How to Protect in a Hyperinflation Environment: Ray Dalio

Some issues are happening around the world, Central Banks have not been able to control monetary policy in the same way in the past decade. They can’t lower interest rates, they can’t get money to a lot of people who need the money.

Just like from 1929 to 1932 there was a debt crisis that came as a result of an excessive amount of debt in the boom years. When you have that in 1932 we hit zero interest rates. When they hit zero interest rates in 1932 like in 2008 Central Banks printed money & bought financial assets, what happens in these cycles is that normally Central Banks can stimulate the economy by lowering interest rates but when you hit zero interest rates that doesn’t work.  

So, there are some real issues happening & hyperinflation is coming towards us & we need to protect our wealth from this situation.

Gold

When it comes to a higher inflation environment, social-economic instability environment, and wars investors try to sell their other assets like stocks, and bonds & buy gold. Over the past thousand years, gold has been proven that gold be an asset class to work against hyperinflation.

Keeping cash as an asset is the most stupid thing an investor can do. With an inflation environment, the value of the cash decreases day by day.

Stocks

When you have a big cash file in your bank account in treasury bills you can use that money to buy more great companies during an economic pandemic. In a hyperinflation environment, investors sell their current holdings in the stock market, as a result of panic selling stock market crash. When the market crashes we can use our excess cash to buy great companies for very low prices. This strategy is used by Warren Buffett & currently, his investing firm Berkshire Hathaway holds more than $180 billion in cash & they are waiting for a huge market crash like the 2008 housing bubble.  Warren Buffett is a master of this strategy & we can do the same if we have the right mentality 7 right knowledge.

Companies like Coca-Cola with inflation raise the prices of Coke products & people are still willing to pay that price to buy Coke products. Let’s say Apple, with the increasing price of raw materials Apple products will rise, but still, Apple fans need to buy the latest version of the iPhone & they are willing to pay that amount.

Real Estate

Real estate is a good investment in any economic environment no matter how bad the economy is. People still need to live under a roof, they need a house to survive, they need a house to protect them from cold, and they need a house to rest. So, real estate is a good investment. If you are a high net worth individual investor you can buy some houses & rent those.

Cryptocurrency

One of the great inventions that happened in the last decade is cryptocurrency. The most important thing about crypto is that crypto is not an inflationary one. When it comes to Bitcoin it has a maximum supply of 21 million coins. In a hyperinflation environment keeping a deflationary asset is a great advantage. The problem with cryptocurrency is that crypto has not proven how it behaves in such market conditions, but allocating a small portion of your portfolio will not harm you.