Today’s Take: Inflation takes no prisoners. But you have the power to beat it.
“You’ve gotta be kidding me … $3,800 for an outlet?!”
After months of getting on my case, I finally caved. On Friday, my family and I got a Tesla.
I had resisted at first because of “battery anxiety.” I’m the type of person who needs to have my iPhone charged at 80% or higher at all times. If I see an electronic device that’s not close to being fully charged, I start to hyperventilate.
So, the thought of a Tesla started giving me panic attacks. What if I was driving and it died on me because its battery wasn’t charged enough?
My sons sat me down and reassured me that a full charge would last 300 miles. And I drive less than 50 miles a month.
Was it irrational? Sure. But I needed to make sure.
They calmed me down and said: “Pop, don’t worry. We got you covered. All you need to do is call an electrician and have them install the special Tesla charging outlet in our driveway. We guarantee we’ll plug the Tesla in every night, and it’ll be fully charged in the morning.”
So, over the weekend I called my trusted electrician, Steve. He’s worked on my house and business for the past 20 years. He’s fair and does top-notch work.
But when Steve gave me the $3,800 quote for the Tesla outlet, I freaked out!
My sons had told me that the outlet should cost no more than $1,000. Steve tried to calm me down…
“Relax, Charles. Let me walk you through this.” He confirmed what my sons said. The outlet should’ve been no more than $1,000. But that was a few weeks ago. Since then, prices for the necessary materials — especially the copper tubing needed to run the electric line — were up more than 70%!
After months of listening to CEOs talk about pandemic-related supply shortages and watching the government flood the economy with $6 trillion … I finally felt it.
Inflation had just punched me in the gut. And boy, did it hurt…
The Perfect Storm
Legendary investor Warren Buffett calls inflation “a giant tapeworm.” It can eat into every part of your household — with every product you buy and every service you use.
Inflation is the result when too much money is chasing too few goods.
When buyers need items and have plenty of money in the bank, no price is too high. Suppliers realize this and try to make hay when the sun is shining. So, they raise prices.
What’s happening in the semiconductor industry is a great example…
Computer chips require long lead times for production. And the pandemic disrupted supply lines, closing chipmaking factories. At the time, it wasn’t such a big deal because demand for chips in automobiles and electronic devices had also slowed down.
But consumer demand for autos and electronic devices unexpectedly started to rise. Each stimulus check the government sent out last year was like throwing gas on the fire. Consumers had more dollars to spend, and demand kept increasing.
The stage was now set for inflation to soar.
The first place I started noticing it was in autos. Used-car retailer CarMax is one of the holdings in my Alpha Investor model portfolio. And during the height of the pandemic, the company reported that business was brisk because consumers were buying used cars since new cars were unavailable.
In fact, new cars were sitting at manufacturer lots waiting for only a few parts: semiconductor chips. Autos today are like smartphones on wheels. The most complex vehicles nowadays have as many as 200 computers in them.
And auto manufacturers had to scramble to buy chips. Some chips were costing them five times more than before the pandemic. Even now, I’m hearing that automakers are paying prices up to 20X or more!
One flash-memory chip that cost $0.50 before the pandemic was offered for $38 in April. A day later, the price jumped close to $50.
But it’s not just computer chips and electronics. Inflation is also impacting most people’s daily rituals, like getting coffee. Starbucks said it was experiencing shortages on basics like cups and coffee syrups. The company is even pausing certain items on the menu until inventory can be restocked.
Main Street America is getting hit. The cost of items we use daily is going up. But here’s what you can do about it today…
You Don’t Have to Be a Prisoner
Inflation takes no prisoners. It hits hard for both consumption and investing.
Fixed returns and monthly income might stay steady. But they won’t be able to keep up with rising prices.
Instead, smart investors know to buy companies selling essential products and services that people can’t do without.
These “inflation-resistant” companies can increase their prices, without seeing a decrease in customer demand. They can continue to grow and increase their bottom lines.
For example, health care and technology companies provide goods and services that their customers can’t do without, regardless of price. These are the kinds of companies you want to own.
And they’re the types of companies we have in my Alpha Investor portfolio. In fact, I’ve made it my mission to help everyday investors like you take advantage of these companies today.
As inflation increases over the next few months, I can show you more companies that will not only survive, but thrive. Not only can they help you beat the impact inflation will have on your investments, you’ll also be building your nest egg for the long run.
That’s why I’ve put together a brand-new project called The Miracle on Main Street. I’m revealing all the details tomorrow at 1 p.m. ET. So mark your calendars!
You won’t want to miss your chance to reclaim your financial freedom.
Founder, Alpha Investor
P.S. Let me know how inflation is impacting you today and what your investing goals are — because I want to help you achieve them. So be sure to write in at AmericanInvestor@BanyanHill.com. I read every email that you send in.