U.S. Inflation Hits 31-Year High; Deflating Your Inflation Fears; Deflation? Berkshire Hathaway Article; Berna Barshay on Retail Stocks; E-mail From a Reader
1) The Labor Department announced yesterday that U.S. Inflation Hit 31-Year High in October as Consumer Prices Jump 6.2%. Excerpt:
U.S. inflation hit a three-decade high in October, delivering widespread and sizable price increases to households for everything from groceries to cars due to persistent supply shortages and strong consumer demand.
The Labor Department said the consumer-price index – which measures what consumers pay for goods and services – increased in October by 6.2% from a year ago. That was the fastest 12-month pace since 1990 and the fifth straight month of inflation above 5%.
The core price index, which excludes the often-volatile categories of food and energy, climbed 4.6% in October from a year earlier, higher than September's 4% rise and the largest increase since 1991.
Based on many articles I'm reading and e-mails I'm receiving, many folks are freaking out about this.
I'm not...
I think it's a combination of short-term supply chain issues (which will get sorted out), a white-hot economy (which is good for stocks), and U.S. workers demanding and getting higher pay (which is good for America).
Other investors are shrugging this off as well, which is why the S&P 500 Index closed yesterday only 1.2% lower than the all-time closing high it reached on Monday.
2) And here's Jason Zweig with a smart piece in the Wall Street Journal about why you should resist the various schemes salespeople are peddling to protect you (supposedly) from inflation: Deflating Your Inflation Fears. Excerpt:
Inflation.
Few words strike more fear into investors' hearts, and for good reason. By eating away at the purchasing power of your assets, inflation is the nemesis of every investor.
Everywhere you turn nowadays, someone is peddling protection: Gold! Bitcoin! Value stocks! Energy stocks! Commodities!
And no wonder: After years of quiescence, inflation has surged, hitting 5.4% year over year in September. With interest rates near zero and governments spending trillions, more of the same seems as unavoidable as nightfall.
Before you overhaul your portfolio, however, you should bear these basic truths in mind: Fear is a good investing philosophy only for the people who sell it. The more Wall Street agrees that a forecast is inevitable, the more likely the future is to repudiate it. And you're probably already better protected against a decline in purchasing power than you might realize.
3) If you want to worry about some macro factor, here's a contrarian view (which I wouldn't rule out):
In summary, I spend zero time worrying about inflation (or deflation). If I own good stocks, I'm going to be fine no matter what...
4) Speaking of which, I was quoted in this Business Insider article about Berkshire Hathaway (BRK-B): Finance guru Whitney Tilson explains why Warren Buffett's Berkshire Hathaway is the ultimate 'stay rich' stock. He dismisses its $7 billion in net stock sales this year, and calls for even faster buybacks. Excerpt:
Berkshire serves as a fantastic nest egg because its shareholders won't get blindsided by any surprises, Tilson said. The former hedge fund manager described it as "the safest stock imaginable" given its fortress-like balance sheet, strong cash generation, diversified cash flows, and the conservative management style of Buffett and his right-hand man, Charlie Munger.
"You're not going to wake up one day and find the stock's been cut in half," Tilson told Insider.
The veteran financial researcher also trumpeted Berkshire as a bargain, noting that its shares trade 20% below his estimate of their intrinsic value. The company is also growing at a very healthy rate, he continued, pointing to the 15% year-on-year rise in its pretax earnings last quarter.
Moreover, Tilson underlined the potential value of the record $149 billion in cash on Berkshire's balance sheet.
"If a big, attractive deal comes along, Buffett will enthusiastically put $50-to-$100 billion to work," Tilson said. "He could write a $100 billion check right now, and Berkshire would still be drowning in cash."
5) A quick follow-up to yesterday's e-mail, in which I mentioned my friend David Berman and my colleague Berna Barshay's views on consumer spending and the retail sector. Berna sent me this clarification:
I am bullish on the U.S. consumer, but this doesn't mean I'm bullish on retail stocks overall.
I am bullish on the two retailers I wrote about last week, Five Below (FIVE) and Foot Locker (FL), and of course, the ones I've recommended in my newsletter, Empire Market Insider.
But I'm not bullish (or bearish) on retailers as a group – they could go either way for a lot of reasons (supply chain, inflation, valuation, hard comps coming up, etc.).
Retail is a sector where stock picking is essential. Unlike energy or financials, where the stocks all tend to move together, there are always retail stocks that go up – even when the sector is a dog, and vice versa.
Thank you, Berna! Berna's stock picks are beating both the S&P 500 and Russell 2000 indexes since her Empire Market Insider service launched in June, with four double-digit winners. You can click here to learn more about Empire Market Insider.
6) Another quick follow-up to yesterday's e-mail, in which I explained why I continue to encourage my readers to get vaccinated, even though it always triggers an angry reaction from some of them...
In my September 15 daily, I shared this e-mail from a reader:
"Whitney, I seldom send e-mails to anyone outside of my business or social contacts. But I feel that I need to contact you to say thanks.
"You and I are probably on the opposite ends of the political spectrum though I consider myself a moderate conservative. My wife and I struggled for several months about the vaccination thing, which is funny because I worked overseas for many years and received just about every vaccination available in the world to work there.
"We finally started the Moderna (MRNA) vaccines last week. Some of the credit goes to you. Your observation about President Trump pushing this along so that it was available in record time made me stop and reflect on whether I was letting my political views get in the way of my health. I still have concerns about the direction for the country and the economy, but I'm confident it will work out.
"I really enjoy reading your articles each day. You and I actually share many values the same about work and family. I thank you again for always making me stop and think." – Richard B.
Richard was kind enough to send me an update yesterday:
"Whitney, I sent you an e-mail a few months ago, which you graciously shared with your readers. I wanted to give you an update.
"I think that you probably saved my wife from a serious illness. While we had only moderate reactions to the first dose of Moderna vaccines, our second doses were obviously needed.
"While I had only minor issues with the second dose, maybe because of all the vaccinations that I took to work overseas, my wife had a mildly severe level of fevers, chills, loss of taste and smell, etc., that one would expect from COVID. I can only imagine how much more severe it would have been for her to have actually had COVID. She didn't enjoy the experience, but it was no worse than a bad case of flu, and now she's better. And I thank you for your part in that.
I'm delighted to hear that, Richard – thanks for sharing!
Best regards,
Whitney
P.S. I welcome your feedback at WTDfeedback@empirefinancialresearch.com.