58 THE BiG DROP
■ Getting the Timing Right
There are a lot of analysts who, since 2008, have been are say-
ing, “The next crisis is right around the corner. We’re going to
have hyperinflation. Buy gold. Do this. Get ready now.”
Many people have bought into that narrative and have been
disappointed. They say, “Well, wait a second. We don’t really
see much inflation. In fact, deflation appears to be more of a
danger in recent times. Oil’s down... gold’s down... commodi-
ties are down. At some point, that narrative loses its credibility.
Here’s what I say to confused investors. Inflation, much
higher inflation is a danger. But so is deflation.
So, again, my advice for investors is be prepared for both.
The investor who’s doing this is Warren Buffet.
Warren Buffett’s not only buying hard assets but he also
has fifty-five billion dollars in cash. The hard assets are his
inflation insurance. The cash is his deflation insurance.
It’s a lesson not to put all of your bets on one side of the
table. My advice is having some inflation protection. Have
some hard assets, whether it’s gold, energy stocks, silver,
land, fine art. But don’t go all in — make that a slice. If the
hyperinflation comes or even extreme inflation comes faster
than we expect, that’s going to preserve your net worth.
On the other side, however, have some deflation protection.
That could include bonds, fixed income and cash.
When I recommend cash to investors, a lot of them reply,
“Well, I hate cash. It has no yield. It just sits there. It’s not sexy
or interesting.”
They don’t understand what cash does. The first thing cash
does is it takes the volatility out of the rest of your portfolio. If
stocks, gold and commodities have been volatile, having cash
reduces the impact. It’s a little bit technical, but that’s what it
does. It helps you sleep a little bit better at night.
Cash is also great deflation hedge. Remember, during de-
flation the value of cash goes up. It doesn’t deliver high yield,