Sometimes I hate it when I’m right. Unfortunately, my prediction early last year that we would suffer serious inflation in 2022 has come true. Despite what the White House and Federal Reserve had been saying, I was right.
Now, we’re in a recession and it’s only going to get worse. Economies around the world are in the process of tanking and a lot of people are going to get hurt. In response to the Covid-19 pandemic, countries ‘round the world engaged in massive spending programs designed to keep the wheels on the cart. Now we’re paying the price with massive inflation.
As I write this, the Dow has crept back up over 30,000 from its high of 36,742 on January 4; but that’s still an 18% decline in just nine months. It may be too late for corrective action in the near term; pension funds, IRAs and 401(k)s are all down 20% to 30%… so far.
If your IRA goes down 30%, the market needs to have a minimum 10% annual gain for the next four years just to get back to even! That’s five years of no growth for your retirement. And that’s if you only lose 30%.
Here in the U.S., GDP continues to be in decline. The advance estimate of 3rd quarter GDP will be released later this month and the financial world is holding its collective breath. In reality, most already know the answer; we’re already in a recession but if the 3rd quarter comes in positive most economists are predicting a double-dip — in other words a short recession followed by another, deeper recession.
So, what do you do about the future of your retirement? What about your family’s future? Now is the time to prepare for the next downturn that will inevitably come. You need to diversify your portfolio by making investments that are inflation-proof and uncorrelated to the markets – managed farmland.
The Scourge of Inflation
Yesterday the Producer Price Index (PPI) came in at an 8.5% year-over-year increase. That was a 0.4% increase for August through September after 2 months of decline. In other words, the worst is not over because the PPI is a pretty reliable forecast of future price inflation.
Now the Consumer Price Index (CPI) has come in at an 8.2% year-over-year gain. USA Today reported that the increase was “…down from an 8.3% rise in August and a four-decade high of 9.1% in June, as climbing food and rent costs again offset falling gasoline prices, according to the Labor Department’s Consumer Price Index. Last month’s increase defied forecasts for a more rapid slowdown in inflation.”
It’s that last sentence that is worrisome. And while gas prices went down in September, they are on the rise again after the OPEC+ announcement that they are cutting back on production.
Food and beverage inflation continued in September, up 1.0% over August and 13.3% versus a year ago. This is where average Americans are getting hit hard. Barclays Bank economists predict double-digital annual food inflation through at least January.
These are the last PPI and CPI reports to come out before the Federal Reserve’s November meeting where they are expected to increase interest rates again by 0.75% (the fourth such increase in a row). In the U.S. the government, mainly the Fed, now has a choice of breaking inflation or breaking the economy. They’re piloting the Titanic and about to hit the iceberg.
Wars And Rumors of Wars
Meanwhile, Russia continues waging war in Ukraine, which has had an oversized impact on the price of grain, fertilizer and the energy sector. The food crisis in Africa, where most grain is imported from Ukraine, Russia and India, is rapidly escalating. In addition, the war is putting a drag on the European economy in general.
China, North Korea and Iran have been saber-rattling for years. Who knows what their next move will be if they feel they can get away with aggressive action. A strong move by any of the three will have a huge international impact.
So, What Do I Do Now?
We don’t know when inflation will go down and we don’t know how deep the recession will be. What we do know is that the current state of affairs is bad and likely to get worse.
None of us have the ability to make meaningful changes to what’s going on in the world. It’s up to each of us to protect the financial futures for ourselves and our families. Now is the time to protect yourself financially.
I have been urging that you should make an investment in managed farmland to establish long-term income streams that go up with inflation and hold their value during recessions. In other words, invest in inflation and build generational wealth.
Alternative Ag Investors offers the opportunity to purchase your own managed farmland so you can diversify your portfolio and earn a strong passive income that isn’t reliant on the whims of the markets or inept governments.
Contact me today at Alternative Ag Investors. Let’s set up a call to go over all of the options available for owning your own greenhouse or farmland including coffee, limes, dragon fruit, strawberries, teak, oranges and more.
Oh… and ask me how you can own farmland in your self-directed IRA or 401(k)!
