Inflation is WAY higher than the Fed is saying

Video Transcript:

(0:00 - 2:16)
It blows my mind, but for some reason, people actually trust the government when it comes to the official inflation numbers. When I point out the fact that those stupid buy and hold pie chart portfolios that financial advisors put their clients in won't actually beat the inflation rate long term, I'll get people in my comments saying, actually, you can just go right to the Fed website and it says inflation is 4% a year long term. And you believe that? So let me get this straight.

You don't trust the government when it comes to every other aspect of our lives. The tax code, the health care system, geopolitical intentions around the world, statistics from the southern border, the pandemic debacle, Supreme Court decisions, lobby groups, political donations, the national debt, social security issues. You don't trust the government about anything else.

But for some reason, you think the government wouldn't dare lie to us when it comes to the official inflation number. I got to say, that doesn't make much sense. Look, this is a very deep rabbit hole, and the whole shady system is intertwined.

But if you want to make money as an investor, you definitely have to see the code in the matrix. There's many things in the world that are actually indexed to that inflation rate, to the CPI number. It's not just a guide, it's actually quite instrumental in our entire economy.

So for example, the government payouts to things like social security and other safety nets. Obviously, they can't pay people what they paid out in the 1980s, that wouldn't be worth much in today's dollar. So everything is indexed to that CPI number.

If that CPI level is overstated, for example, let's say they say it's 6% when it's actually 4%, well that would mean those government payouts are growing too fast, and that would actually end up costing the government billions of dollars over time. But if they can understate the inflation rate, let's say it's actually 6%, but they can manipulate it down to just 4%, well now they can save those billions of dollars by paying out too little over time. Many things are benchmarked to the inflation number, and don't think it ends with the government.

Corporations are in on the gig too. If the government has manipulated that CPI number over the years to be intentionally lower than it actually is in the real economy, well that means that companies also don't have to pay out salaries to keep up with that true inflation rate, right? Companies would also save millions of dollars over time by a constantly understated inflation rate. Have you really never wondered why almost everyone in society feels like there's something wrong with their budget? Their middle class income can no longer afford a middle class home.

(2:16 - 6:18)
They work hard, they've got a good job, yet over half of Americans are living paycheck to paycheck. They feel like it shouldn't be the case, but they're wondering why their wages aren't keeping up with their ever-expanding budgets. And of course countless people in the younger generation are also noticing that previous generations seem to be much better off.

This never occurred to people how manipulating that CPI number to be lower than it actually is can have a ripple effect through the economy? It's like the tail of the frog that won't jump out of the boiling pot of water because the temperature has gradually increased. Over time, the government changes the methodology for calculating that CPI number to intentionally understate it by a few percent. It's just little things here and there that add up to a lot over time.

Oh, housing doesn't really mean what it used to, we can adjust that a little bit. Well, food and groceries, we don't have to include everything, right? Energy, gas, water, electricity, we can make a few changes there as well. And over time, people don't notice it, but the real inflation rate ends up being much higher than the official government stated numbers.

(3:10 - 4:35)
Now, websites like Shadow Statistics and a few others, they do try to keep people informed, but unfortunately, the power of government, the Fed, corporations, the financial industry, lobby groups, and all the elites that benefit from the top down, they just have more power and they can drown out any voices stating the truth, including mine. So now, with the long-term inflation rate officially being 4%, even though almost everybody in society experiences something that's much higher than that, well, now the government can cheap out to payments on all the social safety nets. Companies can give you less frequent raises and your wages will be stagnant.

Politicians get to claim the economy is doing better and their re-election chances go up. The Federal Reserve gets to claim they're closer to achieving their mandate and they get to keep their cushy jobs. Financial advisors can tell you that a 6% or 7% rate of return is actually good.

Things like the all-weather portfolio made famous by Ray Dalio, including all the other ones with the cool-sounding names. The couch potato, the dragon, the cockroach, they're all the same. Buy and hold index funds with stocks, bonds, gold, real estate, commodities, even hedge funds.

Now all these asset managers can tell you that a 7% rate of return is actually good and it's going to lead to a comfortable retirement. And importantly, now they can collect about 1% of your net worth in fees. They can collect that and still tell you that 7% return minus a 4% inflation rate is enough for a comfortable retirement.

But the inflation rate has been manipulated down for years. It's not 4%. You're not actually going to make hardly anything on those portfolios when you back out the true inflation rate.

(4:35 - 6:21)
I've said this a million times and I will keep saying it until people wake up. A single-digit rate of return is simply not good enough. In the real world, with actual statistics, the median retirement value in the United States is about $250,000.

I don't know about you, but that's not nearly enough for a comfortable retirement. The majority of people who get to the end of their investing time horizon realize there was no compounding of investments with that buy and hold strategy. Backing out inflation, the only money they have is the money they actually saved themselves.

Well, of course, the equation won't square up when one of the numbers is intentionally manipulated. I can only present you with the facts. I can't make you listen.

If you want to keep helping your financial advisor pay off their summer home in the Hamptons, then that's fine. For me, I took the red pill 20 years ago. I know the elites are in it for themselves.

I know nobody is going to manipulate the numbers in my favor. I have to do everything myself. I've outperformed the stock market for years because I have to.

I just hope people realize what they're doing when they listen to that kind of buy and hold advice. The advisors love it because it means they don't have to do any actual investing and they make a great income no matter what. But the clients get screwed because, of course, there is no such thing as free money.

Just putting a bunch of assets in a pile has no expectation of beating the true inflation rate. Surprisingly, you actually have to do something to make money beyond just this. So if you want to see the VTS portfolio, yes, it is very different than anything you've seen before, but that is by design.

In order to beat the market, you have to do something different than the market. See you next time. So for an extensive volatility metrics dashboard updated daily and to see all of the live trades for our tactical rotation and option strategies, click this link right here and claim your free trial to the VTS community.

You're always welcome to join us anytime. See you next time.