Don’t Ignore The Investment Bogeyman!
Guest Post by Dennis Miller at Miller On The MoneyGrandson Brock worked two summer jobs and made a hefty deposit into his savings account. This is money he earned and is taking an active role in learning about investing to make it grow.
When asked to define investing, he responded, “Not spending your money; using it to earn more money.” Webster says: – “To commit (money) in order to earn a financial return. – to make use of for future benefits or advantages.”
If only it was that easy. Since the Fed began, the inflation bogeyman steals his cut. I recently wrote how an investor can make & lose money at the same time:
“Since the 2008 bank bailouts, treasuries, CDs and top-quality bond interest rates have generally not beaten inflation. On paper your “safe interest income” might look nice, you made a profit, however, the buying power of your life savings decreased.
In 2022 inflation hit 8%, and most CDs still paid 2%. The confident investor with $1.2 million in CDs would lose a net 6% ($72,000) in buying power of their life savings.”
I continued…
“Friend Frank Trotter at Battle Bank shared an eye-popping statistic in their recent Battle Bulletin:
“Despite gold’s spectacular run, including a roughly 65% gain in 2025, its best year since 1979, U.S. investor allocations remain remarkably thin.
Bank of America’s Global Fund Manager Survey found average professional allocations of just 2.4%, with nearly 40% of managers reporting no gold exposure at all. Estimates of gold’s share of U.S. household financial assets run well under 1%.
Morgan Stanley’s headline-making late-2025 recommendation that investors adopt a 60/20/20 portfolio, with gold receiving the same 20% weighting as bonds, was newsworthy precisely because actual positioning is nowhere close to that.”
Daughter Holly checked their money manager’s website. Around 2.4% was allocated to a couple index funds, designed to ward off the inflation bogeyman. Over the long haul, the buying power of their life savings is at risk!
[td]
While investing is committing money in order to earn a financial return, it is the “future benefits or advantages” that is not being adequately addressed.
[/td]Gold may sit idle for a decade, but when the time comes it performs.
This month’s Battle Bulletin, “What’s on the Other Side of Every Trade? A Serious Look at Currency Investing”, grabbed my attention:
“Here’s the uncomfortable arithmetic for the typical investor. Own the S&P 500, a bond ladder, a money market fund and a house, and you may believe you’re diversified across hundreds of positions. But measured in currency terms, for the most part you own one position at 100% weight.
Since nearly every asset you hold is priced in this currency, and your future liabilities are denominated in it, the concentration feels natural. But it is still concentration.
The argument to ignore currencies writes itself when the dollar is strong, as it was for most of 2011 through 2024. During those years, unhedged foreign exposure was a drag, and dollar concentration looked like wisdom.
But then 2025 arrived with a new administration and new policies, and the same concentration subtracted double digits of global purchasing power in 12 months. Morningstar noted that through September 2025, the dollar had depreciated 13.1% against the euro and about 14% against the franc. An American with no foreign currency exposure did not avoid the currency market that year. They simply took the losing side of it, in size, without ever placing the trade consciously.”
US investors may have beat inflation, and the IRS happily taxed the income; however, are they still losing ground?
I contacted Battle Bank CEO Frank Trotter for clarification.
DENNIS: Frank, thank you for taking your time for the benefit of our readers.
Mutual friend Chuck Butler taught our readers that all fiat currency (not backed by gold) is nothing more than a political promise. What keeps it from becoming worthless pieces of paper is confidence.
Frank, it looks to me like last year people could have made money on paper, beat the US inflation bogeyman, yet still lost buying power in the rest of the world.
Can you explain what that means to a reader who may have an IRA or 401k totally denominated in US dollars?
FRANK: Thanks Dennis. Of course, this varies year by year but most of us focus exclusively on US inflation. That’s not something to ignore, but overlooks much of what is happening in the world. That 100-euro dinner in rural France may have cost $112 last year, but it’s nearly $120 this year. If you aren’t dining in Paris that may not seem like a bad thing, however, over time things level out. Imported goods become more expensive.
DENNIS: Chuck explains that currencies trade in pairs, one goes up, another goes down. Please explain the difference between investing in a currency versus buying shares in an ongoing business.
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