Even the roar of an 850-horsepower Ferrari engine couldn’t drown out this idea…
In May, I attended the Miami Grand Prix.
Formula 1 races are some of the most prestigious events in the world. And the inaugural race in Miami was no exception.
F1 race cars are custom-built. And they’re worth millions. Max Verstappen, the winner of the Miami race, drove a car sponsored by Red Bull that cost $20.6 million.
But as exhilarating as the race was… the real excitement was getting to rub elbows with some of the richest people on the planet. I was anxious to find out where the mega-rich were putting their money…
Teeka at the Miami Grand Prix
These events attract sports stars, entertainers, dignitaries, and royals.
At the Miami Grand Prix, I saw several celebrities like Tom Brady, Michael Jordan, and David Beckham.
I also recognized plenty of lesser-known, mega-wealthy individuals… and during the race, I asked them what they were doing with their money amid this market turmoil.
What they had to say left me stunned…
“I’m buying Ferraris.”
Naturally, I spoke with some of the world’s biggest, most passionate car collectors. So it’s no surprise that well-heeled fans at an F1 race would love to own high-performance sports cars.
But the thing is, that’s not all these wealthy people are buying.
They also said they’re putting their money into red-hot real estate markets like Los Angeles, New York City, and the Hamptons…
A few even mentioned buying condos in downtown Miami – where high-end units are running for $5–6 million…
Many said they’re also buying millions of dollars’ worth of luxury watches and blue-chip art.
That’s when, amid the engines’ roar, I realized: They’re not buying collectible cars, watches, and art simply as a hobby…
They’re buying them to protect their long-term wealth.
It’s Time to Rethink How You Invest
In the past, wealthy individuals bought collectibles as status symbols or passion investments.
Today, they view high-end cars, luxury watches, and fine art as assets whose values will increase exponentially over time – thus protecting their money.
Like you and me, today’s ultra-wealthy are concerned about inflation. In fact, according to a report by global wealth consultant Knight Frank, it’s their No. 1 concern.
And that’s when it hit me… We’re in a “New Reality of Money” where the normal rules of money have been perverted by obscene money-printing and out-of-control inflation.
I own boats and cars that I purchased as recently as three years ago and as long as five years ago. They’re now worth more than what I originally paid.
Friends, that’s not normal. It should never have been able to happen, and yet it is.
My biggest personal winning investment over the last 12 months hasn’t been in crypto… It’s been in luxury watches. I have watches that have risen as much as 800% in value.
Even with the global pullback in asset prices, many of these watches are only off 15% from their highs. What is going on here? Why are the wealthy flocking to collectible cars, trophy real estate, art, and watches to preserve their wealth?
The chart below shows you everything you need to know. It shows how Consumer Price Index (CPI) inflation has risen since the start of the 21st century:
The wealthy are watching their cash reserves melt like an ice cube in the midday Miami sun. They’re desperate to protect their buying power.
But they don’t want to put everything in stocks. They want some real wealth they can hold in their hands… put on their wrists… or admire in their 20-car garage.
And it’s all because inflation is at its highest level since 1982.
Everyone knows when inflation increases, the value of your money decreases.
Since the early 1980s, inflation has eroded the purchasing power of $1 to about 36 cents.
The wealthy at the Miami Grand Prix see this. I see it. And you see it every day at the gas station and grocery store.
The difference between you and them is they have a plan to beat it.
Instead of sitting on cash or allocating the bulk of their assets to stocks and bonds… they’re buying assets that appreciate much faster than inflation.
This is a big, bold change in the markets. It’s still early in its trend. But most individual investors don’t see it coming yet.
While the wealthy diversify their assets… many retail investors still follow the classic “60/40” model.
The “60/40” refers to 60% equities and 40% bonds. Many financial advisers and institutions still recommend this ratio.
But our research suggests this model won’t grow fast enough to keep pace with the New Reality of money-printing and its attendant out-of-control inflation.
Now, I know what you might be thinking. “Hey T, the Fed is in tightening mode now, so inflation should come under control.”
I’m aware of that… But how long do you think that tightening stance will last?
I can tell you the Fed will be done tightening much faster than the everyday investor thinks.
Here’s why I believe that to be true…
The yield on the two-year Treasury note is already rising above the yield on the 10-year note. That’s the bond market telling you it thinks interest rates are going down in the future – not up.
And lower rates in the future mean more money-printing by the feds… and probably a lot more inflation.
I want you to know that stocks will rally once the Fed stops raising rates. That’s great news. But it’s not enough to combat the New Reality of Money.
Let me show you why owning stocks will not be enough to preserve and grow your wealth ahead of inflation.
Stocks Alone Won’t Help You Catch Up
According to a poll by Gallup, 58% of Americans own stocks. But the average investor significantly underperforms the stock market.
As you can see above, the average investor’s return over the last 20 years is just 3.6% per year – compared to a 9.5% return per year for the S&P 500.
Chew on this…
Since the creation of that chart, inflation has shot up to its current annual rate of 8.6% as of May. That means Main Street’s rate of inflation is now 2.4x higher than the average yearly return they are making in the stock market…
So for most people, investing in stocks will not help them outpace inflation.
Can you see how it’s impossible to catch up to inflation when your stock market returns lag inflation by a whopping 5 percentage points?
At the same time, bonds aren’t doing any better…
The yield on the 10-year Treasury is 2.8%. With inflation north of 8%, you’re losing 5.2% per year in purchasing power.
That is a 5% gap between what you make and what you normally buy each year. And that gap is growing every year.
Working Harder Won’t Work, Either
This is why no matter how hard you work… how many extra shifts you pick up… how many more work meetings you slog through… your standard of living will continue to decline.
Your wages can’t keep up with inflation. Your bonds can’t keep up with inflation. Your stocks can’t keep up with inflation.
I want you to know it’s not your fault. You did nothing wrong.
Even if you scrap every little luxury you allow yourself, weekend getaways… an evening out with your spouse… something nice for the kids… an expensive cigar – it’s still not enough to bridge the ever-inflating gap between the lifestyle you used to have and the life you will have next year and the year after that.
If stocks, bonds, working overtime, and pay raises won’t cut it, what will?
To answer this question, we have to look at what the rich are doing.
If you look at assets like contemporary art, they’ve delivered average annual returns of 14.1% over the past 26 years… while others like venture capital and bitcoin saw average annual returns of 19.3% and 230%, respectively, over the previous decade.
So you can see why these wealthy individuals allocate huge gobs of their capital to assets outside the traditional 60/40 stock and bond portfolio.
For instance, a recent Ernst & Young survey found that 81% of ultra-high-net-worth individuals now invest in alternative assets.
By comparison, retail investors allocate less than 5% to alternative investments. Is it any wonder why the Main Street investor is getting left behind?
As more investors diversify into alternative assets, I expect we’ll see even bigger returns from these nontraditional investments.
The good news is you don’t have to buy a Ferrari, a Picasso, or a multimillion-dollar condo in Miami to protect yourself against inflation.
Today, there are strategies anyone can use to invest just like the ultra-wealthy… you just need a game plan.
And that is what I want to talk to you about now…
The Biggest Change Since I Added Bitcoin in 2016
Because of this New Reality of Money, you must shift some of your capital into nontraditional assets. This is why I’ve just made the biggest change in seven years to the asset allocation models we use here at Palm Beach Research Group.
Since I took over my flagship Palm Beach Letter advisory in 2016, our average annual gain is 147.8% – even with this current market pullback.
By comparison, the average annual gain of the S&P 500 over the same time is 12.9%.
That’s a bit higher than the average annual return of the S&P 500 of about 9.5%… So even in a great bull market for stocks – we’ve done over 11 times better.
So to navigate this New Reality of Money, I’m revamping my entire asset allocation model to help you outpace inflation… and beat our unmatched track record of outperforming the markets.
This will mark one of the biggest changes since I added bitcoin to our portfolio in 2016.
The fact is… times are changing, and we need to change with them. By doing so, you’ll be ahead of the curve, which puts you in the position to reclaim the lifestyle you deserve.
My goal is to help show you a path that can ensure you use this New Reality of Money to grow your wealth exponentially outside of stocks and bonds just like the ultra-rich are doing now.
Tomorrow, I’ll share more details on positioning yourself for this New Reality we find ourselves in.
Let The Game Come to You!