Hegna's Hotseat

Tom Hegna's 2022 Economic Commentary


've released my annual economic commentary for the past 10 years because I want you to receive valuable information for free without having to read all the research I do. I try to make economic issues so simple even your clients' children can understand them. For the past several years, I've been one of the few economists in the world who has stayed consistent at saying interest rates will remain low for a very long time. However, I'm confounded this year. Inflation has gotten so out of hand that something has to give. That's why I want to show you how you can explain three types of inflation to your clients, and I also want to share a few ways you can help those clients protect themselves and their future generations from the risks associated with this inflation we're seeing.

One type of inflation we've seen a lot of recently is "elastic inflation." A major cause of inflation is the massive "printing" of money chasing a limited number of goods. When that is combined a supply shortage, we see prices go up and down due to standard supply and demand economics. For example, cars are hard to get because the specialized chips that run and monitor your air conditioner, tire pressure, and different computers are all hard to get. When those supplies are hard to get, their prices are bid up, but when the chip shortage ends, prices will come down. We've seen lumber and copper prices rise and fall throughout the year. However, there is another type of inflation that doesn't come down so easily.

"In-elastic inflation" is sort of like gas prices. If you commute to work or school every day, you're going to fill your tank regardless of whether prices are $3.75, $4.00, or $4.25. Now, if prices rose to $12.00 you might change your lifestyle, so that's why gas prices aren't entirely in-elastic. However, wage inflation is very in-elastic. When you give someone a pay raise, it is very, very difficult to take that away. The big push for $15.00 minimum wage didn't stop there. Many places are having to pay people $17.00 or more, and that causes companies to raise the prices of their products. You used to be able to go to McDonalds and get a burger, fries, and a drink for $5.00. Now, you have to pay $10.00, $11.00, or $12.00! This type of inflation often causes another type.

"Skimp-flation" is like when portions decrease. You used to get a large fry and large drink with a combo, but now you get a small fry and small drink. If you want medium sides, that's an upcharge. If you want large sides, that's another upcharge! When you go to the grocery store, you used to see products with 24 per carton, but now they're sold with 20 or 18 in a carton. I went to Hawaii recently, and a loaf of bread cost $6.29, but that wasn't the largest inflation. The slices used to be large enough to fit a slice of ham and cheese from the deli on them, but now they are so much smaller, you have to fold your ham and cheese slices in half to make a sandwich.

So what can your clients do? Well, the market is at all-time highs, so help them lock in those gains! Explain that even though they think they're rich right now, trying to retire early, and making plans based on this "bubble wealth," all of that can burst when printing stops, interest rates go up, and government spending goes down. Remember, in 2008 and 2009, everything fell at the same time! Stocks, bonds, gas, and gold all fell at the same time. All I would recommend is that you show clients the benefits of locking in some of those gains. Turn some of that bubble wealth into real wealth using products designed to lock in those gains. Talk to them about cash value life insurance with guarantees and tax-free withdrawals in retirement. Show them how annuities with guarantees can protect from market crashes.

If you're not sure how to talk about these products with clients, I suggest you start by listening to the last five minutes of my economic commentary video. I talk about the strategies I personally use because I don't just talk the talk - I walk the walk. Once you've watched that clip a few times, join me for one free webinar. I do several of these nearly every day, and I have different presentations that focus on improving during uncertain times, life insurance, stories that make annuities simple to explain, presentation skills, handling objections, and prospecting with Millennials and Baby Boomers alike.

I hope this helps you make 2022 your best year yet,

-Tom Hegna

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