Penny Wise, Pound Foolish

Hey there,

Has a penny really lost its value?

They’re still the same size, with the same stamping and until 1982 were still made up of 95% copper.

But, the “until 1982…” was a key hint.

You see, the penny didn’t change; the “value” of the penny did.

Here’s what a penny could buy you over the decades, along with its modern inflation-adjusted value:

This erosion of what a penny could buy wasn’t because anything changed about the penny.

It was a direct result of the government printing more and more currency to pay for their spending, hence devaluing the “value” of a single penny.

The fact that the material in a 95% copper penny is worth more than the face value of the penny itself is an extremely good example of this.

Now, nobody really cares about a penny, but multiply the chart above by 100. That means $1 in 1900 was equivalent to $38 today.

Another way to put it, if you have $100 in the bank today earning no interest and inflation ranges from 2 - 3% over the next 20 years, you’ll lose 40% of the “value” of that $100.

How can we be certain of this?

Because of this: 👇

A 50-year mortgage is an expansion of the money supply, just like a 30-year mortgage was.

Every politician, regardless of party, has a massive incentive to increase either spending and/or expand the money supply… Which causes inflation.

Both of these goons (Roosevelt D & Trump R) and everyone in between have done it.

This a why there is always a strong tailwind behind well-located multifamily, inflation becomes the investor’s (YOU) friend.

Over the last 30 years, rents have averaged 3-5% increases per year…slightly faster than inflation and much faster once you factor in the leverage component.

The apartment investor benefits from all this, and the fall of the penny is just more proof.

P.S. we have been making several offers on properties recently but remain very disciplined in the price we offer, the rents we project, and the locations we look at.

Questions always welcome!

Nate & Steven
Rust Belt Capital, LLC

www.rustbeltcapital.com

_Disclosure:
Rust Belt Capital, LLC is not a Registered Investment Advisor. Investing involves risk, including loss of principal. Past performance does not guarantee or indicate future results. Any historical returns, expected returns, or probability projections may not reflect actual future performance. While the data we use from third parties is believed to be reliable, we cannot ensure the accuracy or completeness of data provided by investors or other third parties. Rust Belt Capital, LLC does not provide tax advice and does not represent in any manner that any outcomes described herein will result in any particular tax consequence. This is not an offer to buy or sell any security. Offers to sell, or solicitations of offers to buy, any security can only be made through official offering documents that contain important information about investment objectives, risks, fees, and expenses. Prospective investors should consult with a tax, investment, or legal adviser before making any investment decision. Distributions or profitable investments cannot and are not guaranteed. Not intended to be tax advice and should not be solely relied upon to make an investment decision.