Sorry, Jerome Powell, Inflation Won’t Just Be Transitory – Here Are Your Options To Protect Your Money

Only you can take care of your future regarding money.

Do you remember what Fed Chairman Jerome Powell said earlier this year about inflation in America? If not, let me refresh your memory.

Jerome Powell told us then that inflation would not be a problem in the months to come. The situation was under control. This was already a denial, as the monetary policy conducted by the Fed since April 2020 could only lead to a surge in inflation.

The Fed cannot indeed lower rates to zero for many months, conduct a massive asset purchase program of at least $120 billion per month, and print 35% of all U.S. dollars in circulation in only 18 months, without imagining that this will have repercussions on inflation.

Inflation is over 5% in America for several months

During 2021, the evidence grew as inflation began to climb in America:

In April 2021, when inflation reached 4.2% in America, Jerome Powell started talking about transitory inflation. There was no need to be overly alarmed because according to Jerome Powell, things would return to normal on their own.

Since then, inflation has been above 5% in America. Despite what Jerome Powell said, this inflation is not transitory.

So as an individual, you must act to protect your money from the ravages of monetary inflation. Many people refuse to invest for fear of losing money. However, by doing nothing, you are taking the biggest risk: the risk of losing purchasing power.

In the current state of uncertainty in the global economy, I'm going to walk you through the options available to you to protect your hard-earned money.

The real estate market is an option to be left aside because it is already overvalued

Even though they are starting to rise again, 10-year U.S. Treasury bonds are only yielding around 1.6% currently. With inflation at 5.4% in September 2021, that's not where you should go to protect your money.

Real estate can be an option. Indeed, real estate is a safe haven over a long time, especially since when consumer prices rise, real estate prices generally do the same. The only problem is that the real estate market today is already far too expensive compared to household incomes.

So far, this real estate bubble has been circumvented thanks to low-interest rates, but the past and future increases in interest rates will soon put an end to the bubble and set the record straight. I prefer to stay away from the real estate market. Also, it should be noted that this is not a market that everyone can afford to enter.

Commodities are overvalued. Gold still has some potential if you like the yellow metal.

With prices soaring, some will tell you to go into the commodities market. This may be an option, but don't put too much money into it because commodity prices have already risen sharply in the last year and a half. On the other hand, after the catch-up economic recovery of 2021, global growth will mechanically slow down, especially due to rising inflation and bond interest rates. This will slow down or even reverse the surge in commodity prices by the end of 2022.

So what about gold, silver, and other precious metals? In normal times, they can be excellent safe havens against inflation. However, in the current reflationary phase, this has not been the case. Silver and platinum prices have even fallen sharply since the beginning of 2021.

Gold prices have struggled since the all-time high reached in the summer of 2020 above $2,000 per ounce:

I'm personally not a fan of gold, which has many flaws in a world where everything is going digital, but if you have confidence in this time-tested store of value, you may want to consider allocating a part of your portfolio to it. Maybe 10 or 15% depending on your profile.

Indeed, as central banks turn off the printing press and bond yields rise, gold is likely to regain its strength in the eyes of investors.

The stock market is in the middle of a bubble. Inflation-linked bonds may be an option to consider

While the bad economic news continues to pile up week after week, the stock market continues to move close to its ATH:

While the rally is likely to continue as long as the Fed keeps its ultra-accommodative monetary policy in place, you must remember that trees never grow to the sky. This time will be no different. A stock market crash will happen sooner or later in the coming months.

I would not go to the stock market today to protect my money from inflation. I would rather take my profits before the crash.

Some people talk to me with interest about inflation-linked bonds. After a few difficult years with very low inflation around the world, these bonds can now be a good hedge against inflation. The interest on these bonds varies according to the rate of inflation. In other words, as inflation rises, so does the value and coupon of your bonds.

Those who invested in these bonds at the beginning of 2021 had a good idea.

Bitcoin is attracting more and more investors as a store of value for the world of the future

The final asset that should get your attention to protect your money from inflation is Bitcoin. The first U.S. Bitcoin ETF has just been approved by the SEC. In the meantime, a second one has also been approved. By the end of 2021, several more could be approved, including some based on the Bitcoin spot market.

American investors want Bitcoin for the good reason that the digital currency invented by Satoshi Nakamoto is proving to be a formidable bulwark against inflation if you can accept the volatility that is part of its functionality.

At the beginning of the COVID-19 crisis, the price of Bitcoin was around $9K, with a low reached under $4K during the March 2020 liquidity crisis. So we can say that Bitcoin has performed at least 6x since then. While gold was struggling overall, Bitcoin would have allowed you to multiply your stake by 6.

The key is to have enough confidence in Bitcoin to be patient when its volatility hits, as it did in January 2021, May 2021, and September 2021.

The decision is yours as always to take care of your money

I have just presented several options to consider to protect yourself from the inflation we will continue to face in the coming months. My choice is Bitcoin. That's just my choice. It's up to you to see if Bitcoin is right for you and if you can handle the volatility inherent in a free market that allows its users to set the equilibrium price at any time.

If not, gold may be a better option for you. But don't forget that even legendary investors like Paul Tudor Jones now say they prefer Bitcoin to gold as a hedge against the great monetary inflation we are experiencing.

This is a sign that the world is changing, and that you too should evolve so that you don't find yourself out of date in the future.