Annuities As Inflation Hedges?…NEVER!!!, Ep #74

What's up! It's episode 74 of Payne Points of Wealth, Russia is moving further into Ukraine and markets are going haywire. The volatility's extreme right now. We know the FED is raising interest rates next month but what does this mean right now? Is it time to go to cash or is it time to take advantage of the volatility to create your wealth long term? We're gonna break it down for you from our vantage point. We're also going to talk about annuities today. Annuities aren't bought they're sold. Is it a good investment or a bad investment to have in your portfolio for your path to financial independence? We'll give you our thoughts on that as well.

You will want to hear this episode if you are interested in...

• It's the surprises that you don't anticipate that move everything [1:48]
• The tech wreck [5:03]
• Why we are so optimistic [7:11]
• The Tipping Point [9:27]
• To get something you have to give something [12:14]
• Annuities are horrible inflation hedges [15:24
• Hidden Facts of Finance [19:40]

Why we're so optimistic

Look at what happened in New York this week. They said no more masks and no more Vax ID cards! You're allowed to live your life again. The economy is going to boom. People are flush with cash and they're tired of being stuck in. People are going to get back to traveling. The economy's going to keep booming. The supply chains will eventually become unclogged and what happens is the market looks forward. 

When you look at prices going down right now, it's what I call price adjustment. It's a math problem. Interest rates are going to be higher, inflation's higher. You put that into the equation. You get a different answer. It's lower. But you know what we don't hear on the financial news at all? The PE ratio on the S&P 500 is very reasonable right now. NIt's a good time to be buying. Not panicking. 

This week on the tipping point: Annuities

We're going through a period now where it's very different, the last 40 years have been low inflation, actually a deflationary environment but now we're seeing inflation. Hopefully, we don't go back to the hyperinflation of the 70s. It was horrible, you can't imagine how bad it was, but we just had a 7.5% year over year rate on the CPI. That could see 8% on the next report and inflation is the biggest issue. It's the biggest risk every investor has in their portfolio right now. Annuities are horrible in terms of inflation hedges. 

Once you get that fixed income and you give up your principle, you get the same amount every single year. Yet your cost of living is going up every year. That means the amount you're getting each month $5,000, $10,000, whatever, in tomorrow’s dollars it's like getting half because it doesn't adjust with inflation. 

Meanwhile, a diversified portfolio with bonds, dividend-paying stocks, the cash flow over time is increasing exponentially to keep up with inflation. In fact, if you look at stock dividends, they've increased over the inflation rate since 1950. So annuities don't solve for the most important, most critical aspect of your financial independence plan and that is inflation.

This week’s hidden facts of finance

• The 15 managers with the highest performing funds in 2021 raked in a collective 15.8 billion last year!
• The global value of crypto grew by nearly 1.5 trillion last year, compared with the S&P 500’s rise to nearly 9 trillion market value.
• 75% of 2020 SPACs traded at or below $10
• 25 years ago Bowie bonds were issued on the US Stock Exchange

Resources & People Mentioned

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