¶ Introduction
One of the most powerful companies in the world when it comes to pricing power is, you guessed it, Apple. Because people would trade their second car in to get their hands on one of these. Like the pricing, this is probably worth $30,000 to people, not 1500 bucks. It's got so much pricing power in it. And I know that because I know that people would literally trade their cars to get this. And I know cars cost 30,000. So this is really a $30,000 product, but
it's not being sold for that. So Apple knows it can incrementally increase the prices like this, over and over again to combat inflation because they know that people are still going to buy this because it's such a valuable commodity to people, right? The same sort of thing. I can see over there in the fridge there's a can of Coke in there. Another example of a company that can actually outperform inflation is Coca-Cola because Coca-Cola has the ability to increase each can by one cent. Over
8 billion cans consumed daily. Think about that. Some huge number of cans consumed daily can increase it by one cent. It's almost 2 billion cans of Coke consumed daily. So you think if Coke can increase it by a cent, it's increasing it by like 2 billion cents a day. Isn't that insane? So it's got pricing power, so it can outperform inflation. So check this out. Look at what Warren Buffett's doing right now. Look at this. He knows that the US dollar is inflating. He
knows that, and I'm talking about the Australian dollar, but the US dollar is also inflating. He knows this. So he's positioned his portfolio into bonds, which helps hedge inflation a bit because you're getting 4.5%. He's putting his money into oil stocks hedge, and he also owns Coca-Cola as a company. His highest
¶ Pricing power during inflation.
position is Apple. Think about this. And he's got Moody's. So all these companies in his top five or six holdings, which takes over most of his portfolio and other private companies he owns, he's got pricing power. See his candy. Big, big powerful company. He bought that for $25 million many years ago. It's worth billions now. And it can increase its candy prices to combat inflation because people will still want to buy its product. So he's got tremendous hedge in inflationary pressures with his
holdings and businesses. So, companies can raise prices in inflationary times. This happened during the GFC, the S&P 500 soared because of rising money supply. Owning an index fund, if you've got companies in there like Microsoft, Google, Apple, etc., Coca-Cola, they can increase their prices. McDonald's, the Big Mac index. When you went to McDonald's recently, I bet you were shocked by the price of stuff. Yes, it hurts. It used to be you could go to McDonald's at $5.95 for a meal. a
house to get a meal at McDonald's. It's the Big Mac Index. McDonald's is a perfect example of a company and a business that can increase its prices. Why? Because it has. So if you want to hedge inflation, businesses are a wonderful way to do it. That's how I do it. That's how I do it. So I'm excited that I own certain companies that are hedged with oil stocks. I'm excited that we have businesses that are hedged in products and services that people need. Super, super
effective way to do it, right? So you can either get it through some sort of index, you can get it through ownership of businesses, private or public. All right, next one. This is the last one. The best hedge of all time. We said the best to last. This is the best hedge against inflation of all time. It's the fastest way to outrun inflation. And unlike cash, it can compound very powerfully. So check it out. You're going to be thrilled or you're going to be
disappointed, be the one. Here we go. The best way to
¶ Skills are inflation proof.
hedge inflation is to actually increase your skills. The best way to hedge inflation is to earn more money. The fastest way to outrun it is to earn more. Unlike cash, skills can compound drastically. You can end up finding skills that you can totally transform your earning power with and your income is the most important thing you can do to enhance your wealth. It really is. You can't save your way to wealth. You can do it for a
period of time but you can't get it down to nothing. So, there's an example in, I mean, many examples in the past where there's inflations crushed the economy. I know without a doubt that people in that economy with skills, sought after skills, were still getting paid a ton of money in all sorts of different currencies and or gold and or in barter to apply their skills to the economy. Okay, so it doesn't, if you've got skills, people will find a
way to give you something of value to get them. So it doesn't really matter if your local currency, like the Australian dollar is completely, you know, getting, It's completely collapsed in the last few years in terms of its value, but... I know that if I've got skills, I can get paid in gold, I can get paid in US dollars, I can get paid in barter. Like if I'm good at what I do and people need it, they will find a way to pay me.
Even if the currency is toilet paper, I know during COVID when there's a lot of toilet paper, I could have provided a skill to someone. So Lloyd, I'll pay you in toilet paper. Go, give me the toilet paper. It doesn't really matter what it is, your skills are inflation proof. And it doesn't matter if the global currency is crypto, USD, gold, Bada, whatever, your skills transcend all of the global currencies, all of them. So the most important thing you can do is improve your
knowledge and skills because they are inflation proof. They will ride inflation way up because there's people out there with skills. Think about it. Think about Mark Zuckerberg. He's now like the top three or four wealthiest people in the world. He's also the youngest in that group. Think about the skills that he applied. He became a multi, he became worth $100 billion. Do you think that outperformed inflation? Yes. Do you think Jeff Bezos outperformed inflation?
Yes. Do you think Warren Buffett outperformed inflation? Yes. All the people I know who are wealthy, a lot of my friends who are worth millions of dollars, how did they get there? Did they buy gold? No. Did they buy real estate? No, they didn't. They might say they do now to protect their wealth, but they didn't get there that way, let me tell you. They all did it through actually improving their skills and starting and building their own businesses. That's how
they did it. So don't, and some people have certainly, there's a story of a lady, she just gave a billion dollars to a charity. Her husband happened to invest with Warren Buffett, that's stocks, that's Berkshire Hathaway, and ride that sucker way up to a billion dollars, and of course, incredibly powerful hedge, because Warren Buffett in the last 60 years created 5.5 million percent return. To put that in perspective, the S&P 500, 30,000 percent return. To
put that in perspective, it way outperformed inflation. Inflation hasn't been anywhere close to those two numbers. So stocks and businesses, yes,
¶ Investing in yourself as a hedge.
can also outperform it. But for most part, it's businesses because of skills. So if you want the ultimate hedge, invest in yourself. You are the ultimate hedge. You are the best asset to invest in to overcome inflation. So could hyperinflation happen in Australia? Could we absolutely destroy the power of the Australian dollar? Theoretically, yes. Will it happen? Technically, well, technically yes, but theoretically or I would say no. It's unlikely because
we've got a floating exchange rate. We've got an independent reserve bank. We've got global trading partners. We've got a ton of resources here, deep capital markets. And we do have, despite the challenging leadership we have at the minute, that's a whole other episode of what I think about that. But we do have the ability to control money supply. And we do have hard assets backing. We've got land, arable land. We've got farming, commodities. We've got resources, energy,
hydrocarbons. We're good. But if hyperinflation does happen, Like what happened in Germany, what happened in Venezuela, what happened in Zimbabwe. In those scenarios, you know what happened? People fled back. They just dropped the currency. They went back to other currencies. They went back to the US dollar. They went back to gold. That's what happened. The economy doesn't die. The paper money is just forgotten. All trust is broken and we stop using it. So it's not like you'll just have nothing.
You will have figured out by then if there's hyperinflation what does work and you'll have already gone there. But I can almost guarantee you that if you have business skills and you have the ability to pivot and you buy businesses and build businesses, there's no amount of inflation that can hurt you because you are indestructible because
you invested in yourself. And of course, one of the other hedges that's happening that I haven't really covered here because I don't want to is cryptocurrencies, especially Bitcoin. They're like, oh, Bitcoin's a hedge against inflation. Oh, my God. Do I have to talk about Bitcoin? It's a code. It's a piece of code. And people like, read the Bitcoin standard. How
much research do you have to do to realize something's valueless? Look, people are using crypto and specifically Bitcoin as an inflation hedge. But the fact of the matter is this, gold has got thousands of years of measurable data against inflation than crypto does. It's tangible. Remember, the inflation hedge is against tangible assets, right? Things that can produce value for the world. Crypto doesn't produce any value.
How do I know that? Because I went down to the supermarket, With my wife, we were doing a checkout and I said to the lady, ìHey, do you take cryptocurrency for my groceries?î She went, ìNo.î I was like, ìPfft.î Then I went to my landlord the other day, my property manager and he called up and said, ìHey, you owe rent.î Iím like, ìOh, do you take Bitcoin?î He goes, ìPfft.î So Iím like, ìOkay.î So I rang up my American Express. I got an American Express card, platinum card. Itís a wonderful card,
lots of points. I rang him up the other day and I had like $100,000 to repay on that. I said, ìHey, do you take cryptocurrency? Do you take Bitcoin?î They went, ìPfft.î How is crypto or Bitcoin a hedge when it's not even valuable? I can't use it for anything. At least I can sell gold on the open market. I can sell it. You can touch it. You feel it. Even though I hate gold, I can at least see it's there. You can't see anything with crypto. It's just code. Right? There's
certainly value in the technology of a blockchain. There's certainly value in the technology of internet. There's certainly value in technology of AI, LLM models. There's value in those for sure, because they speed up things. Yes? But I can't see it in crypto. And so it might feel like it's a hedge against inflation. By all accounts, if you haven't bought it, it looks like it's hedged. But how they measure it? is in USD, right? And so if the USD disappeared overnight, so
would the value of cryptocurrency, right? Because it's really got to be valuable in the real world. And that's why I don't think it's the best hedge. So
¶ Value of tangible assets.
I don't hold any of it. I never will hold it. Even if the world adopted it as a currency, which I cannot see happening, I would still own businesses. I would still, for that matter, if it was the right price, own a piece of property. I would still own things that are valuable. And I just can't see how it's valuable. This is why I don't personally own gold. I don't personally own crypto. I personally own
things that are valuable to the world. Because I know if push came to shove and shit hit the fan, like it did in COVID, did people go to crypto? Nah. Did they go to gold? Nah. They went to toilet paper. So I'm thinking to myself, wouldn't I want to own companies that produce toilet paper? That's a better hedge, right? This is where my mind's at. This is how I think. So I know that people got wealthy by not owning those assets. I know they got wealthy by building businesses and