Inflation is a friend to debt holders, but deflation is an enemy.
Disagree here. Inflation increases costs for most companies (there are exceptions, of course), which erodes margins. Add depressed margins to higher interest expense (if floating rate or refi), and you have a very tricky situation to navigate. Add to the fact consumers may run out of steam soon which affects top line growth - I don't know when, but surely persistent inflation is starting to have an effect? Am becoming very wary of cyclical companies.
That said, deflation is undoubtedly worse. I agree with you there. Don't see a deflationary threat on the horizon.
I wouldn't count on a rate hike personally. There is a fiscal put in place which is basically going against monetary policy. Fiscal side has Janet Yellen issuing bills, student loan forgiveness & memorandum, talks of housing credit & tax breaks to make housing affordable, infrastructure spending, there's a lot going on that goes against what the fed is doing. A rate hike isn't going to fix any of that.
I am not familiar with all of the above and have to read some more, but my understanding is that the central bank is independent of government. Govt can do as they please but if inflation picks up, the Fed will raise rates. Am also not familiar with the term "fiscal put" but from what you're saying, all of this spending is feeding into inflation?
I don't think people are content with inflation at 4-5% at all. It causes more inequality as assets appreciate and wages don't increase nearly as fast (all the while rent costs, food prices, energy bills increase!). It hits the poorest in society hardest through literally no fault of their own.
(I'm not a socialist, but anyone with any compassion would realise that inflation cannot be allowed to linger for too long.)
All that said, I am not a strong in commodities at all, but it is looking like oil is not a bad investment today given the global landscape.
Yeah, I've liked oil for a while. I've followed Buffett into OXY. Like the management and like the oil assets. Was tempted by some oil micro-caps (missed GTE at the end of last year) but I didn't fully have faith in management. Even if OXY is a laggard to the general oil industry, it's still a Buffett-backed inflationary hedge at a reasonable price. |
