Hey everyone kevin here in this video we're going to address that you should not have cash that cash is trash because, after all, cash loses value in an inflationary environment, but wait a minute. Why am i holding over 90 percent of my portfolio in cash? That's wild? Why would i even consider selling a rental property to have more cash in an inflationary environment? I mean golly folks if inflation is seven and a half percent and potentially it's as high as 10 percent, the value of my dollar is just absolutely getting eroded. So now, not only do i pay taxes when i sell something to lose money, but now i walk into an inflationary environment and i lose even more money. It sounds like kevin's lost his mind, or maybe there's more to this.

That has to do with logic. That bypasses a lot of people on youtube. Unfortunately, let's talk about that, because it's an important one to talk about, but first i want to quickly shout out ftx us, via the link down below you, can get ten dollars in any cryptocurrency from ftx us. If you sign up remember folks, we are watching the 42 000 level hardcore here on btc.

I have been watching this over the entire weekend and i believe personally believe that bitcoin is waiting to see how the market reacts monday morning. So watch when futures open watch monday morning when the market opens see which direction btc goes, i bet i would make an 80 to 90 bet that it follows what tech stocks do. The correlation is getting tighter and tighter, so stay tuned and check out ftx via the link in the descriptions down below okay. So folks, let's discuss conventional wisdom.

Okay, here we go. Let's put this on there. We go all right, conventional wisdom. All right, conventional wisdom tells us the following that if we get paid one thousand dollars in a month, let's just say we'll make math easy.

Okay, we get paid a thousand dollars a month and let's say we have uh a a uh gas utilities and rent bill and the total gas utilities and rent bill. It comes out to 750 before inflation. Well now we're left with a bottom line of 250 and let's say we want to go purchase a television and that television is 250 with taxes tv before inflation, all right perfect. Well, now we have zero dollars left right.

We've spent all of our money. We've gone from basically being paycheck to paycheck to having no money all right. Well now, what happens if we're in an inflationary regime? Well, the cost of our utility bill might go up. We might get a rent increase.

The cost of filling up our car with gas might go up, our car insurance might go up and in fact all of these things have been happening. Car insurance premiums have gone up between 10 to 17 percent. Gas has gone up, 40 percent natural gas at home has gone up 30 to 40 percent should be going up 20, but it's lagging substantially. The cost of chips and tvs have gone up, everything's gone up so now, all of a sudden you might be paying 825 or about an average of maybe a 10 increase.

Thanks to all this inflation, and so now, you're actually only left with 175 to go, buy a tv but wait a minute now that tv doesn't cost 250 anymore, it costs, let's say 350 because of all the shortages and all the inflation well instead of buying. Essentially, this tv once a month which obviously wouldn't buy atv once a month, but for example, you would now have to wait two months to buy that tv and so, in other words, you're able to afford less stuff. Now the prices of things might be higher, but you're still getting a lower quantity. So, even though you're spending the same amount of money, the quantity you are receiving is lower, and then this encourages you to ask for a higher income, because how else are you going to get the prices of these things down? You're going to write a letter to amazon to make them lower the price of the tv.

Are you going to go write a letter to your utility company to lower the price of your gas, which you could actually do by the way they have programs? For that, especially if your paycheck to paycheck but more broadly, the only option you have is to increase your income right. So in this case inflation destroys this person. Inflation destroys folks who are paycheck to paycheck or are unfortunately in the lower 90 of american incomes, because it makes the money that you have worth less because things are more expensive and you have less of it left over because you're just trying to get by and Everything's more expensive! Imagine now you had credit card debt. Well, your credit card debt just became a lot more expensive to pay off because you're taking less home every single month.

What? If you had student loan debt? Well, that student loan debt just became more expensive? It's not like your credit card debt is tied to some kind of asset. That's going up in value to offset the inflation. No, your credit card debt is a lot more expensive now and you are getting screwed. It is harder for you to survive your student loan debt.

It's not like what you bought with your student loan debt. Your degree is getting more valuable unless, of course, you could get paid more so because these tend to be uncorrelated. It's not like where you have a real estate loan and the property value goes up, while your loan slowly gets paid off right. This is why inflation can actually help people with assets, because the landlord raises rents.

The mortgage payment is the same because the principal and interest payment does not change with inflation. Now they have more money to pay off the loan, so inflation actually makes it easier for the landlord to pay off their loan. But that is not true for student loans and credit card debts and guess what rich people have more of rich people have more assets. Poor people have more what liabilities, especially liabilities that are not tied to assets.

There's that link missing, so inflation is absolutely robbing poor individuals, so why, in any sense, would i want to hold cash? Well, many of you who are in my programs on building your wealth. You might buy sell alerts for what i'm getting back into the market in the stocks and psychology money group. The new program we're releasing a ton of new sections, a path to building your wealth probably needs another month to be fully complete. But anyway, all of these programs, or even the programs on building your wealth in real estate, uh, going from zero to millionaire saving money with the group discounts we have at lowe's.

All of these programs are designed to help you save money and they do a really great job of that, which, of course, you can check those out by the link down below using that v-day coupon code. You already know this, because we've already had a discussion about this in our course member live streams which we have every single day, but i keep getting these comments and it's so important to wonder or to to answer wait a minute kevin. Why are you different and why would anybody else be different? Well, let's take the generic clown nose off here and uh honk that away a little bit and now, let's understand how inflation could actually help me. So, first, in this last scenario, here, let's sum this up by saying that all of this right here is very simply: inflation equals loss of purchase power, right, you're, able to buy less, and you have less money left over to pay off your consumer debts.

Loss of purchase power - that's the key word right here! Well, what if i told you that inflation could actually do the opposite: inflation could increase my purchase power. Well, that's odd! How would that be possible? Okay? Well, let's consider that scenario. How could inflation actually increase? My purchasing power, if i'm holding cash, that doesn't seem to make sense that that defies the basic kind of video that you hear about on youtube that doesn't make sense. Okay, well, let's go past basic and let's go deep here.

What happens when we have rampant inflation in the united states? Well, the first thing that happens is number one. Congress stops stimulating. Look at joe manchin he's blocked. Everything biden wants to do because he believes the federal reserve is quote pussyfooting, that's his word around fighting inflation.

So congress stops stimulating and number two the fed stops stimulating and in fact the fed actually begins to tighten, and so what are the consequences of less stimulus from congress and the fed no longer stimulating and the fed tightening? What are the consequences of this? Well, in a high inflationary environment, because this is another thing that bothers me - a lot of people on youtube are like. Oh, but kevin. Look at these charts. They say when rates go up.

Uh the market usually does well yeah. At first glance, that's true. I mean i saw these charts as well. I'm, like that's interesting, really begs some more research, but wait a minute.

Those charts don't show you an overlay of how high inflation was during those times, and if you saw that tightening during a high inflationary environment is bad for markets well. All of this therefore leads to less money chasing real estate, uh and stocks all right, one: two: if there's less money chasing real estate in stocks because of a lack of stimulus and tightening monetary tightening and fiscal tightening, then the price pressure on real estate and stocks Should come down, in fact, if it becomes more expensive to borrow to buy stocks or real estate, because maybe margin interest becomes more expensive margin, interest or home loans become more expensive, then we're going to have even less demand on real estate and stocks, see all of Stimulus and fiscal money spending helps increase a d aggregate demand for assets like real estate and stocks. When you do the opposite, you reduce aggregate demand for real estate and stocks, which tends to remove at least some price pressures for those assets. And if the fed and congress are going to continue to expand their efforts to fight inflation, then what they do is they continue to reduce aggregate demand for real estate and stocks? You can't go to the moon when you've got a massive anchor called congress.

The anchor of the fed stopping stimulus and the fed tightening these are anchors, preventing you from going to the moon compared to what they were doing two years ago when they were adding uh. You know you know nitroglycerin to your rocket boosters. I don't i'm not a chemist okay, whatever, but you know what i'm saying: okay, they were helping us go to the moon now, they're, not okay! So now wait a minute. Oh that's an earnings call how how does any of this matter with my cash okay? Well, let's consider this so kevin has, let's say 20 million dollars of cash right here, and this is cash.

And then, let's just say, my income on a monthly basis is 20 000 a month, let's just say uh, and this is just uh. You know income over here and let's say my household expenses, my utilities, my children, you know employees or whatever i don't know. Let's say all of this stuff uh takes up all of my 20k. Okay, all my my money over here is gone.

That's that's! Fine! Even even if we had inflation - and this went to 21k uh, my income went to 21k and my expenses went to 121k, whatever i'm not this side of the equation. Right here will get affected by inflation. But the point is this side doesn't really matter, and i know that sounds crazy and i'm just trying to be as transparent as possible. This does not matter if income goes up a little bit and expenses go up a little bit, because my utility bill goes from 200 to 300.

That does not affect me at all, and i know that is incredibly unrelatable, but we're trying to make a point here, because this side does not matter to me. This is not what i'm worried about with my cash, because over my here my cash does lose purchasing. We'll just put pp over here we're losing pp. We don't want to lose pp.

Okay, we want more pp, we want more purchasing power, so we want positive pp over here. We got negative pp all right, so here you got 20 million dollars in cash. Well, what are you gon na do with that 20 million dollars of cash well gee? I would love to buy stocks and real estate i'll just put realty there we go well. What did we just learn in this cycle that we're in right now in the cyclical transitioning, going from a stimulative economy and congress and fed to a tightening cycle? Well, we learned that in these cycles aggregate demand goes down not just because there's less money available for them, but you also have lending tightening both for margin fees.

Imagine when people who are used to two percent margin, all of a sudden start having to pay five percent margin right. People want to start paying this crap off. They have less pressure to buy stocks. Home loans go up from three and a half percent to five percent people, buy less homes, so aggregate demand for stocks and real estate in an inflationary environment that the government is trying to fight will go down.

If aggregate demand is going to go down, then the price of stocks would be expected to go down. The price of real estate would be expected to go down, at least until the inflation goes away and the tightening goes away and there's a u-turn back to accommodation and or stimulus. But until that point we have downward pressure like an anchor on stocks and real estate. So if the cash over here is losing purchasing power through utilities and employees or whatever fine but that's the small portion, if the my portfolio is larger than my monthly income, then over here on my portfolio side, my portfolio actually gains in purchasing power, because that 20 Million dollars of cash today, if we were buying, let's say one million dollar homes.

Let's make an example here: 20 million dollars of cash today buying one million dollar homes would buy 20 homes if we had 20 million dollars of cash and we bought tesla stock uh. At 1k, then, i would buy 20 000 shares of tesla stock right. Well, wait a minute! What? If, because of this downward pressure on aggregate demand, i can now buy homes for 500 000 with 20 million. Well, all of a sudden i can have 40 homes instead of 20..

If all of a sudden i take my 20 million and tesla stock uh is now trading for 500. Well now i can have 40 000 shares of tesla stock. Now this simple equation here does not mean that i think tesla is worth less than a thousand or 880 or whatever it's trading for, and it doesn't matter. It just means that i believe in a macroeconomic cycle that we are going to see downward pressure on asset valuations, both real estate and stocks, and if i'm sitting in cash, my pr and these prices have just as an example, my purchasing power just doubled again.

Yeah. Maybe maybe things over here got more expensive to the tune of you know, call it twenty percent. Okay, that's four thousand dollars a month that things got more expensive over here, but if, at the same time, my 20 million is now able to buy twice as many assets, i have doubled my purchasing power, where it matters more. So to all the clowns who are like, oh but kevin, you're losing money to inflation, what an idiot! Hopefully you now realize that there's something that goes beyond the surface level: here's your youtube, video on finances for third graders and there's a little bit more logic.

That goes into decisions. You have to decide where you are in this, but i think i've made myself clear and if you want to learn more perspective, check out my programs on building your wealth down below you'll, be blown away with perspective and you'll get into that partnership as well. To save money at lowe's, that's a free addition into the program.