Videos Of The Week
Inflation, Interest Rates, Valuations & Other Important Topics For 2024
I hope everyone has had a good break between Christmas and New Year’s and looking forward to 2024. For the first post of the year, I wanted to share a couple videos. Both cover a wide range of topics, from inflation, to valuations, interest rates, and what could be coming over the next couple years.
David Lin Report w/ Bill Smead
This was one of the best videos I saw this week, and it touched on a bunch of topics and sectors. One of the main topics was inflation. I agree with Smead’s take on inflation. Inflation (at least measured by the CPI) has pulled back over the last year or so, but I think we will see inflation start to tick back up again over the next couple years. Inflation is not going to go up in a straight line. In the 70s, inflation had two large pullbacks, but the average inflation rate was painful for the average American.
I think that we in the middle of the first inflation pullback right now, and we will see inflation tick back up over the next couple years. Smead thinks a Fed pivot is what will bring inflation roaring back. I think that oil prices are a bigger driver than interest rates dropping, but I think it is very possible that interest rates coming down could happen at the same time as oil prices going higher.
Are you bullish or bearish on equities for next year?
Our view is that the S&P 500 is likely to have a 10-15 year time period where it doesn’t make any money. 10-15 years. Just at the time when they have sucked the most people into thinking that is the end all, it will turn sour, just like all other investment disciplines that got too popular.
- Bill Smead
Smead and his fund are overweight energy and homebuilders (which was one of the best performing sectors of 2023). Oil and gas and homebuilders account for about 40% of the Smead Capital Management portfolio. They also own several banks as well. I won’t give away the individual stocks, so you can find out what they own by watching the video, but he has an a bullish view on sectors where I have put it in the too hard pile, like banks and homebuilders. They also discuss how low interest rates has distorted asset prices, from real estate to bonds and stocks. It’s an interesting setup for the next decade, but I think that investors with a value tilt would benefit from listening to this video.
You don’t think businesses are inherently good inflation hedges? They have to raise their prices to stay in business.
At 20x earnings, you don’t get an inflation hedge out of a portfolio stocks. At 11x earnings, you get a nice inflation hedge out of a portfolio of stocks.
Adam Taggart w/ Jim Rogers
Jim Rogers is famous for his motorcycle trip around the world, but he also has an impressive track record as an investor. While Smead didn’t predict a bear market for stock indices, just that they wouldn’t have any return for a decade, Rogers thinks we are headed for a nasty bear market. He talks about debt levels, interest rates, and how things could play out with the Federal Reserve. He is sitting on a lot of cash and is looking for an opportunity to short the market if things get frothy and show signs of a blow off top.
He eventually thinks we are headed for higher rates, inflation coming back with a vengeance, and a large financial mess. They also discuss potential wars, and Rogers pointed out that America has been at war every year except for 18 years since 1776. Overall, it’s a video that leaves viewers with just as many questions as answers, but it’s thought provoking to say the least.
Adam, I’m always worried. I invest in the markets. If you invest in the markets and you’re not always worried, you don’t know what’s going on.
- Jim Rogers, when asked about competition for commodities as we shift from America as the global power to a multipolar world.