Last week, the Federal Reserve updated investors and economists on the current state of the U.S. economy.
Chairman Jerome Powell said that while the economy still has some ground to cover to reach the Fed’s goal of stable prices and maximum employment… the U.S. economic recovery remains on track.
The Fed also expects less economic impact from the COVID delta variant thanks to increased vaccination rates and business adaptations like remote work.
But it was Powell’s comments on inflation that caught our eye here at PBRG. Here’s Powell…
We will not raise interest rates pre-emptively because we fear the possible onset of inflation. We will wait for evidence of actual inflation or other imbalances.
Despite inflation currently running well above the Fed’s 2% goal, it still sees the current bout of inflation as short term and nothing to worry about.
We’re not sure what “evidence” Powell and the Fed are waiting for, but we do know this… the damage will already be done by the time we can conclusively say the current bout is long term.
Fortunately, we don’t have to wait for the Fed to do something about it.
In a moment, I’ll show you how you can beat inflation by putting a portion of your income in crypto. But first let’s cover why we believe there’s still reason to worry…
No Relief in Sight
Right now, the U.S. is experiencing fiscal-driven inflation. Since the start of the pandemic in March 2020, the U.S. government has spent an estimated $8 trillion in stimulus and money printing.
Add in the reopening of the economy… pent-up demand from consumers… supply chain bottlenecks… and labor shortages… and you get rising inflation.
You’ve likely seen extreme price increases reflected in commodities like lumber and gas… real estate… groceries… and even used cars.
And the numbers confirm it.
As measured by the Consumer Price Index (CPI), inflation was up 5.4% for the trailing 1-year ended June 30.
To put that into perspective, there has only been one month when trailing 1-year inflation was greater than 5.4% in the last 30 years.
With higher inflation and the Fed maintaining a zero-rate policy, the Fed Funds Rate is essentially negative 5.4%. And that means, most traditional savings and income vehicles also have negative real yields.
Let me explain what that means…
In normal times, investors can make a “real” yield. That means the yield they earn on a government bond is greater than inflation.
For example, if a bond pays 3% interest and inflation is at 2%, your real yield is 1%.
As long as you’re earning a positive real yield, you’re maintaining and growing your purchasing power.
But when real yields go negative, you’re no longer maintaining your purchasing power.
Today, the average savings account yields 0.06%… the average 3-year CD yields 0.20%… the 10-year Treasury yields 1.20%… and the average U.S. corporate bond yields 3.6%.
Subtract 5.4% from any of those options and you’re in the real red.
Now, the Fed keeps suggesting the current bout of inflation is “transitory.” That’s a fancy way of saying it’s short-lived… about 6–9 months.
We don’t know whether inflation is transitory or not… but we’re not going to wait on the Fed to find out. And regardless, we do know crypto yields can beat it.
Some rates are 297 times higher than traditional savings accounts… and blow away the yields you’ll find in the anemic bond market.
Crypto Rates Will Outpace Inflation
The longer the current bout of inflation runs, the more investors will be looking for safe havens from rising inflation… and with few options returning a positive yield, more investors will turn to crypto and crypto income.
At PBRG, we call the income you earn from your crypto “Tech Royalties”… and if you understand traditional royalties, then you know how Tech Royalties work.
Just like a musician receives a royalty payment every time their music is paid, Tech Royalties yield more crypto as their underlying crypto projects grow.
To earn Tech Royalties, you deposit your crypto assets on a crypto platform. In return, you receive more of that crypto as a reward. It’s similar to earning interest from a bank account. But the interest you earn on crypto platforms is much, much higher.
How can these platforms pay such high yields?
Like banks, crypto platforms accept deposits and make loans. But the increased risk of holding crypto over cash is why they can compensate depositors with higher yields.
For instance, rates on some crypto platforms like Celsius, Ledn, and Nexo can go as high as 17.8%. That’s 297 times higher than what you’ll get in a traditional savings account and 15 times the 10-year Treasury bond.
More importantly, they can pay more than three times the current rate of inflation.
Plus, Tech Royalties are paid in more crypto. So your “dividends” will appreciate at the same rate as the underlying token.
A New Income Source to Beat Inflation
I know that earning income from your crypto assets might seem novel to many of you. And that’s precisely why you should consider it as a hedge against inflation.
You see, we’re still in the early stages of a crypto economy. But Tech Royalties are already catching on. And millions in “interest” payouts are out there for the taking.
Take “staking” for example. It’s one of our favorite ways to earn Tech Royalties.
Staking is the action of locking your crypto assets (i.e., your “stake”) to help secure that crypto’s underlying network. In exchange, you earn rewards.
And it’s a trend that’s taking off…
Crypto platform Kraken paid out over $100 million in staking rewards to customers in the first half of 2021. Assets staked on Kraken year to date jumped from $1 billion to about $5 billion. That’s fivefold growth in six months.
And a recent JPMorgan report concluded that an upgrade to the Ethereum network could spur the adoption of staking… and cause staking rewards to balloon to $20 billion in the near term and $40 billion by 2025.
Whether you’re worried about inflation or not… you owe it to yourself to consider Tech Royalties. You can get started by depositing a small stake of bitcoin on one of the platforms I listed above.
Not only will you earn yields significantly higher than the rate of inflation… but as bitcoin rebounds, your crypto dividends will appreciate, too.
Just remember, extra yield comes with extra risk. These platforms are not FDIC-insured or backed by the U.S. government.
So, be smart about your individual crypto position-sizing. And don’t put all of your crypto assets on one platform.
As always, be sure to do your own research before making any investments.
Regards,
|
Grant Wasylik
Analyst, Palm Beach Daily
P.S. We may not know where inflation is headed from here, but one thing is certain… as more investors seek safe-haven investments like crypto, prices and yields have nowhere to go but up.
And as crypto moves higher, so will its underlying technologies and projects… including one Teeka is calling “Genesis.”
To learn more about this multitrillion-dollar project… and why Teeka believes it will become the most important investment trend of the decade… click here.