Last week, Senate Democrats agreed on legislation that would lead to significant cuts in energy costs for millions of Americans.
It’s called the Inflation Reduction Act. Some estimate its tax savings will save the average U.S. household $1,800 per year in energy bills.
The $433 billion bill still faces an uphill battle. Senate Republicans oppose it.
Even if the Senate votes to pass the bill, it will still need to go to the House for approval… And to President Biden for his signature.
Look, I rarely get involved in politics. My focus is on helping everyday Americans protect and grow their wealth despite the machinations coming from Washington.
So I can’t say whether this bill will deliver on its promises or make matters worse. And when it comes to the political hacks in D.C., color me a skeptic.
But let’s say the bill will reduce your average energy costs by $1,800 per year.
That’s a nice chunk of change. But is it enough to help you beat inflation?
I don’t think so…
According to research by Moody’s, U.S. households are spending an added $341 per month to buy the same goods and services compared to 2021.
That’s an added $4,092 per year.
So even if the Inflation Reduction Act passes… It barely puts a dent in lowering actual inflation costs for most Americans.
I’m not saying an extra $1,800 per year wouldn’t help. Of course, every little bit of saved money counts.
What I’m telling you is if you want to outpace inflation… you need to think outside the box. Because D.C. isn’t coming to your rescue.
Why You Can’t Keep Up
If you’re like me, you’re not relying on Congress to bail you out of any financial hardships. Instead, you’re putting your money to work for you.
But even if you have money in the markets, it’s likely your returns still won’t be enough to outpace inflation.
Here’s what I mean…
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. That’s compared to the S&P 500’s 9.5% return per year.
Since the creation of that chart, inflation has shot up to its current annual rate of 9.1% (as of June). That means the rate of inflation is now 2.5 times higher than the average yearly return Main Street is making in the stock market.
So for most people, investing in stocks will not help them outpace inflation.
At the same time, bonds aren’t doing any better…
The yield on the 10-year Treasury is 2.6%. With inflation north of 9%, you’re losing 6.5% per year in buying power.
That’s a 6% 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…
A survey of U.S. companies found employers plan to increase overall average salaries by 3.4% in 2022. That’s less than half the current inflation rate.
No matter how hard you work or how many extra shifts you pick up… 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.
If stocks, bonds, working overtime and pay raises won’t cut it, what will?
Smarter Investing for a New Reality
We’re living in what I call a New Reality of Money… where obscene money-printing and inflation have twisted the normal rules of money.
And in this New Reality, you need to rethink your ideas about investing and saving for retirement.
That means thinking outside the box.
To prepare you for this New Reality, I’ve been closely following the investing trends of ultra-high net-worth individuals in my network.
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.
To protect their wealth, the ultra-rich are buying alternative assets. These are less traditional investment options such as private equity, cryptocurrency, collectibles, art and trophy real estate.
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 the wealthy allocate huge gobs of capital to assets outside the traditional 60/40 stock and bond portfolio.
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 Main Street is getting left behind?
As more investors diversify into alternative assets, I expect we’ll see even bigger returns from these nontraditional investments.
It’s Not Your Fault
I’m a student of history. And when inflation hits, politicians have always blamed outside forces for it.
During World War II, Germany blamed Jews for its economic woes. Today, Argentina’s president blames the country’s sky-high inflation on “a few rogue businessmen” in the food sector.
We’re seeing the same thing in America right now.
Politicians blame Putin’s invasion of Ukraine for higher energy prices. They blame the oil companies for higher gas prices. They blame supply chain issues for higher food prices.
But they never blame their excessive money-printing and currency debasement. And they never will.
Friends, I want you to know if you haven’t been able to catch up financially, it’s not your fault.
It’s not your fault Congress has spent like a drunken sailor… It’s not your fault the Fed has inflated the monetary supply by trillions of dollars…
It’s not your fault that prices are going up… It’s not your fault that the markets are tanking… And it’s not your fault that America is going in the wrong direction.
But it will be your fault if you don’t begin to prepare yourself now for the New Reality of Money.
Of course, I know most of you can’t afford to invest millions of dollars in watches and fine art like the wealthy.
So I’ve designed a strategy to give exposure to these alternative asset classes for a fraction of the costs. (Paid-up Palm Beach Letter subscribers can read more on our fractional platforms right here.)
This strategy strikes the right balance of growth, value, income, and asymmetric opportunities to help the not-yet-rich become wealthy.
Friends, this New Reality of Money will require a different approach. The only way to catch up is to opt out of the traditional 60/40 stock and bond portfolio. This approach has lined Wall Street’s pockets with fat fees for decades, and they are loath to give it up.
The ideas I’ll bring you in future articles may make you uncomfortable… Not because they are risky but because they are new. But a new reality of money requires a new way of investing.
The bow and arrow might have worked wonders for 10 centuries, but once the gun came along, those left holding bows and arrows got slaughtered. The same is happening now in the investment world.
The rich, the connected, and the powerful are using different wealth-building techniques to radically grow their wealth, while the everyday investor is struggling under the weight of a broken investment strategy that cannot keep up with inflation.
That doesn’t mean you can’t make money in stocks. You can. We are making tons of money in stocks right now over at my Alpha Edge service, with recent annualized gains of as much as 43.8%, 52.3% and 77.8%.
But we are using a strategy to own these stocks that less than 1 in 1,000 investors truly understand. Wall Street uses this “gun” every day to shoot down massive low-risk gains while they are busy selling you their 60/40 “bows & arrows” approach.
Over the coming weeks and months, I’ll share what I’m doing for my subscribers to help them win this battle. It’s the exact methods I’m using to protect my own money, and I can’t wait to tell you more about it.
Let the Game Come to You!