Now everybody is Sam from financial samurai and I'm bringing another episode to you from my hot tub because otherwise I wouldn't be able to record these episodes because I'd probably just go crazy Writing and recording all day. I'm tired. I don't know about you guys, but mentally Exhausted and I'm looking forward to a better July.

The stock market has been going backwards It's down about 8% from its June highs The real estate market it's still pretty strong below or at the median home price of your city or below When you get to about 50% above the median home price of your city That's when the real estate market is starting to slow down and you're seeing more price cuts Conversely, you're finding more deals So if you want to find more deals, you may have to look for the price point about 50% Higher than the median home price for your city now in this episode I want to talk about inflation because some of you have asked should we be concerned about inflation given that the Fed is Printing so much money pumping in so much money The government is doing all this stimulus to keep our economy afloat and the short answer is no I don't think we have to worry about inflation at all for the next 12 months Maybe 24 months and the reason why is simply that there are tens of millions of people unemployed And if you look at the US personal savings rate, it's skyrocketed to 33% in April and for May and June July I'm sure it's gonna be over 20% Because the economy is still not fully open and when you're uncertain about the future you tend to hoard cash And when you hoard cash, you're not buying things which means demand is down Which means pricing pressure is down.

So instead of worrying about inflation We should really worry about deflation, but I'm not worried about deflation either because I think there's a right balance going on Where the government and the Fed are really pumping in dollars into the economy to keep us afloat And if you think about a deflation, it's not so bad if you are cashed up and you're looking to buy assets for example if there's deflation in Property prices.

Well, that's a good thing in terms of affordability Especially with mortgage rates at all-time lows if there's deflation in College tuition prices, that's great because they shouldn't be going up so much anyway And they should be going down for once goodness gracious if campuses are closed Why are you still charging max tuition and you saw USC raised tuition by another 3% a year.

I mean, that's ridiculous So if you're looking to spend money and you have to spend money Deflation is pretty reasonable. So long as there's no stagflation where there's deflation as well as stagnation Then it kind of gets tricky because hey There's deflation your income is probably gonna go down Your existing assets are probably gonna lose value and so forth and it's a it could be a death spiral That is hard to get out of without a lot of government intervention and then on the flip side if there is inflation Well your existing assets will by definition inflate with inflation over time or inflate faster than inflation So for example stocks real estate if you could buy Private universities and earn the tuition dollars.

They're probably going to continue to outperform Inflation inflation is that you should look at the Treasury bond market Bonds are all about inflation. They're predictors of inflation. They trade based off inflation assumptions and if you look back towards the late 1980s you can see the 10-year Treasury bond yield peak and Gradually go down for the next 30 plus years And that is a signal that inflation at least here in the United States is Under control because everything is relative when it comes to investing in bonds and investing in stocks But more specifically bonds because the yield that a bond pays Let's say it's 3% is all related to inflation and what the opportunity cost is Owning the bond and owning something else.

So if the bond yield is 3% Well inflation is probably around 2% or 2 and a half percent because the bond yield needs to pay a higher rate of Inflation for an investor to own that bond. Otherwise, why would you bother right? It's called the risk premium the risk premium to own stocks or the risk premium to own bonds So let's say the bond yield declines to 2% Well, you can kind of guess that inflation is probably lower as well Inflation is probably below 2% Maybe it's 1% or 1.5% So that spread is the risk premium the bond risk premium you can say Because you need to be paid a little bit more in Interest to hold the bond for the risk of the bond not paying you back.

So when it comes to US Treasuries Well, it's a sovereign as it can get the US Treasury bond market will pay you back and if it doesn't pay you back we've got bigger problems to deal with and you can move along the risk curve in the bond market and go from US Treasuries to Municipal bonds which are still very low risk to corporate bonds to junk bonds, right?

And so as you move along the risk curve, these bonds will pay higher and higher yields But then there's higher and higher risk That the entity won't pay you back or won't pay you back in full after the duration is over So the US Treasury bond market is a great indicator of inflation and right now with the 10-year bond yield something at around 0.65% I mean that's close to an all-time low it is signaling to the world to investors or to anybody paying attention That there is no inflation on the horizon So ten years you can only earn point six five percent a year in other words Inflation is probably no more than zero point six five percent or it's probably a little bit less Now, of course many investors are hiding out in the US Treasury bond market for safety reasons because stocks Well, frankly are very very volatile right now and there's just a lot of uncertainty and so investors are saying well Might as well have a little bit more certainty actually a lot more certainty in the US Treasury bond market and earn hardly anything Then risk losing money in the stock market The stock market has had a great rebound a great run since its March 23rd 2020 lows and I personally believe we're probably going to be range bound over the next six months So we're talking maybe 2700 to 3,250 on the SP 500 I think there's a 70% chance that we're gonna trade in this range until there's a vaccine as a result I don't think anybody should be anxious or feeling that FOMO That they're gonna miss out on some great investment instead I think it's perfectly fine to stack cash to save as much cash as possible And if you haven't done a cash audit yet Go through all your various accounts and add up how much cash you have in each account I think you'll feel much better if you do that and also shoot to have a cash target goal You know by quarter or by the end of the year or by this time next year Having these cash savings goals will motivate you to save more and also make you feel better about an uncertain time period There are clearly gonna be winners and losers during any year, especially a year with so much market dislocation It's up to us to be diligent to do our research to find those winners to plan ahead I personally I'm not really excited to put new money to work in the stock market when the SP 500 is over 3,000 Yeah, I could go to 3,200 maybe 3,300 and hit all-time highs But I just don't see that happening so soon with all that's going on so instead I'm just gonna continue to look for real estate deals because Inflation is low, which means mortgage rates are low and there are deals to be had on the higher end of the price curve Further I think all of us should be thinking about ways in finding ways to make more money at home Finding a permanent solution to make more money at home And I've been making money technically at home since my first five cent Google Adsense check came in in 2009 And so I'm probably gonna write about this in the near near future and talk about this, of course All right, folks I'm gonna wrap things up and turn on the Jets and turn on the bubbles if you like this podcast I'd love a positive review the positive review will keep my podcast going In fact, I think I might wait to record another episode until I can get 200 reviews.

Hopefully all positive right now I think there are about 186 or so reviews on iTunes. So the more the merrier I think this is a way to pace myself and to shoot for new goals and barometers and you've got to find a way to Pace yourself as well. The name of the game right now is survival Forget about trying to outperform constantly and be just a hero and everything you do, you know We're going to the fourth month of sheltering in place who knows exactly what will happen in the future But I think if we can survive and survive some more we're gonna come out of this.

Okay Thanks so much everyone for your support. I'll talk to you guys later