Are We Having The Worst Inflation 💸 Of All Time?

Panic 🚨 is the biggest killer of creativity – avoid it!

The problem with our regular WhatsApp debates is that they have polarized us rendering to stop thinking and we tend to promote views aligning to our political inclinations. It is important to read through the data which is publicly available before making conclusions and getting panic attacks which drains our productivity & positivity alike.

The Pakistan 🇵🇰 Context!

One of the debates I witnessed recently within expat community was about inflation and how high it has been in Pakistan with a few people mentioning that we never had witnessed such inflation ever in the history. Upon hearing that, I thought to write about this misconception as inflation that we are seeing right now is nowhere what we have already seen in 2008. The charts below are self explanatory of what we had gone through in past 25 years and even after COVID we are not even close to where we were back then. Having said that, by no means we are out of the deep troubles due to domestic and global issues.

You can have a look at this writeup from dawn back in Sept 2008 for soaring 25% from 6.45% inflation within one year.

**Crude oil prices trend (absolute values)**

The Global 🌍 & US 🇺🇸 Context

The crude oil prices were skyrocketing during 2008 too along with global financial & housing crisis. The oil price went to $140 during that time and if you adjust with inflation these prices were around $180+ compared to current standards as shown in the chart below. Working on absolute numbers is fine, but context is always required to be in mind when working on long term trends.

**Inflation adjusted crude oil price in last 30 years**

The problem this time around is that the oil 🛢 prices might remain to be on higher side for mid term at least until the war situation between Russia and Ukraine cools down which no one can predict. Moreover, this time, the inflation has hit the most powerful country in the world because of crazy money printing during COVID19 along with food inflation due to war now. The chart below will give you an idea the crazy way money printing has been executed which was not evident for the USA in last several decades which has caused serious inflation compared to 2008. I take the US as benchmark for certain studies due to 2 main reasons:

1 – It is the biggest economy of all so what happens in the US will impact every other country.
2 – The US being a matured economy has the most reliable data compared to a third world country like Pakistan.

**US Inflation Rate [LHS} vs Crazy Money supply [RHS]**

What are your options 🧮 ?

With all these global and local events going on – what should an average investor look for and invest in? While in Pakistan, you have very little options for investment in the outside world & with skyrocketing interest rates you may want to:

1 – Lock in to long term profit rates of around 15% for some portion of your investments. (possible with T-bills etc)
2 – To have a little bit of exposure in gold is also desirable [not more than 10% if you are abroad, not. more than 20% if you are in Pakistan]. Discussed about gold investment here.
3 – Buy stocks of value and dividend paying companies for long term as current market valuation of Pakistan (P/E = 4) is even less than Sri Lanka (P/E = 6). This makes Pakistan as attractive buying opportunity for long term.
4 – If you have enough capital, then you might want to keep one residential property for own usage [if you are a person who feel better with property ownership – video here]
5 – What you dont want to do is to keep your savings in bank account which earns you below inflation rates.
6 – Most importantly focus on increasing your income and try to earn in USD providing value outside Pakistan – increasing your productivity should also be your priority as discussed here.

**Interest rates [LHS] vs KSE100 index [RHS]**

The inverse correlation between the stocks and interest rates is always there and in all markets. No one can time the market – thinking to juggle investments on time to time basis between fixed income and stocks will not help. Make your strategy and invest in short to medium term investment in fixed income options (while interest rates are high) and long term into good dividend paying stocks. I made a video for filtration criteria I use for dividend paying stocks being completely a newbie.

Keep looking for options – do whatever you want, but just note that the investments are made to make you comfortable. In case you feel anxiety from your investments then either the investment is not right OR your attitude towards the investment is not correct – so you need to work on that! 🔴

About Myself

I post 3 videos every week on my YouTube channel on the topics of productivity & personal finance specifically for expats & in general for wider Pakistani community. Besides this, I update this website / blog on weekly basis so do visit regularly for updates – To get value out of the content, please consider subscribing both the YouTube channel and the newsletter.