Ben Hunt: Inflation Ahead!

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Ben Hunt – highly respected fund manager, author, and former professor/entrepreneur/venture capitalist – says that to be successful in managing your wealth, there’s only one question that matters:

Are we entering a deflationary future, or an inflationary one?

The strategies and appropriate investment targets for each are extremely different, so you’d better answer correctly.

Though Hunt says as long as you identify the trend “roughly” right, you should do fine. You don’t have to be brilliant with the exact investments you put your capital into. As long as they benefit from the secular trend, its massive scale and momentum will do the heavy lifting.

So which kind of future are we entering?

Hunt thinks we’re at a very important inflection point. That after decades of deflation (e.g., chronically declining interest rates), we’re now transitioning into an era of secular inflation.

The $trillions in monetary and fiscal stimulus so far, and the near-certainty of much more to come, are certainly a big step in that direction.

And with asset prices completely distorted from reality, a struggling global economy, and an inflationary outlook, Hunt thinks the coming years will be extremely rocky for investors. Lots of cross-currents, with the only guarantee being that the majority of investment predicts will be foiled – as there remain very few active investors alive who have any experience managing capital in an inflationary environment.

Which is why Hunt is emphatic that now, more than ever, is the time to partner with a financial advisor who understands the risks in play, can craft an appropriate portfolio strategy for you given your needs, and apply sound risk management protection where appropriate:

Anyone interested in scheduling a free consultation and portfolio review with Mike Preston and John Llodra and their team at New Harbor Financial can do so by clicking here.

And if you’re one of the many readers brand new to Peak Prosperity over the past few months, we strongly urge you get your financial situation in order in parallel with your ongoing physical coronavirus preparations.

We recommend you do so in partnership with a professional financial advisor who understands the macro risks to the market that we discuss on this website. If you’ve already got one, great.

But if not, consider talking to the team at New Harbor. We’ve set up this ‘free consultation’ relationship with them to help folks exactly like you.

SCHEDULE YOUR FREE CONSULTATION

This is a companion discussion topic for the original entry at https://peakprosperity.com/ben-hunt-inflation-ahead/

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The scenario that scares me the most is one where everything I own and produce goes DOWN in value, while everything I have to buy or pay goes UP in value.
Some call it “stagflation” I’m not sure thats exactly what I have in mind. Think of it this way, the elites at the top have never been more powerful in the history of the world. And we have never lived at a time when so much of life is arranged, managed, planned and controlled by a very small percentage of people at the very top. It clearly behooves them to arrange the market and government in such a way that squeezes the middle class [ ie anyone with assets ] while leaving themselves unscathed [ or even enriched ].
So what kind of world do you have when the price of almost everything the common man owns goes down, while the things that we are almost forced to pay for goes up? In such a scenario we’ll see insurance [ particularly the kind thats mandated for you to pay ] will go up. Taxes go up. Food and medicine go up. Fines, surcharges, banking fees, and levies all go up and up and up. Fuel goes up. New taxes are invented. etc etc.
All of this happens while your stock portfolio goes down and down. Your house loses value, maybe there is hardly any market for it at all. Your wages stagnate, unemployment rises, but taking your kid to the movies costs 100 dollars.
All these big industries will be supported by endless bailouts [ at your expense ] and so they will never experience the natural market forces that would bring prices down in order to bring relief to the public. Prices for the things you have to buy will stay high, supported by endless money printing, while everything you own withers and dries up.
“Inflation or deflation” seems like a sort of naive question because it assumes everything will rise or fall together whereas we see that there is already a deep disconnect between true market forces and those who are close to the spout of newly printed money.

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Everything you need (or are “required” to need), costs more, everything you don’t need, costs less. Or, anything you need to sell goes bidless, stuff you need to buy is unobtainium. On the plus side, there is always “Hey [your favorite endearment term here], look at all the money I saved today on stuff we don’t need. It was on sale!”

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Its what I believe is and will happen. Credit deflation with consumer goods inflation. The only disagreement is that I believe fortunes will be lost…Especially with reduced consumer spending, higher taxes, high unemployment etc. Its the worst of all worlds.

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Do the New Harbor guys feel BTC will shift the fiduciary responsibility of managers to include BTC as an asset class that must be part of any inflationary environment strategy?

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We actually need inflation specifically on consumer goods. While food, healthcare, real estate and education and services have increased at an alarming pace. Consumer goods have gone nowhere. In fact, many have deflated… And not just electronics like like TVs which was $350 in 1950, 1970, 1990 , 205, 2020 and tvs are still $350. But most home goods have gone down in price. though many like appliances and clothing have, just reduced quality and life span. But there is the bulk of things that have not kept pace with even the average 4% per year increase. I sell retail. And we average less than 2% per increase in the 20+ years I have been in business. Things are about to break. We are going to see hyper inflation I think. But, do not believe things like healthcare will tolerate a dime more. AND wages and salaries will lag.

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At 7 min, Adam asks the question: how long can this go on? Ben replies: the government controls the printing press and the narrative: IOW; there is no limit (until the inflation catches up with us). But then he acknowledges that Japan is going just fine buying back debt for decades. My comment: Thus, it’s conceivable things could last for a generation if we can avoid political unrest.
At 16 min, Ben fantasizes about “bottom-up” political change. Thanks Adam for politely calling our attention to the real world! My comment: I wish we had a pro moderator like Adam in the national election debates…
At 20 min, Adam hates being long a fake market, but Ben says we gotta dance. My comment: A’greed’ To both!
At 22 min, Ben again decries the “gap” between the “real world” and the “investment world”. And believes everyone needs a “financial advisor” now more than ever to not get “caught up in the narrative”. My comment: Well, if this were true, how have those investment advisors done over the last 11 years compared to the market using basic index funds? And if they haven’t understood the world to date, why will the future be any different?
At 23 min, Ben says it’s frustrating for money mangers, since they “know what the truth is” while the rest of the world doesn’t. Really? Really? If so, why have money managers done so poorly vs the market for over 10 years? Remember, a decade is half a person’s working life! My comment: Methinks Ben is way, way too confident in his understanding of what constitutes “value” today. When the Fed prints money, that’s real value if you take the cash and buy things with it (esp 10% NW in physical gold on the way up).
At 24 min, Ben acknowledges the market is “the only game is town” but people need to minimize their maximum regret, and thus balance TINA with FOMO in order to balance “staying wealthy” with “becoming wealthy”. My comment: I think the risk of serious inflation in housing/medical/education is indeed very real, so nobody can really “stay out” of this market without getting quite poor in real-world terms before it’s over. I also think a person can participate in this market with little risk using stop losses and a basic understanding of what is going on. That’s how I’ve stayed in the market during this decade of overvalue while being perfectly aware of traditional measures of value (which clearly don’t work anymore).
At 25 min, Ben thinks money managers “scratching their head” at this market are somehow valuable for investors because it makes them more conservative. My comment: I disagree; had one followed his advice it is unlikely they could have 3X NW in the last decade, again, with little risk by merely using index funds and stop losses and keep cashing out upon declines).
I’m disappointed Ben is still, at this late hour, seems to believe “company earnings” and the “economy” will have any relation to the markets over the next 5-10 years. It sure hasn’t over the last decade based on any traditional metrics. It’s been obvious to me that since the tech bubble era all our markets have become a Keynesian beauty contest. I think Ben and other money managers need to build a model that makes sense of our world today and makes accurate predictions about it, such as Michael Green has when he noted this discrepancy in the 1990s and cautions how value investors (what I clung to for a long time) need to “evolve”.
One more comment: Ben is a real class act, and this country needs more people like him. Thanks a bunch for this interview!

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We are going to see hyper inflation I think. But, do not believe things like healthcare will tolerate a dime more.
No. People have been screaming about potential hyperinflation since the 1970s. This simply cannot happen without complete government collapse, and the USA will be the last country to experience this if it does happen worldwide, merely because we have the nukes, all the food, most of the energy, and the world's reserve currency. Basically, we have the world by the balls, and hyperinflation is merely a political choice, not an economic reality. And trust me, housing, education, and healthcare can tolerate much, much higher prices. We ain't seen nothing yet, IMO. Hence, one better own some assets today. YMMV.
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BTC is 88% all printed. USD is NOT 88% all printed.
QED

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If memory serves me (which happens less and less these days), I seem to recall Chris Martenson the hagiography includes the story that he was none too enamored with “financial advisers” and he took over the management of his own finances.
Seems paradoxical that he now partners with “financial advisers”.
“Do the New Harbor guys feel BTC will shift the fiduciary responsibility of managers to include BTC as an asset class that must be part of any inflationary environment strategy?”
rotflmao.
Those guys don’t know squat about crypto.

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Gold is 100% printed.
QED.

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MKI -
Thanks for the kind words and thank you for your weekly dissection of the nuggets in these interviews that catch your attention. I’m guessing there are many readers who, like me, appreciate your ‘Cliffs notes’ to these conversations.
I also like how you find points of agreement and disagreement with each speaker and yet hold in your mind that, while you might not see things exactly as they do, each speaker contributes valuable perspective to the macro puzzle we are all trying to understand.
Ben is a great example. Like you, there were one or two points expressed I’m not sure I personally fully buy into yet. But that said, I’m confident of several things:

  1. Ben is waaay smarter than I am
  2. My own understanding of reality is boosted by looking through his eyes, even if my mind isn't yet on board with 100% of his conclusions
  3. Ben is a good-hearted soul doing his best to make a positive difference in the world (and succeeding!). He's definitely a guy I want in my tribe as we face the uncertain future.
My goal for these weekly videos is to bring in quality big thinkers/highly experienced guests and let each listener sift the wheat from the chaff for themselves. I trust that the PP audience has the maturity to still respect these expert perspectives even if they don't always agree with every point made. Or, as F. Scott Fitzgerald put it: "The test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time and still retain the ability to function." You, in my opinion, are an example of that maturity of mind. Thank you for that.
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MKI, I disagree whole heartedly. I know healthcare can not tolerate much more. I am self-employed, and I cannot afford health insurance costs for myself. And what is worse even with the ridiculous costs, I can’t even get a drs appt in a reasonable amount time to get enough treatment to even come near my deductible for the year/ Basically, the access doesn’t keep pace with cost of small deductibles. So, there is no reason to go. I no longer believe in western medicine for chronic conditions. So barring being hit by a bus, there is no reason to have insurance. ( and there actually cheap insurance for accidents) I will go uncovered for the first time in a long moving forward. So, to the answer of healthcare can tolerate more? Nope not for me and my family. We are done completely. And education cannot tolerate more either. Look at all those scam schools, that the govt got stuck with the debts. But besides those, kids are leaving school with a 100-200k of debt… its a house… People are no debating whether an education pays… And the verdict is probably not in terms of yesteryear. So, again, I think people are re-evaluating the costs of school and the return of being owned corporately.
As for the complaining about hyper inflation since the 70s. I have lived through the 60s and 70s and I can tell you inflation in the 70s was a very real thing. In fact the average home price, autos AND salary increased 3x in the decade. Note: salaries kept pace ( it was the older people who suffered but they actually didn’t as most owned real estate that purchased at what is now silly prices ) We have seen nothing like it since. And I do not recall anyone complaining about inflation since then. I do recall a housing bubble in the early 00’s but that was not real. AND was well needed actually to correct. Too bad the politicized that and crashed it when it did not warrant. ( average price of new home doubled between 2000 and 2005 - but didnt tell you that that home also increased in size 50% and had high-end finishes: instead of linoleum, there was tile and hardwood; instead of carpet there was hardwood; instead of firmica counters, there was granite. NO comparison between those homes.
As for the collapse of the US domination of the world markets, I say, wake-up call for you… You are living in 20 year old history. We do have some fuel reserves because we have gotten used to cheap oil that we control from the middle east. However, our ability to control those countries and the money is at severe risk currently due to political and religious reasons. As for the world being pegged to the US dollar. Nope that is going under. The chinese and russians know its only a matter of time for the US and have been positioning to take that lead. AND when that happens the US will not be the last country to suffer , it will be the only. The US has demonstrated with corona virus that it is not a super power of anything… anymore. Not sure where you live , but sounds like you are one of the US self-lovers , that think you are the center of the universe… Trust me china has found out that they and the rest of the world can be better consumers than the US. I know from personal affairs with Chinese factories, they dont need us or even want us anymore… AND we are going to be in a fight very soon to get anything from them… They produce everything we need and I mean everything , and they are nat’s ass away from turning off the faucet… AND they will not be the ones to suffer and they know it… I am not sure where you are living but your statements reflect some knowledge that is about 2 decades old… So not incorrect , if this is 2002. But as for today and what is happening , its like you cant let go what used to be accept what is today…

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China is a net oil importer so if the world gets “reset” it will be in a similar situation as the the US in 1970’s. Net oil importer balancing export of dollars and manufactured goods. The difference is that apparently China has lots of gold.

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nordicjack, to summarize your points and answer them:
1. Healthcare cannot go higher because prices are already ridiculous high so I cannot afford it now and besides the service is bad so I will go uncovered.
I don’t disagree with your assessment of health care which is a government scam. But I see no evidence of this scam ending anytime soon. Why? Because the PTB are cashing in and the public is not very bright.
2. And education cannot tolerate more either.
I don’t disagree with your assessment of education itself (funded by law to put students & taxpayers into lifelong slavery). But I don’t see it slowing down. Why? Because it’s free money people can get today, so they will likely continue to take it.
3. I do not recall anyone complaining about inflation since the '70s real inflation.
Many have been warning about hyperinflation due to our national debt since the '70s (I’ve certainly worried about it myself). This has never yet materialized. However, serious inflation did enter assets prices (stocks, housing) and any costs controlled by the government (education, healthcare, gov wages). As I mentioned, I don’t see this slowing down. Why would it? It’s a gravy train, and the PTB are cashing in.

As for the US domination of the world markets, I say, wake-up call for you.. You are living in 20 year old history. Sounds like you are one of the US self-lovers that think you are the center of the universe...your statements reflect some knowledge that is about 2 decades old...its like you cant let go what used to be accept what is today... Well, what can I say? The definition of ad hominem comes to mind...
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People are going to start cashing out of the market, driving up purchasing power of the dollar. If oil stays low deflation is a certainty. We have had inflation, not deflation. And all of those manufacturing jobs supposedly coming back to America, thus driving prices up? Not going to happen. Those jobs will go to India, Vietnam and Indonesia.
And people working from home in tech may have to compete with Asians too.
So, all around a very spooked atmosphere for consumers and investors that will have people pulling out of the market and parking in cash. Should be a very low velocity environment.
You need another FDR and sky high taxes on capital gains and high incomes to restore confidence. Major wars are, hopefully out of the question, but cheap universal health care might help bootstrap things.
Japan has had next to no inflation for years in spite of tremendous government stimulus.

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“O, think how, to his latest day,
When death just hovering claimed his prey,
With Palinure’s unaltered mood,
Firm at his dangerous post he stood;
Each call for needful rest repelled,
With dying hand the rudder held,
Till in his fall, with fateful sway,
The steerage of the realm gave way.”

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Be your own central bank. No need for advisors.

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The Government controls the narrative? I don’t think so. Governments take their cues off the citizens and reflect back what they think the citizens want to hear. Within states where free speech reigns, there are many views competing from which the general view emerges. That aggregate view forms the narrative. That narrative can be either positive or negative in tone. At extremes it is either abjectly fearful or fearlessly complacent.
 
Ben mentions that the stock market is President Trump’s scorecard. It is a very good proxy for societal growth but it is worth remembering that the longer a market has been trending in one direction, the greater the chance that it will do a U-turn. The Federal Reserve cannot legally buy stocks but it can be argued that it forces investors to buy more stocks, indexes, ETFs etc. because they are chasing higher yield.
 
We like to explain markets in terms of cause and effect. The media can put one explanation forward in the morning followed by an exact reverse explanation in the afternoon when the market does an about turn. That does not make sense to me. Actual market conditions do not change very rapidly but mood can. Financial journalists then respond with a post event rationalization which often completely contradicts the explanation of a short time earlier.
 
People buy stocks when they are feeling good and sell when they are fearful. Stock Markets have no absolute limit on supply and demand because share issues can be created at any time as can buybacks. This makes valuation all the more uncertain so people tend to follow what everyone else is doing i.e. they herd. Much of the time a market is range bound but occasionally it can be a stampede in either direction. Sell stops are no protection when a market gaps down.
 
Stock Markets, because of the great degree of uncertainty, are in aggregate driven by the prevailing mood. Elliott Wave Theory posits that the prevailing mood is endogenous and not subject to any discernible outside influence. In other words, it is unconscious. It follows a wave pattern from peak to trough and back again. The best guide to where that mood is on its wave path can be seen in the major stock market indexes, particularly the Dow30 which has not yet exceeded its February high…
 
My view is that the same complacency (or lack of fear) of governments that have brought in ultra low interest rates is parallelled in the private sector by a fearless (complacent) approach to the stock market. In other words, the government does not lead the private sector (or vice versa) but both public and private sectors are driven simultaneously by the same psychological force.
 
Anyone who has any knowledge of technical analysis of stock markets will know that the Fibonacci sequence (1,1,2,3,5,8,13 etc) plays a large role in chart forecasting through the phi golden ratio of 1.618. The great 12th century mathematician Fibonacci, who popularised the Arab-Hindu numeric system over Roman numerals, used the sequence to solve a problem involving the growth of a population of rabbits. It is a mathematics of growth which manifests everywhere in nature. Elliott Wave Theory largely follows this sequence of 5 waves of an upward impulse (3 up separated by 2 down) followed by a 3 wave correction (2 down separated by 1 up). Note the 5 and the 3 - both fibonacci numbers. Markets, driven by waxing and waning mood, seem to stick to this 3 steps forward and 2 steps backward growth pattern in all time frames.
 
Of course, governments love low interest rates given that they are the largest borrowers. It makes sense to think that they deliberately manipulate markets. Perhaps they do think that they can successfully do this but my experience is that all of their attempts to interfere bring on side effects which are counter-productive. The irony is that the Federal Reserve does appear to take its lead off market rates. Check Federal Reserve rate changes against 3 month notes and the Fed almost always follows the market.
 
There are just so many participants in bond and stock markets that I think it would be impossible for any government to be able to influence any market over the longer term. It’s just that we humans always like to have someone to blame when things get rough and so the government or the Federal Reserve are easy targets for venting our anger.
 
So, in answer to the question of how long the present conditions will last, it will not be as Ben says: “so long as they control the narrative” but because the aggregate public mood changes. Politicians are always highly attuned to and willing to respond with a change of narrative. Politicians who lead are a rarity, most of the time they simply reflect the aggregate view of their constituents.

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…my goodness we were supposed to be in a strong Inflationary cycle from the Financial Crisis that still hasn’t happened. With so many unemployed and millions more that have no money set aside for any emergency. I mean, the baby boomers alone don’t even have $1k for any emergency. We can see, we can feel and we can make good decisions just by following what really has happened in the economy with every crisis.
Yes, we are printing Trillions and yet the M2 or money supply movements into the economy has been stagnant or non existent which reflects heavily on why the high inflation hasn’t happened. I just don’t see how the 1% can move inflation within the market because of their needs and wants. Give the money to the middle class where it truly belongs then I’ll show you the inflation you expect.
I have taken the stand that you have to dance, it has been the favorable thesis since 2008 and I thank God I took to listening what the market has been telling us and the ““market””, as the market has been correct to date if you wanted it to do is go up. “Buy the dip” has been very profitable, a blessing for sure.
Inflation will not happen for a while and maybe be quite muted for a good long time. I just can’t wrap my head around inflation or high inflation until you can square the hole that’s been left when 20 million good folks lost their jobs. No velocity of money anywhere and the one percent surely cannot cause any inflation because their numbers just don’t show they could buy enough of anything to cause the inflation. Give the cash directly to the middle class, then we will get the inflation. As a side note: I would rather have a major jobs program like an infrastructure build that puts the cash in every corner of our country as all these areas will need the electricity themselves and we have money moving everywhere and benefitting everyone with sustainable jobs and good wages. Do this and you will get inflation and the coffers will spill over with new taxes to pay for the bailouts. I have no issues helping to save our country by paying more in taxes so long as we take care to pay back the money we created to save our economy.
The reason I have GOLD and Silver is to hedge everything. I think it’s probably more realistic that we are in Bankruptcy now, and that these precious metals will be used again as a store of wealth, accepted everywhere as cash just use your debit card. Good if bankrupt, good if money and I have my precious metals in hand, none of it paper. If you do not hedge then you are being irresponsible are my thoughts. History has shown that these precious metals will be very relevant if the shit really does hit the fan so it gets a lot of attention now than at any point in my life.
Good luck Folks, I really don’t care if we get deflation, inflation, stagflation, we will have to deal with whatever is, so, I just pay attention so I can preserve the hard earned cash made, to live another day.
What I can control and produce with my labors that are cheaper to do than what is currently available. I know oil is going on a long term run so gets my dollars. I know I can grow my food and pretty much eliminate that from my life/budget and it’s so healthy for me on many fronts. Good food, good exercise and a great attitude on life because I feel so good doing everything necessary to maintain my water supply, growing food, maintaining the homestead and keeping my home warm and fuel available for cooking. How will I manage the inflation or deflation when I have to wait until the receipts come in after the harvest?! I worry then for what I can do today. Inflation won’t arrive for me this week, month, until the end of next year? Maybe it will always just be muted, nobody knows really. What goes around, comes around so some day, of course, we will have inflation but show me where and how badly. It’s all a guess and I do my best guessing as inflation shows itself clearly. What’s the time horizon? Nobody, not even the experts can show the when or the seriousness when it isn’t here yet. It’s a process. So I only concern myself with a deep pantry and a few fuel sources so I can use the cheapest form of energy for that particular time period. This is inclusive of all the core issues that face our family each and every day. Redundancy and resilience are my concerns. I rest real easy when I know that all I have to do is have the time to act calmly when things start getting a bit silly. I don’t want our daily lives to change at all why we take the time to figure out what needs to be done. I sure as hell don’t want my first thought to be: get to the store and buy everything, and certainly hit the toilet paper aisle first!!! I have long ago figured that one out and have more toilet paper than I could use in a year. I figure if my neighbor needs a roll then I may get a half cord of wood stacked for my kindness. Of course I would refuse this lopsided windfall but my neighbor did just this before I could tell him it isn’t a fair exchange. The beauty of this is he is my builder for our Cabin build and I want his friendship and support because he is a character Man, is a doer not a taker and I like these type Folks.
Good Luck and this is a terrific discussion today. Adam has made the weekend a fun, thought provoking part of this site. I think it is getting better and better and that goes to Adam and his commitment and hard work. Again, I gravitate towards doers instead of talkers, Adam is a doer. Just the truth and it resonates with so many respectful comments by everyone, especially when the topic isn’t so clear cut that we all see the same thing. I do not see the inflation yet and we have experienced so many supposed inflationary assumed events but the 2008 crisis nor this Virus has shown very little inspite of the fact we have created so many thin air dollars to help cause inflation and it hasn’t appeared. I work very hard to not be so rigid, to live openly with my biases. I want to change immediately when I recognize that I am wrong. I am motivated to see things as quickly as possible, so again, I DO NOT FEEL inflation is something I need to worry about just yet. I do look forward to 2021 because I believe we have to rebuild our inventory such as lumber and so many other areas to get things done. We MUST return home many businesses of national security interest such as pharmaceuticals and we need this dome yesterday. We as a country need so much more resilient than we have today so this will be something we deal with immediately after the elections and remake America into the image we have all been raised thinking we had. My biggest bug up my rump is the Media and I am especially insulted by their censoring of the news, the truth and for this reason alone I hope they get broken up and that the press itself start to pride themselves on a truly unbiased way of writing again. If that really ever existed in our past anyways. We have lost the competitive nature of the news as so many papers closed in the last 50 years. I hate that I don’t get a daily paper and get the News expected from writers, writing about our community that needs to be promoted more, to help the many of us.
I also do not like giving money, our tax dollars to anyone to sit home. I say you need help, then fine, you got it but bring your watters to our office because we are cleaning up the canals, lakes and streams from all the trash that has ended up in them for the last 50 years. It’s time we start to have some pride in community as a thank you for the help the community has given to you and your family. Honestly, it only takes leadership not management. From that clean up I believe we all benefit not to mention the environment…Peace BOB