Dear Reader,

If you caught my note on Tuesday, you know inflation is already at 5%. I expect it to reach 10% next year.

• I’ve been warning readers about rising inflation for the past year.

Now everyone’s talking about it. Former Treasury Secretary Larry Summers says an inflation surge could be on the horizon. Michael Burry, the famous fund manager from The Big Short, told his Twitter followers to “prepare for inflation."

Others have made even bolder warnings. Wharton professor Jeremy Siegel recently said “we could easily have 20% inflation” in the next two to three years.

• The problem, of course, is that inflation destroys your purchasing power.

Even if inflation simply hovers at 5% for the next 10 years, every $100 you have in your wallet today will only buy $60 worth of stuff a decade from now.

• One driver is the psychology around inflation, which recently took a turn.

People are starting to expect higher prices. And when people expect higher prices, they do things that make prices go higher.

Take lumber, for example. If you go to Home Depot, instead of buying a little bit of lumber, you buy a lot of lumber and save whatever you don’t need for later. Other people do the same thing, and it drives up lumber prices.

When a lot of people act this way, it becomes a self-reinforcing process that leads to even higher inflation.

Fortunately, you can protect yourself from the wreckage by owning certain asset classes, like real estate, precious metals, and other commodities.

You’ll hear more about some of the gigantic profit opportunities I see in these asset classes in the days ahead.

Jared Dillian
Editor, The 10th Man
Mauldin Economics