In today’s Exponential Investor

  • Where to beat inflation
  • Big buildings, worthless savings
  • OldFi vs. DeFi

On 27 December last year, we published some of our best ideas from 2021 as something to ponder over during the festive period.

When we say “best” ideas, we don’t necessarily mean the most exciting, sometimes just the ones where we’ve been most on the money.

And in 2021 there was no better foresight than our view that inflation was going to run rampant in the economy.

In fact, while the central banks were calling inflation “transitory”, we said: “Transitory? Not a chance.”

We went on to highlight two earlier editorial essays.

On 17 May we wrote: “… inflation is set in, here to stay and something you’d better get used to and get ready for.”

Shortly afterwards, on 14 June, we wrote: “There’s a very good chance that inflation will be more than the BoE forecasts and will last longer than it expects.”

So, us: 1  BoE: 0

There have been ways to prepare for this eventuality. We’ve been banging on about them for over a year now. Thankfully, a handful of people actually sat up and paid attention. Sadly, many more thought we were crazy.

That’s because we had the audacity to explain to people that, to beat inflation, your best bet was the cryptocurrency markets.

And, today, I’m telling you exactly the same thing again.

If you want to trump inflation, if you’re even remotely interested in tackling the cost-of-living crisis, please know that the government and central bank won’t save you.

The crypto markets will.

And on Friday I’m going to explain to you exactly how. All you have to do is join the thrill-seeking investors who’ve already sat up and paid attention. What you don’t want to be is one of the luddites who still think we’re charlatans or snake-oil salesmen. Join the ranks of those regressive fools at your peril.

The Empire State of inflation

Before I explain just what the crypto markets have to offer, you have to first understand that inflation can be both good and bad.

For example, New York’s Empire State Building cost $40.9 million to build in 1930.

That’s right, we said million.

Now fast forward to 2022. Recently, a proposal was approved to replace eight escalators in the New York subway transit system. Have a wild guess at how much it costs in 2022 to replace those eight escalators…

Let us help, $62.2 million.

It cost more to replace eight escalators underground in 2022 than to build the entire Empire State Building in 1930.

So, what is this telling us? Well, it’s simple. Inflation is good… for asset owners. But not for savers.

You see, a recent (2019) assessment attributed the Empire State Building a rough valuation of $2.3 billion.

That’s a 56x return in 92 years. On the face of it, this seems pretty good. And, to be fair, I’d say it’s an okay return. But it’s nothing to kick the doors down over.

Of course, it’s nowhere near the returns you’d have made over time investing in some of the world’s best companies, such as Apple or Amazon, or in some of the best crypto, such as bitcoin.

But it’s a damn sight better being the owner of an asset like a building than being a saver, because, over the same period of time, the value of the USD has dropped by 94.2% due to inflation.

If you’d decided to save $40.9 million in 1930, then today you’d have equivalent purchasing power of just $2.37 million.

As we say, inflation is great for the asset owner, not great for the saver.

Or should we say, not great for the saver in the traditional financial system…

Crypto code catalysts

Why would you bother having savings in the old financial system (OldFi) when, in the decentralised financial system (DeFi), you could not only earn real savings but inflation- busting savings to boot?

Remember, in OldFi the central banks intentionally shadow tax you every year with their inflation rate. They don’t even try to hide it.

They typically focus on a target of 2%. That means they will intentionally reduce the purchasing power of a pound by 2% every year.

And then in situations where they’ve really sucked at their job (like now), your pounds will devalue by more than 10% every year.

And you can add to this the government’s wanton desire to tax you further, restrict you more, and control your finances more.

So, what should you do?

Be an asset owner.

But what kind of asset owner, when markets are capitulating in double-digits on a seemingly daily basis?

Well, arguably, property is a looker. But it can also be a fast track to poverty if you end up asset rich and cash poor in an economy with skyrocketing prices (inflation) against a backdrop of increasing rates and a cost-of-living crisis.

In my view, the only way to beat these crazy multiple threats to wealth is to invest risk capital in sections of the market that have asymmetric risk (the ability for potential rewards to massively outweigh the potential risk of failure) and to enter the world of DeFi.

Taking that one step further, deploying smart capital into the crypto markets now, while there is unadulterated fear in the market, could be the smartest long-term move you make this year.

A whole sub-set of crypto is primed for exponential rocket-fuelled growth off the back of the biggest, most important upgrade we may ever have seen. This guaranteed upgrade could unlock the key to three crypto beating the market, inflation, and all other assets in 2022.

They could even set up the potential for five- and six-figure gains for those prepared to stomach the risk, and learn and understand just how big this upgrade is set to be.

OldFi is not your friend right now. DeFi and the imminent crypto code catalyst are. For my money, I know where I’d be putting my capital at present…

Until next time,

Sam Volkering
Editor, Exponential Investor