Surfing the inflation tsunami

It’s coming! Will you run, hide or learn to surf?

David CampbellFormer high school band director

Self-made multi-millionaireProfessional investorReal estate developer

Real estate brokerReal estate & business advisor

Financial mentorOver $500 million of real estate experience

Houses, condo-conversion, multi-family, winery,Resort, office, retail,

California, Texas, North Carolina, Mexico, and Belize

HusbandFather

MusicianRegular guy

Tonight’s Agenda

What is Inflation and Quantitative Easing?

Who is responsible for Inflation?

Who benefits and who loses from Inflation?

How do you and your family protect and maybe profit from Inflation?

There ain’t no such thing as a free lunch!

• David Campbell owns a real estate development company and works extensively with investors.

• Mike Piromgraipakd sells gold

What is NOT on Tonight’s Agenda

Nothing for sale

No MLM

No close

no investor left behind

Fiat Currency

What is Inflation and Quantitative Easing?

Inflation is an increase in price as a result of the increase in the supply of currency and/or the increase in the velocity of money.

Quantitative easing is an increase in the supply of currency while attempting to keep prices low by reducing velocity.

Inflation is NOT increased demand

INCREASED LIFESTYLE = INCREASED CONSUMPTION

Inflation is NOT scarcity of goods

INFLATION FROM PRINTING

INFLATION FROM: VELOCITY OF MONEY

TOTAL CURRENCY:$200

Velocity of money

BUYS:$100 COWS

SELLS: $100 CORN

BUYS:$100 COWS

SELLS: $100 CORN

SELLS:$100 COWS

BUYS: $100 CORN

SELLS:$100 COWS

BUYS: $100 CORN

TOTAL EXCHANGE:$400

Who is responsible for Inflation?

Inflation is an Economic “Solution” forO v e r s t r e t c h e d

Governments

Debt

$13.6 Trillion

201 US GDP IS $14.66 TRILLION (CIA FACT BOOK)

THE PRESIDENT'S AMERICAN RECOVERY AND REINVESTMENT PLAN

Doubling the production of alternative energy in the next three years.

Modernizing more than 75% of federal buildings and improve the energy efficiency of two million American homes, saving consumers and taxpayers billions on our energy bills.

Making the immediate investments necessary to ensure that within five years, all of America’s medical records are computerized.

Equipping tens of thousands of schools, community colleges, and public universities with 21st century classrooms, labs, and libraries.

Expanding broadband across America, so that a small business in a rural town can connect and compete with their counterparts anywhere in the world.

Investing in the science, research, and technology that will lead to new medical breakthroughs, new discoveries, and entire new industries.

Job #1 Increase money supply!

WHAT HAS INFLATION BEEN DOING IN THE UNITED STATES OVER 100 YEARS?

WWI

WWIIVIETNAM IRAQ

Where is current velocity?

What will happen to velocity/ inflation when consumer sentiment

returns?

What is happening to money supply?

US vs China money supply 2008-2010

INFLATION AROUND THE

WORLD

2008

2009

South Carolina Governor, Mark Sanford, the h e a d o f t h e R e p u b l i c a n G o v e r n o r s Assoc ia t i on . . . fears tha t excess ive government borrowing to fund the stimulus could lead to an inflationary spiral to rival Weimar Germany's.

FEBRUARY 21, 2009

John Hathaway,

Portfolio Manager and Senior Managing Director the Tocqueville Funds

“The unstated objective of government economic stimulus would seem to be currency devaluation. Success will be defined as inflation that alleviates debt burdens to a degree sufficient to rekindle the appetite for risk in the private sector. Since nobody knows in advance how much inflation is required, it is more than likely that policy makers will overshoot their objective. The results could well be of Weimar proportions.”

THE RATE OF INFLATION IN 1923

WEIMAR GERMANY HIT

300,250,000% PER MONTH

PRICES DOUBLED EVERY TWO DAYS

Who benefits and who loses from Inflation?

Who benefits from inflation?

BorrowersTrade Deficit Governments

Deficit Spending GovernmentsLiberal Governments

Arbitrage Lenders - Institutional Banks

Government advantages to inflation

hidden form of taxation

100% tax on interest income OR inflation?!?!?

reduces real cost of government’s debt

creates short term / misguided feeling of prosperity

gives government unlimited discretionary spending

Government disadvantages to deflation

increases real cost of government’s debt

if it will cheaper to buy next month, no one will buy

government spending power is limited

ratio of government debt to GDP goes up prohibitively

ACTUAL INTEREST RATE - INFLATION RATE

TRUE COST OF BORROWING

INTEREST RATE FOR BORROWERS

- INFLATION RATE TRUE COST OF BORROWING

BORROWING TO MAKE A PROFIT ?!?!?!?

5%-10%-5%

Who Loses from Inflation?

SaversWorkersIncome Tax Avoiders

Consumer Price Index is a BIG LIE3% CPI (inflation)??

How do you and your family protect and maybe profit from Inflation?

ACTUAL EARNINGS RATE - INFLATION RATE

TRUE EARNINGS RATE

THE EFFECTS OF INFLATION ON SAVINGS AND INVESTMENTS

0.6% EARNINGS - 3% INFLATION 2.40% LOSS!!!

ACTUAL EARNINGS RATE - INFLATION RATE

TRUE EARNINGS RATE

0.60%

HOW IS THAT RISK FREE?

Inflation: a foe to savers

Inflation: a foe to slow investors

leveraged investment

TODAY?AFTER 1 YEAR?

AFTER 20 YEARS?

Interest only loan

$100,000 $100,000 $100,000

Inflation at 3%

Hammers needed to repay debt

16,667 hammers

16,181hammers

9,505 hammers

With an inflation forecast of 10% inflation how can

your investments out pace inflation?

0

125000

250000

375000

500000

YEAR20092010201120122013201420152016201720182019202020212022202320242025202620272028202920302031203220332034203520362037203820392040204120422043204420452046204720482049

value - mortgage = equity

appreciation

mortgage

equi

ty g

row

th

equity

inflation adjusted cash flow

$0

$1,000

$2,000

$3,000

$4,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40

adjusted gross mortgage expense variable expenses monthly net income

Income & Adjustable Expenses Increase

Debt Expense Stays Constant

Net Cash Flow Increases

What if you took out a 30 year fixed mortgage in 2009?

RATE OF INFLATION

RATES ARE LOW BECAUSE OF SUBSIDIES NOT BECAUSE OF MARKET CONDITIONS

FORECAST FOR INFLATION IS VERY HIGH

Borrow at 5-9% to invest at 6-12%+

Strong Cash Flow Vehicles

Deeds of Trust (notes)

Mortgage Pools / Group Investments

• $100,000 borrowed at 6% = $500 I/O

• $100,000 invested at 12% = $1,000

Net Monthly Income = $500 (PROFIT)

Arbitrage into Cash Flow Vehicles

GoldBonds / Treasuries

Stock MarketReal Estate Businesses

Questions & Answers

David@HasslefreeCashflowInvesting.comwww.HasslefreeCashflowInvesting.com

disclaimers

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disclaimers

disclaimers

FORWARD LOOKING STATEMENTS: The Presenter, its related companies, this written presentation, and its related documents contain forward-looking statements and information related to future events. These statements may be identified by words such as “expects,” “looks forward to,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “will,” “project”, “forecasted” or words of similar meaning. Such statements are based on assumptions that contain a high degree of subjectivity and are, therefore, subject to certain risks and uncertainties. Changes in general economic and business conditions, developments in the financial markets, including fluctuations in interest rates, inflation or deflation rates, and many other unforeseen risk factors will cause your actual investment results to vary materially from these forward-looking statements as expected, anticipated, intended, planned, believed, sought, estimated or projected. Presenter does not intend or assume any obligation to update or revise these forward-looking statements in light of developments which differ from those anticipated.