bullet (if you will excuse the pun).

It is not the only answer to an investor beating inflation, beating the market, beating the system.

To achieve that you really need to build a portfolio with the finest, most productive assets available to investors.

That sounds simple, right? Well in theory.

The truth is that you need the guidance of the finest investors in the world, to help you construct a portfolio that not only has the potential to beat inflation, but also to deliver returns that would make the average punter’s eyes water.

To do that I think you need to see a special briefing soon and learn what it means to truly invest.

Of course, you can go it alone. But when you’re fighting a financial system from several angles, while trying to get on with your day-to-day grind, perhaps that smart answer really is to turn to an investment guru and learn from the best in the game.

That way, gold might get nuked, inflation might soar to double digits, bitcoin might crash and stocks might do a “dotcom”, but with the right portfolio you could still be in for smooth sailing.

Until next time…

Sam Volkering
Editor, Exponential Investor