What our clients are saying
Tumwater has helped my family think about our financial future– but in a uniquely holistic way.
I really value being to ask for Ben’s advice on any financial topic, be it immediately related to our investment planning or not.
Ben sees and understands how the big picture impacts the tactical decisions he helps you make.
The service provided by Tumwater has met all of my needs.
Tumwater has given me a place to have my money managed, to allow
the money to work for us, thereby increasing in value every day. Tumwater
invests the money into funds that grow, watches those funds to stay
[diversified]. You hire a Financial Advisor to focus on increasing the
value of your saved money. This allows you to focus on your own profession to
succeed. The money invested then grows and is there for life’s big bills, college
for youngsters, retirement, etc.
I have complete trust in Tumwater, they alleviate a huge burden of stress in my life.
My first contact with Ben occurred when he was the Financial Advisor for my
former employer… The first one-on-one meeting we held to discuss my financial future
was a total wakeup call (Yes, there were tears). He laid out an honest appraisal of my
current financial situation and what I needed to do differently to move positively
toward a reasonably comfortable retirement. I took his sound advice to heart. Last year,
I was unexpectedly laid off and that led to my decision to retire at the age of 70.
I reached out to Ben and he immediately set up a time to talk about the best
options for my 401K. A plan to roll the funds into an IRA was set in place and
implemented by Ben and his co-worker, Jackson. I am confident that Ben has my best interest at heart.
Communication is never an issue—I always know I will receive honest, appropriate guidance.
[I] sleep well at night knowing Ben and his team are taking care of our investments.
Tumwater has been a great resource for financial planning for my future and eventually my retirement.
I’ve worked with Ben to find the right balance of investments that suit my long-term saving goals.
I also have appreciated Ben’s help with other savings goals, whether it’s regarding an emergency savings fund,
or saving for a specific purchase. He is always willing to answer my questions and explain the rational behind
investment moves. He also reviewed my 401(k) plan which was very helpful!
Tumwater allows us to enjoy our retirement.
Tumwater provides a thorough explanation of my
assets and how best to meet my needs.
Tumwater has helped to make us feel financially secure over the long run
because of the sensible investment strategies Ben has employed for us.
Cherie and Jim C.
I find the entire staff consistently responsive. This is significant for me.
Once I recognize I need information, it is helpful to receive that information quickly.
You have been a valuable resource for others in our family.
You have gained our trust and respect and this is very important at our stage in life!
Cherie and Jim C.
Through Ben’s guidance for over 10 years he has
brought to a comfortable financial position heading into retirement.
We have 100% confidence that you know what you are doing which is so
much more that most professionals who call themselves a financial advisor.
They have helped me feel safe with my financial future and provided me a
valuable resource to come to with any questions about financial decisions and planning.
What is Our Best Defense Against Inflation?
This is a great question. And it’s something a lot of people are wondering about these days. With our country printing literally trillions of dollars in 2020, inflation is going to be a real concern in the coming years.
Put simply, inflation eats away the value of our dollars.
The academic formula that best describes how that happens is MV = TP. Let’s translate that into English.
M is the amount of money in the economy.
With the recent stimulus bills, the government has increased the money supply by roughly 20% this year. You can see what an unprecedented spike this has been in this chart:
Next, we have V, or the Velocity of money.
Essentially, this is how often each dollar in the economy gets spent each year.
The velocity of money has nose-dived in 2020 because we have all been stuck at home, businesses have been closed, or have been forced to reduce capacity. You can see that the velocity of money is down almost 25% this year:
This lack of velocity is why we have avoided inflation so far in 2020, despite the unprecedented spike in the money supply. Even though there are more dollars in circulation these days, people are not spending those dollars as fast as they were spending last year.
Finally, T stands for the number of Transactions happening in the economy each year and P stands for the Price of everything being bought and sold in the economy.
Money x Velocity = Transactions x Price
If the amount of money in system remains where it is today and the velocity of money and number of transactions returns to where they were pre-COVID, prices will have to rise. Inflation.
Eventually, and maybe sooner than a lot of people think, people will get back to spending the way they did pre-COVID.
Without a plan for how to reduce the money supply and pull all those extra dollar bills out of the system, how can we avoid inflation? And policymakers haven’t even bothered discussing how they might do that.
With a spike in the money supply of 20% in just this year we worry the increase in prices could be significant.
For long term investors, the best way to “hedge” against inflation is to simply use investments that have a history of generating higher returns than inflation.
After all, if inflation makes everything you have to buy more expensive by 3% per year (which it has historically) then you can directly offset that by investing in something that grows your money by 3% as well.
If something you want to buy increases in price from $100 to $103 but at the same time the $100 you want to use to buy is invested and it also grows to $103 then you’ve directly offset the price inflation with your investment return.
We’re even better protected by investing in something that earns 5% or 7% or 10%. The better the rate of return, the more protection you have against inflation.
How About Gold?
There is a very common belief that precious metals in general and gold in particular are the best ways to “hedge” against inflation. After all, if the US Government is debasing the US Dollar by printing trillions more why not get out of that currency? If you hold your money in gold you’re not subject to the ups and downs of the US dollar and therefore you’re money is protected from inflation, right?
If we look at how much an ounce of gold costs in US Dollars after accounting for inflation over time we see a couple of things:
- As an investment, gold did really well from 1971 to 1980. From a low of $35/ounce ($262 in today’s dollars) just before the US went off the gold standard to a high of $843/ounce (more than $2,200 in today’s dollars) – more than 42%/yr. for those 9 years!
- But today the price of gold is less than $2,000/ounce. It was worth more than $2,200/ounce in today’s dollars 40 years ago!
History is Still Our Best Guide
Historically, the two asset classes with the best protection against inflation are stocks and real estate. Stocks have historically averaged 10-12% returns per year, while investment real estate has historically averaged roughly 9% returns per year.
The problem with real estate for most people is they’re usually already overly concentrated in real estate because of their investment in their home.
But once someone has enough assets on their balance sheet to mitigate that, we believe real estate can be an intelligent holding for diversification and beating inflation.
The higher returns and the ability to get thoroughly diversified at very low cost make a diversified portfolio of stocks a better “hedge” against inflation for most people.
Many people will say there is too much “risk” in holding stocks. We explore that topic and more in our new 9-Email Course: Foundations of Financial Success. Sign up here for free!