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Full Description
"I urge everyone to read this important new book."—Ron Paul, Host of Ron Paul Liberty Report
Americans are facing sticker shock at every turn: from the gas pump to the grocery store and every kind of consumer service. But the eye-popping price increases are just the tip of the iceberg in terms of the threat to the country's economic recovery. Inflation showers windfalls on the rich while penalizing workers, savers, retirees, small businesses, and most of Main Street economic life.
New York Times bestselling author and former investment manager David A. Stockman, who served as director of the Office of Management and Budget under President Reagan, explains the roots of today's runaway inflation so investors at all levels can calibrate their financial strategies to survive and thrive despite economic uncertainty.
The Great Money Bubble covers the entire economic landscape, including:
Why the rising price of assets is far more dangerous than rising consumer prices
The inside story on stock market manipulations and the effects of ultracheap debt
Why real estate is no longer a guaranteed inflationary hedge
Stockman's four-step strategy to protect your savings and portfolio
After spearheading the economic policy for the Reagan Revolution, Stockman worked on Wall Street at the highest levels, and is now an adviser to professional investors. With this book, readers at all investment levels can have access to his groundbreaking financial advice.
Contents
OUTLINE for INFLATION NIGHTMARE: How to Protect Your Money in the Coming Crash by David A. Stockman
Part 1
Chapter 1: Washington's Infernal Inflation Machine
An economist's definition (classical, a la Friedman): Inflation is caused by central bank money printing, not by supply and demand for goods and services in the market
Inflation artificially increases the price of almost everything: goods, services, housing, stocks, other financial assets, collectibles and crypto
Real world examples here
Different kinds of inflation
Core inflation vs. food/energy
Real world examples here, story format
PPI, CPI, inflation expectations, "stagflation"
Real world examples here, story format
What's "normal" inflation? Is it necessary for growth?
Stockman's thesis: Massive money printing is causing massive asset inflation in the form of stock prices that are not justified by earnings and interest rates that are drastically below what is needed to cover inflation and risk of loss, and it is tying up capital for long periods of time.
Chapter 2: How do normal people experience inflation? How do you know if inflation is happening?
Stories > as in what an average person experiences to what happens to paycheck/dividends/savings accounts
Risk-free rate lower than inflation
Real world examples here, story format
What happens to your paycheck when inflation runs hot
Real world examples here, story format
Savings rates in the age of QE
Real world examples here, story format
Fed's "hedonic adjustment" to hide inflation from ordinary people
Real world examples here, story format
How long you have to work to buy a good, such as a house or car
For instance, the average worker had to work 7,160 hours (almost four years) to buy the median home in 1971. By 2020, he had to work double that: 14,365 hours.
Same was true of a new car. To buy a standard Ford Mustang Coupe, the average worker had to work 5.3 months in 1971, 8.2 months in 1997 and 10.8 months in 2020.
While all that was happening, ordinary savers are barely keeping up with inflation in their paycheck while any savings they have suffer from low rates
Examples and data illustrating the above, 1990s CD rates vs. today, etc
Chapter 3: How to read the signs of inflation
Lessons from previous period (stories, not economic theory/economic policy)
How Reagan and Paul Volcker fixed the inflation disaster of the 1970s
Brief history of the period
Real world examples here, story format
The "Great Moderation" of low inflation and growth ballyhooed by Bernanke in 2005 was a ruse.
In fact, goods and services inflation was just temporarily pushed underground owing to imported deflation from China
A generation of investors and savers has now lulled to sleep by artificially low inflation
Chapter 4: Why inflation is a danger now
For consumers, goods inflation has been artificially cheap while services inflation has taken off. As China matures, goods inflation will catch up.
For investors, fiat credit has led to asset inflation, going to the top 1% as a massive, serendipitous windfall
Stock valuations are an illusion of the worst kind (Stockman thesis)
P/E ratios are vastly inflated...earnings haven't increased materially since 2007
15x earnings to now 35x earnings, the result of monetary inflation
Tech leaders have driven the indexes today for the most part (FAANG stock effect)
Real world examples here, story format
Projected capital appreciation is falling (according to Vanguard et al) and yet new market highs keep getting printed, over and over
How long can the Fed keep this up, inflating the system?
Inflation of asset has become institutionalized, nobody even thinks about it anymore
At some point the music stops...right?
Bond yields will go up, but bond prices will drop causing big capital losses
When bond yields go back to normal, justification for ultra high P/E multiples will collapse, causing stock prices to adjust drastically lower
So what would actually happen to a typical retiree portfolio, real world examples here, story format
Similarly, financial asset inflation makes the carrying cost of debt dirt cheap, thereby encouraging households to over-borrow in order to make up for the shrinking purchasing power of their wages.
Accordingly, during the past three decades, household debt in all forms has increased from $36,000 per household to $130,000
Expand on household debt examples: credit card explosion, home equity boom of 2007
Part 2
Chapter 5: The slippery slope for investors now
Essentially when the Fed finally gets cornered and it becomes apparent that inflation is no longer transitory, and it has to deal with America's $85 trillion of combined public and private debt, there will be big corrections
Bond market is biggest bubble in history
Stories from bond market breaks past
Bond repricing will spread to the stock market
When all correlations fall to zero, as in 2007, "nowhere to hide"
Real world examples here, story format
Investors think high stock prices are sustainable because high P/E multiples are justified by ultra-low bond yields
But that will correct in the tech sector, deflating the value of the whole stock market since they have lead the growth for years
Everything prices off the 10-year bond, if that's 200 bp under inflation, can that last? It can't
Chapter 6: How to invest once inflation really takes off: how to protect hard-earned savings
Inflation-proof "real assets" investments
REITS/Real Estate
Art (Alternative investments)
Cryptocurrency
Commodities
TIPS
Growth Stocks that do well in inflationary times
Banks/Financials
Food
Healthcare
Energy
Building Materials
What will in fact work: The role of cash and true hedges
Stick to short-term cash-type investments (T-bills, savings accounts, CDs) cash and keep as liquid as possible
Cash is not trash, it will soon be treasure
Gold as a hedge
Buying puts (how to do this safely using funds or ETFs)
Federal government is not going away
Treasury bills are safe, if lower rate of return: likely 2% to 4% return once Fed is forced to let interest rates rise to check CPI inflation
Chapter 7: What Investments to Avoid and Why
Avoid meme stocks, tech stocks, flavor of the month trading, crypto schemes
Bubble thinking is a symptom of underlying sickness
Chapter 8: Debt Strategy
What to do with any debt you might have/credit cards, mortgage, college loans, medical bills
