Happy Friday, everyone!

Today, I want to show you the kind of chart we all love to look at:

It’s beautiful, isn’t it? Straight up.

Now, you might be surprised to hear that’s actually the chart of the Venezuelan stock market over the last 5 years.

Yes, the same Venezuela that has:

  • inflation of roughly 100,000% per year
  • defaulted on their government debt
  • 94% of their population living in poverty
  • seen 3 million people flee the country
  • one of the worst food shortage crises in the world - where 15% of the population eats only food waste from restaurants and supermarkets and 75% of people have lost an average of 8 kilos in weight.

On top of that, it’s the most violent country globally and essentially has two people who call themselves presidents.

You get the picture.

So did Venezuelan stock investors make money during all this time?

No, because the Venezuelan currency (the bolivar) has lost 99% of its value during the same time.

The Venezuelan government has printed billions of its own currency to fight its never-ending crisis, essentially rendering it worthless.

So although the stock market chart looks good in theory (it went up 200,000% in 2019), the actual purchasing power of the money in it has collapsed.

Here’s why that’s important to you:

To fight COVID, Western countries have printed a lot of money, too - increasing the money supply by roughly 25%.

A lot of that money has gone into financial assets - which is why the rich (who own assets like stocks and real estate) have gotten much richer during this crisis (and if you’ve been reading this newsletter, that should include you).

At the same time, however, the purchasing power of cash has gone down.

That’s because inflation is happening in the things that you actually need to buy.

For example, if you want to buy a house and house prices go up 10% - your actual inflation isn’t 0% like the government tells you. It’s 10%.

The same applies to safety in retirement.

15 years ago, you could save $1 million and buy a government bond that paid you 5% in guaranteed cash flow every year ($50,000 a year).

But today, to get the same guaranteed income stream of $50,000, you’d have to pay $10 million.

That’s why the idea that inflation isn’t happening is a myth.

Now - this doesn’t mean we’re going to become Venezuela, of course. But because central banks are manipulating the money supply (and interest rates), your cash loses value every year.

That’s why Ray Dalio, founder of Bridgewater Associates, the largest hedge fund in the world, now calls cash “trash.”

This trend isn’t likely to stop anytime soon, by the way.

To continue fighting the crisis in the West - and to pay for the debt we’re incurring in the process - it’s likely we’ll expand the money supply by at least 15% per year for the foreseeable future - twice the average rate.

This means that to not destroy your wealth, you need to invest in assets that keep up with the pace of monetary inflation of at least 15% annually.

This is the most important theme I’ve been trying to drill home since I started writing these newsletters.

The economy has changed - which means we need to change too.

You’re not investing to earn more than 0%. You’re investing to at least keep up with monetary inflation - which will be anywhere between 15 and 25% per year going forward.

That’s why bitcoin is a no-brainer. It goes up in value by 200% per year.

But stocks, particularly in regions with stronger fundamentals (like Southeast Asia), with strong pricing power (like technology monopolies) and high rates of innovative growth, will do well too.

Rapid-Fire Best Insights

Quote of the week: “The road to serfdom is working exponentially harder for a currency growing exponentially weaker.”

If you want to dive deeper into the economic cycle we’re going through and what the future holds - read Ray Dalio’s own Masterpiece on how the world is changing.

Tweet of the week: The biggest bitcoin investment vehicle in the world is just about to surpass the biggest gold ETF in the world. Bitcoin is digital gold.

And on an unrelated note - last year, I committed to reading a lot more philosophy in 2021. This week, I’m listening to The Tao of Seneca.

Anything else I think you should know:

Coinbase, the second-largest cryptocurrency exchange in the world, went public this week.

A lot of people have asked me if they should buy the stock instead of bitcoin - because they feel bitcoin is expensive.

But bitcoin isn’t expensive - because it’s on an exponential adoption curve.

The more people use bitcoin to store wealth, the more it will be worth.

That doesn’t make it expensive - it just makes it more widely used.

Today there are roughly 100 million crypto users in the world. That number could hit 200 million by the end of the year - and 5 billion within 10 years.

Bitcoin is just getting started.

You’re still very early.

Until next week,