Inflationary Follow-Up
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Mr. … wait. What!?
Sorry, quarantine flashbacks. Today is Reader Feedback day! The day when we hike up our hip waders and go fish in the Great Stuff inbox for your stock market questions, general rants and queries.
Wanna join the fun?
Just drop some bait on the hook and send it off to GreatStuffToday@BanyanHill.com. Who knows … you may just get a bite and show up in next week’s edition of Reader Feedback!
Now, that’s enough fluffing. Let’s get right to today’s featured presentation:
I love your writing style!
Yes, there’s a lack of perspective on “out of touch” Wall Street… Inflation is a strange beast and one that can be easily misunderstood.
Having lived through Zimbabwe’s hyperinflation nightmare, I have been well-placed to observe this “beast” from many angles…
Like you, I believe that we may see a period, say a year or so, of minimal inflation — not brought on by a healthy uptick in production, but rather by a reduction in demand for goods as fearful people try to conserve their money.
Is inflation on the horizon? Yes, I believe there is inflation on the horizon … and massive inflation too.
Predicting the trigger-point for significant dollar inflation is an extremely difficult exercise because you are dealing with a mix of animal spirits and insufficient data. It is disturbing that the Fed has refused since 2006 to publish M3 money supply…
I would assert that the dollar is “on a hair trigger” in terms of inflation. But then my old shotgun with its notorious hair trigger can stay loaded and ready to fire for years on end if there is nothing to bump it…
In an environment where production is suppressed, and the floodgates of money supply are finally opened by a desperate bid for wealth-preservation, you have a double whammy inflation burger … remember to hold onto your hats!
— James D.
James, my man! Thank you for writing in!
That was one interesting dissertation on inflationary pressures and the U.S. dollar. I just wish I had the room to publish your entire email.
Still, I think I included the juiciest bits and the parts that I can address without writing my own multipage doctorate paper.
First, I want to clarify my stance on inflation after yesterday’s rant. I do believe that we will see some short-term inflationary pressure as the supply side of the U.S. economy ramps back up.
These risks will likely be short-term, though, and shouldn’t have any lasting impact on investments.
If you ask me, the real investment boogeyman that no one’s talking about right now is asset price inflation. Why else is the Dow at an all-time high when we’ve yet to recover from the pandemic?
Anyway … I digress. Inflation has been a big topic here at Banyan Hill for the past couple of weeks. And, as many Great Ones know, I’m rather partial to the economic stylings of Banyan’s local bluesman and world-class economist Ted Bauman, editor of The Bauman Letter.
James, you mentioned how the Fed no longer shares M3 money supply data. Well, it also just discontinued MZM, a measure of money velocity … or how fast U.S. dollars are spent. I know I’m changing the subject a tiny bit, but I thought Ted’s comments on this were important enough to share:
Inflation is always and everywhere caused by an excess of available money relative to productive capacity. Money velocity only determines how quickly that inflation is revealed; it doesn’t cause it.But the key variables — money supply and productive capacity — are, well, variable.
There is no question that we are going to see inflation in the short term because supply chains are disrupted, and some industries reduced capacity during the pandemic. And, of course, there will be a short-term base effect that will cause everyone to freak out.
But unlike Germany in the 1920s, which was heavily reliant on imports that it had to pay for in hard currency, or the U.S. in the 1970s, which was hit with an energy supply shock and above inflation COLA clauses in major union contracts, there’s no reason to suspect any long-term structural basis for inflation.
So, there you go — short-term freakouts on inflation, but no real long-term structural basis for concern. If you want more of Ted’s investment and economic stylings, be sure to check out his YouTube channel by clicking here.
Finally, if you think Ted knows his $#@!% on economics and inflation … just wait till you see what he knows about taxes!
Ted recently finished a comprehensive guide on how you could SLASH your taxes for this year. Before filing your taxes, you need to see this! But you have to hurry. That tax filing deadline is fast approaching!
Click here now for the urgent details.
(I know, I’m not your mother or your calendar … but seriously, are you gonna put it off ‘till the last minute again this year?)
Now, let’s see what else rose to the top of this week’s mailbag…
SPAC King
Stephen, you’re exactly right: SPAC deals like these are usually a one-for-one kinda shebang.
You buy 10,000 shares of Decarbonization Plus Acquisition (Nasdaq: DCRB), and it will become 10,000 shares of Hyzon … when the SPAC gets its final approval to merge. Then, the ticker will change in your account all on its own.
It’s like SPAC magic!
He’s Frozen In … Carbonate?
Regarding this line from your report: “Yeah, you’ll laugh at sand conservation until there’s a Caterpillar backhoe outside your Florida beach cabana excavating sand for Taiwan Semiconductor … just saying.”
As a Florida resident and a geologist, I feel it is my duty to let you know that the sand in Florida is carbonate, not silicate! — Stephen M.
Stephen, I feel it’s my duty to let you know what a rabbit hole (Sarlacc pit?) your sand sleuthing led me down. Have you thought about starting up Geology Stuff? I’d subscribe. Anyway, we “oops,” we correct — thanks for the heads up!
I need to take a visit to said sources of carbonate for … research purposes.
Déjà Dune
Investing in sand? Alternate ending to Dune, imbibing in too much of the spice, or fiscal genius? We await your recommendation for you are the Kwisatz Haderach.
— Capt. Spike
Some Kwisatz Haderach I turned out to be. I couldn’t even see that Florida sand was carbonate and not silicate, Capt.! And … I’ve kept saltwater aquariums for decades! (They use carbonate sand, by the way.) You’d think I’d recognize the difference. Anyway…
This isn’t the spice talking, Capt., I assure you. I was serious when I highlighted U.S. Silica (NYSE: SLCA) as a potentially rewarding investment. I’m just waiting for that right moment to yell “Ya Hya Chouhada!” before I call “muad’dibs” on SLCA. Thanks for writing in!
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Dick’s Due Diligence
EARNINGS? did you say EARNINGS!! How can you have earnings with your business doors closed? That was the dilemma for AMC in 2020. But alas, there is hope.
They reported a fourth-quarter loss of $3.15 per share on revenue of $162.5 million. Not great but not bad considering the circumstances. No future guidance yet, but understandable with people still being cautious. Remember 2020 B.C.? It was a glorious two months Before COVID-19.
Two weeks ago, I saw some of my extended family for the first time in nine months. I feel more comfortable as I have been vaccinated and, I hear tell, chipped by Bill Gates. He’s really not going to enjoy tracking me.
Point is, people will begin to feel more comfortable going out and resuming activities like dining out and going to the movies. AMC has weathered the storm and is positioned well to rebound. Guidance should come when it is somewhat measurable again and hope for future growth. — Dick K.
Right! How can you have earnings if you don’t eat your meat? If you don’t eat your meat, how can you have any earnings?
Good to see you again, Dick! And thanks for helping me break out of this weird sand-and-sci-fi sandpit I dug myself into.
I, too, tuned in to AMC’s (NYSE: AMC) earnings report last night with a full tub of hot buttered popcorn.
And, like yourself, I was also far from surprised that AMC declined to channel its inner Kwisatz Haderach and pave the Golden Path for 2021. (OK, that was the last Dune reference … I think.)
“Hope for future growth” is all you can have when your holiday season revenue crashes 88%. But maybe that’s just my optimistic realism — you tell me.
I’m still impressed the company’s scrounged around (from couch pockets, lint traps and public markets alike) for over $1 billion on hand.
I personally think AMC has the wherewithal to outlast the pandemic’s rather uneven reopening … but it’s not like I’m at the edge of my seat to find out. Dick, you of all Great Ones should know my oft-professed love for Roku (Nasdaq: ROKU) and the gains that come with it.
Variations On A Theme
You asked for it, Joe. “Oh, nay nay. It’s poll day here at Great Stuff, and it’s about time we cut our yapping and hear from you all out there.”
As a transplant (Wisconsin to Texas), I feel the need to correct your grammar. The correct term is “y’all” for singular and “all y’all” for plural.
As for investing, my portfolio is 70% value with emphasis on dividend growth, 15% gold and 15% for the occasional pass line bet (with double odds, of course).
Great Stuff is great stuff. — Roger M., Good stuff since 1945
Y’all don’t sound all that jolly, Roger. (Get it? Jolly Roger? I kill me sometimes…)
As it happens, spellcheck and certain Great Stuff editors — y’all know who you are — are less enthused about the constant y’alling and drawling. So, “you all” slips through occasionally. You’re right. I know it’s plural. We good?
At least I stopped trying to sneak “y’all’d’ve” through the proofing razor wire…
Nice portfolio breakdown, by the way! Solid allocations and risk assessment with the leeway to jump on opportunities. It’s like a melting pot of all that gooey market cheese … or something like that.
Great Ones, take note. Roger’s on point.
No Preamble
Open up. — James M.
You can’t make me! You’re not my therapist, James … though some Great Ones would argue that I could use a better one. I’m sure we’ll be talking about why I’m not actually the Kwisatz Haderach this week. Fun times…
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Until next time, stay Great!
Joseph Hargett
Editor, Great Stuff