Latest / Money Grows on Trees / #247 - How To Protect Your Wealth In The Australian Dollar Collapse

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#247 - How To Protect Your Wealth In The Australian Dollar Collapse · Money Grows on Trees

0:00
What I don't believe in is buying a completely ridiculously overpriced
0:04
property that's got negative cash flow, sending you into a financial spiral. And
0:07
that's currently what is happening because prices are ridiculously out of control. Bitcoin's
0:11
a hedge against inflation. Oh my God. Think
0:15
about Mark Zuckerberg. Think about the skills that he applied. He
0:18
became worth a hundred billion dollars. Do you think that outperformed inflation? Yes.
0:22
Do you think Jeff Bezos outperformed inflation? Yes. Do you think Warren Buffett outperformed inflation?
0:25
Yes, the best way to hedge inflation is to actually... I'm Lloyd James
0:29
Ross, seven-figure investor and entrepreneur, and I've helped thousands of
0:32
business owners and professionals turn financial stress into
0:35
success. If you're stuck in old money habits, overwhelmed by investing,
0:39
or unsure where to start, this is for you. I'll give you the mindset
0:43
and strategies to take control, grow your wealth, and achieve
0:46
financial freedom. It's time to make your money work for you. How
0:50
to protect your wealth in the Australian dollar collapse. Inflation's up, the
0:54
dollar's down, leaving your money in the bank. It's like putting it into a
0:57
leaky bucket or chucking it into the fireplace. But here's the thing, smart
1:01
money people and highly intelligent people financially have beaten inflation before.
1:05
So in this episode, I'm going to break down exactly how you can protect your wealth
1:09
even in uncertain times like now, using proven strategies that
1:12
worked in most of the cases of brutal inflation in
1:16
the past. So some economic history tied into this. So
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if you haven't watched the previous episode yet on why the Australian dollar
1:23
is collapsing, go and watch that now. Go watch that episode, because we'll set up
1:26
and tell you why it is actually falling. Because once you know why
1:29
it's falling, then the how-to of how to get out of it will be in this episode now.
1:33
So every few decades, Inflation
1:38
seems to roar back, which means the value of the currency falls. And
1:42
you have to adapt or you're going to get lost or fall behind. Your
1:46
wealth is going to get hit. And history shows us that inflation can
1:49
be survived and even used to grow your wealth if
1:53
you play the game correctly. So just
1:56
to be clear, in the past there's been some examples
2:02
or real-life experiences where hyperinflation has
2:06
completely decimated the economy. And as I said on the previous episode,
2:09
it has crafted things like World War II from it, right? So hyperinflation, Zimbabwe,
2:13
Wyoming, Germany, it's extremely unlikely in Australia
2:17
we're going to see hyperinflation to that extent, where we're taking
2:20
a wheelbarrow of money down to the shop to buy a loaf of bread. But nonetheless,
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It's inflation's already eating away at your wealth, all right? We are
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a developed economy, thankfully, with institutional safeguards and we've
2:31
got an independent monetary policy and all these sort of fiscal controls in place
2:35
to mean that our money is safe from hyperinflation, but
2:41
An economy or a country and a government can get a bit ahead
2:45
of themselves and they can start pulling too many levers, which seems to
2:48
be happening at the minute. It's causing more inflation than
2:51
normal and it's slowly draining away the value of your wealth every
2:55
single month and every single year. Let's get
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tactical. I'm going to take you through real examples
3:03
of how you protect your wealth in periods like
3:07
hyperinflation or in periods like we're seeing now, which is rising inflation. So
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the very first one, the simplest one, and before I
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explain these, let me just explain one economic concept that you have to understand. To
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prevent inflation wiping away your wealth, what you want to do is
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buy assets, typically hard assets, not
3:26
always, but typically hard assets that you only
3:29
buy once and never have to buy again. Because once
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you bought once with today's currency, no matter how much inflation
3:36
runs away, you never have to worry because the value of that will follow the
3:39
currency. And there's no proven better way to do that than
3:43
with property, okay? Now you would have seen on some of my ads lately and
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some of my content, I'm just like killing property. I'm like, property, you
3:50
don't need it. And what I mean by that is, cause I had a friend of mine asked me
3:53
today, he goes, Lloyd, What's this? What are you doing? You
3:57
don't like property. I'm like, oh yeah, okay, the ads are working pretty well. I've
4:00
had a vendetta against it at the minute because what I
4:04
don't believe in is buying a completely ridiculously overpriced
4:08
property that's got negative cash flow, sending you into a financial spiral,
4:12
and putting you under extreme financial pressure that you feel like killing yourself. I
4:15
don't want property to do that to you, and that's currently what is happening because
4:19
prices are ridiculously out of control. But the reason for it
4:22
is because people are running to it to prevent inflation wiping away their
4:25
wealth. And they know that property is one of the ways to do that. So
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here's, I want to caveat this. I believe in buying property when
4:32
it's appropriately valued for the right reasons to produce passive income over
4:36
time to put you in a better financial position. Without a doubt, I'm a big believer. However,
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we haven't seen property at that price range in this country for
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many years. So right now, I'm against it. And
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I don't own any. Because I don't think it's going to create any wealth in
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the next couple of years. It's extremely overvalued. That's
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why I've started a rebellion against it. Because there's other smarter ways
4:57
to make money and grow your wealth than property. And I became a multi, multimillionaire
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without owning a single house. So there are ways. And I want to give you
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hope that you can do it too without having to clamor into a property you can't afford. I just
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want to caveat that, just so you know. So check it
5:11
out. For an inflation hedge, property is
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good because once you buy it once with specifically with a mortgage to if
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you can afford the mortgage and put a reasonable deposit in there. Because
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the value of the mortgage falls away over time towards the bank. So like the
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bank lends you $800,000, in the next say, I don't know,
5:29
20 years, it's worth $400,000 or less. So
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inflation is working for you if you have a mortgage. And the other thing
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too is you don't have to keep rebuying the house necessarily. You do have to do
5:39
some upkeep. But what you don't want to do is buy a property that requires you
5:43
to continually put money into it because you do get hit by inflation. So here's an
5:46
example. Let's say you bought an apartment and
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the apartment's got high body corporate fees, it's got high maintenance, it's
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got high insurance, it's got high operating costs, that could be
5:55
a problem when it comes to inflation because you're having to put money in all the time. Whereas
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if you buy a house that doesn't have the same running costs, perhaps
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something that's a bit newer or you're buying it undervalued. more
6:08
land attached to it, then you're going to find that it's a better hedge, just so you know.
6:13
Here's a historical example. In the 1970s, when there was a
6:16
massive oil embargo and inflation shot up to 13% and interest rates
6:19
shot up to 17%, property owners who already owned a
6:22
property thrived because the rents climbed, but the fixed rate
6:26
mortgage they had, they were able to keep that in today's dollars. They
6:29
were actually able to devalue their mortgage, which is amazing for
6:32
a mortgage holder. The same thing happened in
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Australia during the early 2000s boom, I'd say the late 90s boom, which
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is the last real estate boom we had, which is 25 years ago. And
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real estate outpaced inflation due to rising wages and population growth. The
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same kind of thing has happened over the last few years, but
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now it's a point where not many people
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can even buy a house. So it's not as effective
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right now. So here's how to win when it comes to using
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property as a hedge. One, focus on positive cash flow. Do
7:04
not put yourself in a position just to beat inflation by house when you're putting
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yourself in an absolute financial bond that will cause you to commit suicide to
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get out of it. This is crazy. People are doing that. People
7:14
laugh that it's like, I saw an article with a guy recently,
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he felt like he had nowhere to go financially and he killed himself. This is what we're
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doing to people because we're focusing on, I must own a house to have any social
7:24
status in the country, which is a joke. You can't take it with you when you die.
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Make sure if you're going to do property, have high cash flow.
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wherever possible. I know it's difficult in this interest rate environment and the price of houses, crazy,
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but still possible. Lock in wherever you can fixed interest
7:39
rates. Now in America, you can lock in 30 year fixed interest rates, crazy.
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Anyone in the States who bought a house can lock in a 30 year fixed term at
7:47
two and a half percent, killing it. But we don't have that in Australia. We
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don't have those types of fixed rates because we don't get the same borrowing
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power that you get in America. The same capital is not available
7:58
in Australia. So in Australia, we can have fixed rates for about four to five years.
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So if you're on a fixed rate now, just so you know, that's going to stop in
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the next four or five years if you just fixed it. So fix it wherever you
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can, but be aware that it can come off the fixed rate. Avoid overleveraging
8:13
and speculative property traps. Boom, boom, boom. This is a big warning sign for
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right now because people are overleveraged and there's a massive speculative
8:19
property bubble. Right now, just be aware
8:23
of it. You're buying into the biggest property
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bubble in the history of the country. Last time, A
8:30
friend of mine on X, well, acquaintance on X, appropriately
8:35
sent me to some history, some economic history in Australia. The
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last time we had an immigration-led boom like we're having now,
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boom, was in 1870 to 18, actually it
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was, yeah, it was 1870, 1890, I want to say, late
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1800s. And what happened then was there was a massive gold rush in
8:53
Australia and had huge immigration coming to Australia, and
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of course, a massive property boom. just like what's happening at the
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moment from immigration. But if you look at
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the data, the property market
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didn't recover for like 70 years. 70. Yes.
9:12
You think this is the first time there's been an immigration-led boom in the country? You're wrong. So
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can property go sideways and down for seven years? Yes, it can. Happened
9:20
in Tokyo in 1988. The property market in Japan still hasn't recovered.
9:24
And I know what you're going to say, but Lloyd, they didn't have immigration in Japan. Well,
9:27
they did in Australia in the late 1800s, and it didn't recover for like 70 to 80 years. So
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just be aware that yes, property can be used as a hedge to
9:36
protect your wealth, but buying in an overpriced bubble and buying too
9:39
much leverage and not being able to service it is a problem, it's a worse problem.
9:43
So don't be too pedantic about protecting your wealth when you're gonna put yourself
9:46
in a financial bind for the rest of your life. You don't want to handcuff yourself just to get away from inflation.
9:50
What kind of life is that? Next way to prevent your
9:54
wealth being degraded is high interest savings accounts. I
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know it's not as effective. I get it. But here's where it helps. It
10:01
doesn't build wealth from your money, but it does protect it from inflationary
10:05
wipeout. Meaning, if you put your money in the bank, it's like a
10:09
bond. You're lending money to the bank, and they're paying you accordingly for
10:12
the borrowing of your money. That's kind of what it is. It doesn't sit in a
10:15
vault. Just sit there, and they just pay you money. They
10:18
actually use the money themselves to lend at a higher rate. For example,
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right now, you can I've got some money in the term deposit myself, and
10:26
the term deposit is producing about 4.5%. You can get better. Up
10:29
to 250k, you can get better savings accounts in some
10:32
places like St. George and ING. I think they're like 5 and 5.5%. This is
10:36
in Australia. In America, not so easy. You
10:39
can put your money into treasury bonds, which is probably better than
10:43
a savings account in the States in the bank, and they're paying about 4.5%. So
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whether it's treasury bonds or treasury bills in America, or
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whether it's Australian savings accounts, you can get about 4.5% return
10:54
on your money, and that will prevent at least 4.5% a
10:58
year of inflation biting away at it. Again, not the best,
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but it's certainly a place to store your wealth. And in Australia, we
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have government guarantee of your money in the bank of
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up to $250,000, which means if there's a bank run and the bank
11:13
collapses, the Australian government will give you your money back. And
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the same in America too, by the way. And I don't think it'd even stop at $250,000. I
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think they would just honor it and get it going. Otherwise, we don't have an
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economy. Real use case, here's what happened in countries with high inflation like
11:26
Brazil in the 2010s, smart savers rotated into
11:30
cash high-interest savings accounts and
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short-term bonds. So there's an example of what happened in Brazil and this happens all
11:36
the time. I mean, even looking at Warren Buffett right now, just so you know, he's
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put $370 billion into
11:45
short-term treasury bills, just so you know. So here's an example of how he's
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putting his capital, not into risk assets, he's putting it into risk-free
11:52
assets, getting a 4.5% return on $370 billion.
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So if it's good enough for Warren Buffett to protect himself against inflation, good enough for
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you and I, all right? So that's the other way to do it. All right, the next way to
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hedge your bets to a collapsing Australian
12:06
currency is the global hedge for a weak Australian
12:09
currency, which is actually the US dollar. And you're probably thinking to yourself,
12:13
why would I trade one fiat currency that's getting killed by inflation for
12:16
another one? Well, here's why. The US dollar is the world's reserve currency,
12:20
which means during times of inflation and during times of uncertainty, people
12:24
flood to the USD, not the AUD, not the Australian dollar,
12:27
the US dollar. And so what happens is the value of that dollar
12:31
is more steady against other assets. And so you do have a better hedge
12:34
against inflationary pressures if you own the world's reserve currency. You'll
12:38
notice soon when I explain some examples of what's happened during hyperinflation if
12:42
you have USD it's better. It's the last currency that's
12:45
effectively Disappeared and so you're better
12:48
off to own that than you are to the only Australian currency during risk off
12:52
Experiences like we're seeing now. Okay, so some historical examples
12:56
of what happened in 2008 the global financial crisis when there
12:59
was a massive run on banks and US banks were going bankrupt and Even
13:03
then, the Australian dollar fell from 98 US cents down to
13:06
60 US cents. In a matter of weeks, it just collapsed. Bang. So
13:10
even though the American economy was wobbling, people
13:14
flood to the US currency as a safe haven. It's a safe haven asset,
13:17
just so you know. So it can protect you from a falling Australian
13:21
dollar if you hold USD. And a lot of our wealth is held in
13:24
USD currency, not Australian currency presently. Okay,
13:28
in 2020 in COVID, again, the same thing happened. The Australian dollar was 70 cents, 70 US
13:31
cents, it was buying 70 US cents, and it dropped down to 57 US cents because
13:34
there was uncertainty. People thought the world was gonna end. And when that happens, they
13:38
run to USD denominated currency, okay? It's
13:41
just, it is a quick way to hedge your bets
13:44
against a falling Australian currency. The next way, this is arguably the
13:48
most popular way to hedge inflation. Not
13:52
necessarily the best, but it is timeless. And this has worked time
13:55
and time again for thousands of years. And of course,
13:58
you guessed it, it's gold. Not my favorite asset because it's
14:02
not productive, meaning if you have an ounce of gold today, in the
14:05
next 100 years, you still have an ounce of gold. It's
14:08
like, I've talked about whether you want to own the goose that
14:12
lays golden eggs or whether you want to own the golden egg. Owning gold is like owning one
14:15
golden egg and then hoping it grows in value over time, which it does
14:18
against inflationary pressures, but I prefer to own the goose. However,
14:22
if you want to buy gold, and that's why gold's up like 40% year to date, is because
14:26
it protects purchasing power during crises. And so you'll see gold go
14:30
up in value when there's inflation happening and also when
14:34
there's global uncertainty. And here's why. Because there's limited supply
14:38
and they can only pull out gold over a certain period of time So there's like this
14:41
global demand for an uncertainty limited supply eating a scarcity hedge
14:44
and that's why it's a great example of what you can put your money into
14:49
to protect it against inflation so during the German crazy
14:53
hyperinflation when they're taking wheelbarrows of the the paper mark down
14:56
to the to the to the shop to buy a loaf of bread really happened in 1923 and
15:00
Gold was the go-to there.
15:04
So people that moved their money into gold as that paper currency
15:08
collapsed, they protected all of their wealth. Same
15:11
thing in the 1970s, the oil embargo in the United States, inflation went crazy. Gold
15:15
went from $35 an ounce to $800 an
15:19
ounce in under 10 years because of the massive inflation.
15:23
So you can see very clearly when there's massive inflation, gold is
15:26
a run-to asset for a lot of people, which is why it's had such a tremendous rise in the last
15:30
12 months. but in times of risk on, doesn't do anything. Goes
15:33
sideways, goes nowhere, doesn't produce income. So it's not a great financial freedom vehicle,
15:37
but it's a great currency hedge, right? Gold didn't make people rich, as they say,
15:40
but it sure meant they didn't get their wealth wiped out. Just quickly,
15:44
if you're ready to take control of your finances, but feel stuck on where to
15:47
start, I have a solution. My book, Money Bias Happiness, simplifies
15:51
investing and wealth building with practical steps to help you achieve financial
15:55
peace. Get your copy via the link in the show notes, and let's get your
15:58
money working for you. Now, back to the episode. Next one,
16:02
oil. All right, black gold. I'm reading a book at the moment called Titan.
16:06
It's a John D. Rockefeller story, the richest man in history. He would
16:09
be worth in today's dollars about $600 billion if we wind it forward with
16:12
inflation. And he owns Standard Oil. And so if you look
16:16
at one of the greatest hedges against inflation is oil. Oil,
16:20
the reason why it's a hedge is because oil is in everything. It's
16:24
in transport, it's in food production, it's in goods
16:28
and services. Oil is in fuel, it's in everything. It's
16:31
in food production because of fuel and farming equipment.
16:36
Oil passes the inflation test because it keeps profits flowing. It's
16:41
an inflation-proof product because we need it in everything. It
16:46
actually forms the basis of most inflation, price inflation,
16:49
because it is in everything. If you have a world without
16:53
oil, goodbye iPhone, you don't have one. In fact, almost all
16:56
goods in the world, if you don't have oil, they disappear. If we don't
16:59
have oil, one of the key hydrocarbon, the
17:03
food bowl of the world disappears and you and I starve to death. I
17:06
just don't think people really grasp how important oil is to
17:10
your well-being. You probably have no idea. It's
17:14
such a great hedge because if inflation goes
17:17
up, guess what? You just increase the price of oil. It's like gold. It
17:22
will ebb and flow with inflation itself. And so the value of
17:25
oil becomes more and more valuable over time because it's a scarce resource.
17:29
There might only be enough for the next 200 years. Here's
17:33
what has happened recently to hedge against inflation. If you take a
17:36
look at Warren Buffett's share portfolio, the top five positions, guess
17:39
what's there? Chevron. And Chevron's one of the world's largest oil
17:43
producers. And you look at Occidental, it's now up the top five as
17:46
well. So two of the top five positions in his portfolio are
17:49
oil companies, Occidental Petroleum. So the reason he's positioning
17:53
his portfolio into oil companies is because he knows that oil
17:56
has pricing power, that he knows when inflation goes up, you can just simply
18:00
increase the price of oil. It's an inflation hedge,
18:04
right? But he doesn't just buy the actual commodity, he buys the
18:07
businesses that produce. So he's still buying stocks
18:11
in companies to hedge inflation, which we'll come to in a second. So
18:14
during the 1970s, oil shocks, inflation went out of control again,
18:18
as an example. Oil stocks went way up. Now, if
18:21
you're looking in the last couple of days, when Iran was attacked
18:25
by Israel, Iran's like
18:28
it produces I think Iran sends 15% of China's
18:32
oil comes from Iran So Iran's a big oil producer you look at
18:35
when this conflict bang oils Oil supplies
18:40
contained a bit and bang the price of oil has gone up to now. It's like it
18:43
was $45 a barrel and now it's gone up to 75 and like a
18:46
number of days and So oil can
18:51
surge when there's high inflation and global
18:55
unrest. So you look at what happened in the 70s, oil went
18:58
drastically high. And people made a ton of money out of
19:01
energy. Energy, oil. Oil is the foundation of
19:05
all energy. So currently, most energy I should say.
19:09
So 2021-2022 inflation, it
19:12
went up to $120 a barrel. So you can see real world examples
19:15
during COVID went up to $120 a barrel, or certainly after COVID, went
19:19
down to negative. What's interesting about COVID is that when the global economy stopped,
19:23
oil went drastically down, and it went down to negative $37 a
19:27
barrel. So let me explain what that means. you
19:31
were being paid to house oil
19:34
back then. It was like the ultimate oil boom. So if you had to bought
19:37
oil companies back then, you killed it. But it went up to $120 a barrel,
19:41
because it is a good hedge against inflation, right? So there you go. Great
19:45
way to beat the inflation pressures is oil. Now,
19:48
what's next? We have gold, oil.
19:53
Buffett's moves on oil. Here we go. Stocks.
19:57
This is interesting because you're like, well, how do paper assets protect against
20:01
inflation? Here's how. With real businesses, real
20:05
businesses beat fake money. So people are like, Lloyd, how come you're not
20:08
buying gold? You're not buying this? I'm like, I'm already hedged in
20:12
inflation because I have businesses. So one business we have is
20:15
a laundromat, and we know if inflation goes way up and the dollar loses its
20:18
value and collapses, we just increase prices. Why? Because people need to
20:21
clean their clothes. Fact. It's a very recessionary proof business
20:25
model. People need clean clothes. They don't want to walk around in smelly clothes
20:28
and filthy clothes, so they need to wash. They need to dry. So if inflation
20:33
inflates the value of the local currency, we just increase prices. So
20:36
businesses that do well in inflationary times are
20:39
ones that can raise their prices. It means they've got what's called high
20:43
or good quality pricing power. So they can increase
20:46
their prices during inflation. They can increase dividends. They
20:50
can effectively outperform inflation. So for example, one
20:53
of the most powerful companies in the world when it comes to pricing power
20:57
is, you guessed it, Apple. Because people would
21:00
trade their second car in to get their hands on one of these like the pricing This
21:04
is probably worth $30,000 to people not 1500 bucks It's
21:07
got so much pricing power in it And I know that because I
21:10
know that people would literally trade their cars to get this and I know cars
21:14
cost 30,000 So this is really a $30,000 product, but
21:17
it's not being sold for that. So Apple knows it can incrementally increase
21:21
the prices like this and over and over again to
21:24
combat inflation because they know that people are still going to buy this because it's such a
21:27
valuable commodity to people. The same thing I can see over
21:31
there in the fridge, there's a can of Coke in there. Another example of a company that
21:34
can actually outperform inflation is Coca-Cola because Coca-Cola
21:38
has the ability to increase each can by one cent. Over
21:43
8 billion cans consumed daily. Think
21:47
about that. Some huge number of cans consumed daily
21:50
can increase it by one cent. It's almost 2 billion cans of Coke consumed
21:54
daily. So you think if Coke can increase it by a cent, it's
21:58
increasing it by like 2 billion cents a day. Isn't
22:01
that insane? So it's got pricing power, so it can outperform inflation. So
22:05
check this out. Look at what Warren Buffett's doing right now. Look
22:08
at this. He knows that the US dollar is inflating. He
22:11
knows that, and I'm talking about the Australian dollar, but the US dollar is also inflating. He knows this. So
22:15
he's positioned his portfolio into bonds, which
22:19
helps hedge inflation a bit because you're getting 4.5%. He's putting his
22:22
money into oil stocks hedge, and
22:25
he also owns Coca-Cola as a company. His highest
22:29
position is Apple. Think about this. And he's got
22:32
Moody's. So all these companies in his top five or six holdings, which
22:36
takes over most of his portfolio and other private
22:39
companies he owns, he's got pricing power. See his candy. Big,
22:43
big powerful company. He bought that for $25 million many years ago. It's worth
22:46
billions now. And it can increase its candy prices to
22:49
combat inflation because people will still want to buy its product. So he's
22:53
got tremendous hedge in inflationary pressures with his
22:56
holdings and businesses. So, companies can raise prices in
22:59
inflationary times. This happened during the GFC, the
23:04
S&P 500 soared because of rising money supply. Owning an
23:07
index fund, if you've got companies in there like Microsoft, Google,
23:11
Apple, etc., Coca-Cola, they can increase their prices. McDonald's,
23:15
the Big Mac index. When you went to McDonald's recently,
23:18
I bet you were shocked by the price of stuff. Yes, it
23:22
hurts. It used to be you could go to McDonald's at $5.95 for a meal. a
23:27
house to get a meal at McDonald's. It's the
23:31
Big Mac Index. McDonald's is a perfect example of a company and
23:34
a business that can increase its prices. Why? Because it has. So
23:38
if you want to hedge inflation, businesses are a wonderful way to do it.
23:41
That's how I do it. That's how I do it. So I'm excited that
23:45
I own certain companies that are hedged with oil stocks. I'm
23:48
excited that we have businesses that are hedged in products
23:52
and services that people need. You know, super, super
23:55
effective way to do it, right? So you can either get it through some sort of
23:58
index, you can get it through ownership of businesses, private or
24:02
public. All right, next one. This is the last one. The
24:05
best hedge of all time. We said the best to last.
24:09
This is the best hedge against inflation of all time. It's
24:14
the fastest way to outrun inflation. And unlike
24:17
cash, it can compound very powerfully. So
24:21
check it out. You're going to be thrilled or you're going to be
24:24
disappointed, be the one. Here we go. The best way to
24:27
hedge inflation is to actually increase your skills. The best way to
24:31
hedge inflation is to earn more money. The fastest way to outrun it
24:35
is to earn more. Unlike cash, skills can compound drastically.
24:38
You can end up finding skills that you can totally transform your earning power
24:42
with and your income is the most important thing you can do to enhance
24:45
your wealth. It really is. You can't save your way to wealth. You can do it for a
24:48
period of time but you can't get it down to nothing. There's
24:53
an example in, I mean, many examples in the past where there's inflations
24:57
crushed the economy. I know without a doubt that people in that economy with
25:01
skills, sought after skills, were still getting paid a ton of money in
25:05
all sorts of different currencies and or gold and or in barter to
25:09
apply their skills to the economy. If you've
25:12
got skills, people will find a way to give you something of value to
25:15
get them. It doesn't really matter if your local currency like the Australian dollar
25:19
is completely getting It's completely collapsed
25:22
in the last few years in terms of its value, but... I
25:26
know that if I've got skills, I can get paid in gold, I can get
25:29
paid in US dollars, I can get paid in barter. Like if I'm
25:32
good at what I do and people need it, they will find a way to pay me.
25:36
Even if the currency is toilet paper, I know during COVID when there's a lot of toilet paper,
25:39
I could have provided a skill to someone. So Lloyd, I'll pay you in toilet paper. Go,
25:42
give me the toilet paper. It doesn't really matter what it is, your skills are
25:46
inflation proof. And it doesn't matter if the global currency
25:49
is crypto, USD, gold, Barter,
25:53
whatever. Your skills transcend all
25:58
of the global currencies. All of them. So the
26:01
most important thing you can do is improve your
26:04
knowledge and skills because they are inflation proof. They will ride inflation way
26:08
up because there's people out there with skills. Think about
26:11
it. Think about Mark Zuckerberg. He's now like the
26:14
top three or four wealthiest people in the world. He's also the youngest in
26:18
that group. Think about the skills that he applied. He
26:22
became a multi, he became worth $100 billion. Do
26:26
you think that outperformed inflation? Yes. Do you think Jeff Bezos outperformed inflation?
26:30
Yes. Do you think Warren Buffett outperformed inflation? Yes. All
26:33
the people I know who are wealthy, a lot of my friends who are worth millions of dollars, how
26:37
did they get there? Did they buy gold? No. Did they buy real
26:40
estate? No, they didn't. They might say they do now to protect their
26:44
wealth, but they didn't get there that way, let me tell you. They all did it through actually
26:48
improving their skills and starting and building their own businesses. That's how
26:52
they did it. So don't, and some people
26:55
have certainly, there's a story of a lady, she just gave
26:59
a billion dollars to a charity. Her husband
27:02
happened to invest with Warren Buffett, that's stocks, that's Berkshire Hathaway, and
27:05
ride that sucker way up to a billion dollars, and of course,
27:09
incredibly powerful hedge, because Warren Buffett in
27:13
the last 60 years created 5.5 million percent return. To
27:16
put that in perspective, the S&P 500, 30,000 percent return. To
27:21
put that in perspective, it way outperformed inflation. Inflation hasn't
27:24
been anywhere close to those two numbers. So stocks and businesses, yes,
27:28
can also outperform it. But for most part, it's businesses
27:32
because of skills. So if you want the ultimate hedge, invest
27:35
in yourself. You are the ultimate hedge. You are the best asset to
27:38
invest in to overcome inflation. So could hyperinflation happen
27:42
in Australia? Could we absolutely destroy the power of
27:46
the Australian dollar? Theoretically, yes. Will
27:49
it happen? Technically, well, technically yes, but theoretically or
27:53
I would say no. It's unlikely because we've
27:57
got a floating exchange rate. We've got an independent reserve bank.
28:00
We've got global trading partners. We've got a ton of resources here,
28:04
deep capital markets. And we do have, despite the challenging
28:07
leadership we have at the minute, that's a whole other episode of what I think about that. But
28:11
we do have the ability to control money supply. And
28:15
we do have hard assets backing. We've got land, arable land.
28:19
We've got farming, commodities. We've got resources, energy, hydrocarbons.
28:24
We're good. But if hyperinflation does happen,
28:27
like what happened in Germany, what happened in Venezuela, what happened in Zimbabwe. In
28:31
those scenarios, you know what happened? People fled back. They
28:34
just dropped the currency. They went back to other currencies. They went back to the US dollar.
28:38
They went back to gold. That's what happened. The
28:41
economy doesn't die. The paper money is just forgotten. All trust is
28:45
broken and we stop using it. So it's not like you'll just have
28:48
nothing. You will have figured out by then if there's hyperinflation, what
28:51
does work and you'll have already gone there. But I can almost guarantee you that
28:54
if you have business skills and you have the ability to pivot and
28:58
you buy businesses and build businesses, there's no amount
29:01
of inflation that can hurt you because you are indestructible because
29:04
you invested in yourself. And of course, one of the other hedges
29:08
that's happening that I haven't really covered here because I don't want to is cryptocurrencies, especially
29:12
Bitcoin. They're like, oh, Bitcoin's a hedge against inflation. Oh,
29:17
my God. Do I have to talk about Bitcoin? It's a code. It's a
29:20
piece of code. And people are like, read the Bitcoin standard. How
29:24
much research you have to do to realize something's valueless? Look,
29:29
people are using crypto and specifically Bitcoin as an inflation hedge.
29:33
But the fact of the matter is this, gold has got thousands of
29:36
years of measurable data against inflation than
29:41
crypto does. It's tangible. Remember, the inflation hedges
29:44
against tangible assets, right? Things that can
29:48
produce value for the world. Crypto doesn't produce any value.
29:51
How do I know that? Because I went down to the supermarket, With my wife,
29:55
we were doing a checkout and I said to the lady, ìHey, do you take cryptocurrency for
29:58
my groceries?î She went, ìNo.î I was like, ìPfft.î Then I went to my landlord the
30:02
other day, my property manager and he called up and said, ìHey, you owe rent.î And I'm like, ìOh, do
30:05
you take Bitcoin?î He goes, ìPfft.î So I'm like, ìOkay.î And
30:09
so I rang up my American Express. I got an American Express card, platinum card. It's a
30:12
wonderful card, lots of points. And I rang him up the other
30:15
day and I had like $100,000 to repound that. And
30:18
I said, ìHey, do you take cryptocurrency? Do you take Bitcoin?î They went, ìPfft.î How
30:25
is crypto or Bitcoin a hedge when it's not even valuable?
30:30
I can't use it for anything. At least I
30:34
can sell gold on the open market. I can sell it.
30:38
You can touch it. You feel it. Even though I hate gold, I can at
30:41
least see it's there. You can't see anything with crypto. It's
30:44
just code. There's
30:49
certainly value in the technology of a blockchain. There's certainly value in
30:52
the technology of internet. There's certainly value in technology of AI, LLM
30:56
models. There's value in those for sure, because they speed up things, yes? But
31:02
I can't see it in crypto. And so it might feel
31:06
like it's a hedge against inflation. By all accounts, if you haven't bought it, it looks
31:09
like it's hedged. But how they measure it is
31:13
in USD, right? And so if the USD disappeared overnight, so
31:16
would the value of cryptocurrency, right? Because it's really got to be
31:19
valuable in the real world. And that's why I don't think it's the best hedge. So
31:23
I don't hold any of it. I never will hold it. Even if the world adopted
31:27
it as a currency, which I cannot see happening, I would
31:30
still own businesses. I would still, for that matter, if it
31:33
was the right price, own a piece of property. I would still own things
31:37
that are valuable. And I just can't see how it's valuable. This is why I
31:40
don't personally own gold. I don't personally own crypto. I personally own
31:44
things that are valuable to the world. Because I know if push
31:47
came to shove and shit hit the fan, like it did in COVID, did
31:51
people go to crypto? No. Did they go to gold? No. They went to toilet
31:54
paper. So I'm thinking to myself, wouldn't I want
31:57
to own companies that produce toilet paper? That's a better hedge, right? This
32:01
is where my mind's at. This is how I think. So I know that people got wealthy
32:04
by not owning those assets. I know they got wealthy by building businesses and
32:07
investing in themselves. So I'm all about playing wealth games. What are
32:11
the wealthy doing? What did the wealthy do to build wealth? Because
32:14
it's much better than just preserving it. So I hope this makes sense to you and
32:17
you've enjoyed the episode. And if you have, hit the subscribe button,
32:21
leave us a comment. What do you think is happening to the Australian dollar? Do
32:25
you think it's going to be hyperinflated? Let me ask you this. What is
32:28
your hedge against inflation below? Leave it in the comment section,
32:32
share this with a friend, and I'll see you on the next episode of the Money Grows
32:35
on Trees podcast. Thanks for listening to Money Grows on Trees. If you enjoyed
32:39
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32:46
if you're serious about building wealth, make sure to check out the links in the show
32:50
notes and follow me on all social media platforms at