Building Wealth When Germany's economy collapsed into hyperinflation, two men took advantage. One was Adolf Hitler. But before Hitler came Hugo Stinnes.
Through a series of risky yet prescient moves, Stinnes emerged as Germany's "business kaiser." The history books also refer to him as the "Inflation King."
Stinnes was born in Mülheim, Germany in 1870. He didn't lack for much as a kid. His family operated several coal mines, a shipping line to carry the coal up the Rhine River, and a trading house to sell goods.
Stinnes inherited the family business at the age of 20.
During World War I, Stinnes' company was vital to Germany's efforts, supplying materials to combat the Allies. But his success didn't make him anywhere close to the country's richest man.
That changed quickly.
You see, once the war ended, Germany's new Weimar government was forced to sign the Treaty of Versailles. Its terms included Germany having to pay the Allies a massive sum in reparations.
The Weimar government decided to print money to satisfy its debts. Combine the printing presses being fired up with billions of papiermark (or "paper marks") – Germany's paper currency – coming back into circulation after the war... and inflation ensued.
And this was not just any normal bout of inflation. We're talking about one of the worst cases of hyperinflation in recent memory.
Before the war, one U.S. dollar cost about four German marks. By January 1923, it cost 1,700 marks. And in December 1923, that same dollar was worth 4.2 trillion marks.
The chart below shows the value of one gold-backed mark to the paper mark...
In a famous story from that era, a German student ordered a cup of coffee for 5,000 marks. He finished his cup and went to order a second one. This time, after just a few minutes, the price had risen to 7,000 marks.
Germany's hyperinflation in the 1920s crippled the nation's economy. Once the damage was done, Hitler took advantage of the popular unrest to seize power in the 1930s.
By contrast, Stinnes had seen this inflation coming...
Before prices skyrocketed, Stinnes began to lever up. He went to the banks and took out huge sums of debt. He then used that cash to expand his business operations... buying more coal, steel, shipping and cargo lines, even forests. He also kept gold in Switzerland.
Essentially, he bought businesses and assets that had tangible and real underlying values.
Stinnes' business eventually became a major cog in Germany's economy. He became Germany's largest employer, with about 1% of the entire German population working for him.
Stinnes even became a banker so he could access debt more easily.
Most folks would view massive amounts of debt as a gamble, even a death sentence with such geopolitical turmoil in the country. But again, Stinnes saw where the economy was headed. He understood inflation was all but certain.
As inflation raged, the value of the German mark became basically worthless... making it easy for Stinnes to repay his debts.
Here's the best part... The hard assets he owned – steel, real estate, lumber – all increased in value. Many of these were also income-producing assets, so cash flow was never a problem for Stinnes.
His shrewd bet left him debt-free and controlling some of Germany's most valuable businesses and assets. In 1923, he owned the entire industrial cycle, from raw materials to distribution.
Stinnes was so influential that he was a member of the Reichstag (parliament) for the German People's Party from 1920 to 1924.
At the height of his power, at age 54, Stinnes died in 1924 from complications from gallbladder surgery. And just a year later, his business empire collapsed without him.
Stinnes understood something I've preached for many years... In times of crisis, you need to hold hard assets.
Something real and of practical use will soar in value when the world goes haywire. It's not rocket science. And this has proved true all throughout history.
Today in the U.S., we're at an interesting moment in time... Government debt has exploded higher – to more than $35 trillion, to be exact. Inflation has come down from previous highs, but it remains historically high. And as we've said in the past, we don't see it returning to its pre-pandemic lows any time soon.
Plus, war and geopolitical strife are raging throughout the world. It's not a stretch to think that America will get sucked into some conflict sooner or later.
The U.S. isn't in the same trouble as Germany back in the 1920s. But I'm still concerned about where the country is headed.
At the very least, investors need to have their portfolios prepared for a crisis. And that doesn't mean selling everything and hiding under a bunker... It means getting exposure to many different types of hard assets – things that will hold their value when a crisis does occur.
In my Retirement Millionaire model portfolio, several of our hard-asset stocks are currently strong buys. They give us exposure to everything from precious metals to farms to timberland, and more. (Existing subscribers can view the portfolio here... If you don't already subscribe, click here to learn how to get access.)
It's time to follow the business kaiser's playbook. Make sure you've allocated some of your portfolio to hard assets today.
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Here's to our health, wealth, and a great retirement,
Dr. David Eifrig and the Health & Wealth Bulletin Research Team
October 24, 2024