Oct 3, 2022
Has inflation peaked? Investment mogul and Shark Tank star Kevin O’Leary doesn’t believe so.
“We haven’t yet,” he tells Stansberry Research. “particularly if this Build Back Better bill prints another $400 to $600 billion and flushes it right into the economy. That's probably not going to be a good outcome for inflation, because it's very inflationary, even though it's trying to be labeled as an anti-inflation bill.”
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“Anytime you print money, you get inflation,” he adds.
Inflation is a particularly big concern for investors. If price levels continue to rise, it would likely lead to more rate hikes from an already-hawkish Fed — and that probably won’t be good news for stocks.
Many investors have been using alternative assets to hedge against spiking levels. Have they worked? Here’s O’Leary’s take.
Gold
Gold cannot be printed out of thin air like fiat money, so it has been a go-to choice for investors looking for an inflation hedge.
At the same time, the price of the precious metal tends to stay resilient even in times of crisis.
O’Leary has bought gold.
“I've added a little gold and I'm using the GLD, which is an expensive ETF. But it's liquid enough, you can put millions in and out of them in an hour and not move the market,” he says, referring to the SPDR Gold Shares (GLD).
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Given the massive increase in consumer prices and what’s been happening around the world, investing in gold should be a hot move this year — but it isn’t.
Despite having a nice rally in February and early March, the price of the yellow metal is actually down around 9% year to date.
“Right now, gold as an indicator is not doing what it should be if you really believe we're going to hyperinflation,” O’Leary says.
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Bitcoin
One of the reasons why some consider bitcoin as the new gold is that bitcoin also can’t be created out of thin air like fiat money. The number of bitcoins is capped at 21 million by mathematical algorithms.
While some credit bitcoin’s rise to people’s increasing distrust in fiat money, the crytpocurrency is far from smooth sailing.
Since soaring to $68,990 last November, bitcoin has pulled back a staggering 71%.
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The downturn has impacted O’Leary’s portfolio.
“We took a hit, we were at 20%, and then it grew up to 23%, then it went down to 16% of the portfolio,” he says, adding that “it was really volatile.”
But that kind of volatility wasn’t unexpected.
“I've always said, you're going to get this volatility as an industry that's not regulated, because there's no institutional bid.”
O’Leary also mentions that for the big market cap names in the cryptocurrency world like bitcoin and ethereum, he has “doubled down” in some cases to take advantage of the extreme volatility.
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“Why not add to the position if you are going to stay long?” he says.
Luxury watches
With the downturn in financial markets, the second hand market for luxury timepieces have taken a hit as well. Bloomberg recently put out an article titled The Crypto Collapse Has Flooded the Market With Rolex and Patek.
But O’Leary, who’s an avid watch collector, is more optimistic.
“I've been listening to this dialogue now for a year about how watches are going to roll over. It simply hasn't happened because the demand for watch pieces, particularly the brands of Rolex, F.P. Journe, AP, even Omega recently has had a huge run.”
He admits that watches have pulled back from their peaks, but they’ve still served him well.
“If you've owned these watches for 24 months, it's still out paced the S&P, it’s still outpaced crypto. It's the best asset class to have been in in the last two years.”
With inflation still rampant, more and more investors are considering real assets as an alternative way to achieve market-thumping returns.
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Jing is an investment reporter for MoneyWise. He is an avid advocate of investing for passive income. Despite the ups and downs he’s been through with the markets, Jing believes that you can generate a steadily increasing income stream by investing in high quality companies.
