March 14, 2022
When stocks are fully priced, people begin to look for an excuse to sell. We have 2 excuses. A war, and inflation.
Problems have been exacerbated by the administration. While facing a war, it is at war with our great oil and gas industry. Even as I write this, the Biden Administration is unable to allow quick permitting for drilling on public land. It is mind numbing that at a time when we need leverage against an enemy (Russia) we have no ability to act in our nation’s interest.
Our President seems unable to make a decision in favor of the country he runs. He has also cancelled the Keystone pipeline and other projects that would maintain our energy independence. Two more large pipeline projects are battling to stay alive in Minnesota and Michigan. One of them, called simply Line 3 is being challenged by the White Earth of Ojibwe tribe because it may be harmful to wild rice. You can’t make this stuff up. Every little, whiny wheel seems to get preferred treatment over the interest of our country.
Europe is in trouble. They can’t get off of Russian oil. We could help a lot by exporting more LNG (liquified Natural Gas.) We have the companies willing to do that. But guess what? Biden killed that too. That would have meant sales of other equipment as well, like heat pumps. He killed it due to “concerns from the climate team.”
U.S. push to export LNG amid Ukraine crisis slowed by climate concerns, sources say
In 1979, Jimmy Carter gave his famous “Malaise Speech” which basically told us we all had to do with less and drive 55mph. He made a pledge that day to make solar 20% of our power by the year 2000. As of today, 43 years after a national commitment to solar, it generates less than four percent of our energy. So, don’t you think it is a wee bit premature for Biden to buckle to extremists and tear down the one source we have to keep our nation as the leader of the world?
Biden continues to appoint officials who are known enemies of the oil industry.
‘Inflation is as violent as a mugger, as frightening as an armed robber and as deadly as a hit man‘. Ronald Reagan.
Many of you know from the Rule of 72 that it only takes about 10 years to double your money at a 7% rate of return. Today, with inflation running slightly higher than 7% your net return is zero.
Inflation can be bad for stocks. Inflation has much more impact on real returns and purchasing power than most people think. That is why you invest in stocks in the first place, because they stay ahead of inflation. If you are in fixed income or CD’s you will lose a lot of income. The growth of dividends has been one of the best ways to beat inflation over long periods. Real estate can also benefit from inflation as rents increase.
Energy is at the core of inflation. It is the base cost for just about everything. Biden is now blaming Putin for high gas prices. His team are all trained to say the “Putin price hike.” That’s how stupid he thinks voters are.
So what else is driving inflation? Gee, I don’t know. Handing out trillions of dollars to people might just possibly create rapid demand. Too much money chasing too few goods. I personally know several multi-millionaires that got $2,800 in the big handout. If you were worth 10 million, it didn’t stop them from sending you a check. Lots of wealthy folks have their money in tax free bonds and stocks. The bonds don’t create taxable income and the stocks don’t either if they are not sold. Their taxable income might be Social Security alone. They made zero effort to do the tiny bit of fact gathering it would have taken to not send rich people checks.
All in all, 5.2 trillion dollars was pumped into the economy, due to Covid. It is hard to get your head around a trillion dollars. If one dollar bills were placed end to end, a trillion of them would reach further than the earth is to the sun. About 96 million miles. As a comparison, it is 25 thousand miles around the world.
In addition, families were getting $300 per kid in cash, not credits. Then there was easy unemployment, cessation of rents and student loans, and food stamps. Is it any wonder that people didn’t want to work?
Inflation is self-limiting, in that as prices go up, demand goes down. The fed will raise rates this week making easy money less easy. We don’t want demand to collapse, and we can hope for some good news like Covid dying out completely or an end to Russia’s unimaginable destroying of a country and tens of thousands of lives to date.
See you soon,
Craig Verdi Please forward to a friend.