Financial Strategy - Post COVID?

[LWJ]

So, hopefully we are turning a corner in the next few months with the vaccines. (not going to argue this, keep out of PARF)

The US Federal Government has done one very large stimulus that greatly increased the supply of money. Can't recall if this is M1 of M2. That class was long ago. But, we are poised to do another Federal stimulus any minute.

Summary. Inflation seems very very likely.

What does the braintrust say to get ahead of inflation? Is there an opposing argument?

I am all ears.

TIA!

[Racerbvd]

Invest in lead.

[gtc]

A friend turned me on to Howard Marks a while ago. His latest memo addresses your questions.
https://www.oaktreecapital.com/insights/howard-marks-memos

He may not be as extreme as a lot of people here like to act when it comes to investment, but seems pretty smart to me.

[MRM]

There won’t be an inflationary effect. Experience has shown that an increase in money supply doesn’t result in inflation. The Fed has been doing its best to trigger inflation by printing (and inventing) money for years, with no effect. Inflation is caused by a lack of confidence in the economic and political system and the market’s collective belief that prices will be higher tomorrow so spending today is a form of savings. For the foreseeable future there is confidence in our economy and an expecting that prices will be stable or lower. The bigger risk is deflation, triggered by technological improvements and the declining need for labor.

[Sooner or later]

I agree MRM.

Also, we have a great inflation fighter in our pockets with the smart phone.

[tabs]

Originally Posted by MRM

There won’t be an inflationary effect. Experience has shown that an increase in money supply doesn’t result in inflation. The Fed has been doing its best to trigger inflation by printing (and inventing) money for years, with no effect. Inflation is caused by a lack of confidence in the economic and political system and the market’s collective belief that prices will be higher tomorrow so spending today is a form of savings. For the foreseeable future there is confidence in our economy and an expecting that prices will be stable or lower. The bigger risk is deflation, triggered by technological improvements and the declining need for labor.

And I thought you were smarter than that...My GAWD MRM you had me fooled...but in the end you are no smarter than the rest of the monkeys on this Board..

There can't be HYPERINFLATION if NOBODY HAS ANY MONEY TO BUY ANYTHING..When 5M households in the USA are facing EVICTION come the first of the year and DO NOT have money to buy food.. the nations economy is in serious shyte.

When that tsunami hits it is gfoing to ripple right through the economy like a sledge hammer. Apx 40% of small businesses are saying they are NOT GOING tzo REOPEN..

CV in the end is not the causation for the economic collapse, the REALITY is that the US was INSOLVENT and the slightest push woulda done the US in...

The FED on one hand tells ya that they are going to keep printing 120B a month and keep interest rates near ZERO until they get to that 2% inflation rate and have "full employment ." WHICH MEANS NEVER EVER.. Then on the other hand they tell ya everything is robust..and or swell...

THE MOTIVATION as to WHY THEY ARE TELLIN YA IT IS ALL SWELL...is that they DO NOT WANT TO STAMPEDE THE HERD... The reason for the motivation is that the situation is so dire that the economic system is one breath away from collapse. Otherwise logically they wouldn't be tellin ya it is swell. ...

But you Boyz buy into the lies..you want to believe because you can't face reality.


Now MRM says the USD is stable...That is like Custer saying there are not any Indians down in the valley...

two things of note..

1. The USD has been in decline on the FX since November

2. The overnight SP Futures since March have been trading exponentially higher off the Asian markets..during the business day the SP has traded almost flat. So thinner trading volume has pushed Equities higher..So what is going on there.. Could it be that all of those USA Trade Deficit USD's are being repatriated because the Chinese want to buy something of value in face of the decling value of the USD. The take is THEY DO NOT WANT TO BE STUCK HOLDING USD's.

The ADVERSE SHIFT is taking place and the worm has turned on the USD where the exodus has begun. When that hits the US economy will cease to be. You then can claim that you had more fun in he11.


The real economy has ceased to function it no longer exists it is all smoke and mirrors.. JUst printing and borrowing keep the lights on until the suckers wise up and figure out the USA is insolvent and the money isn't worth anything..Then every asset you have vanishes into the thin air it is, except for Gold, Silver Guns and Ammo.. Those are real tangible assets which you can hold in your hand.

[LWJ]

I appreciate the above. Which is exactly why a asked. My financial barometer (which was excellent in the past) is goofy during COVID.

Thanks!

[RWebb]

you can make a lot of money by shorting tabs

[Sooner or later]

I am shocked, shocked I tell ya, that Tabs found this thread.

[MRM]

All the factors Tabs outlined are deflationary. Insolvent or not, the US economy is not going to experience inflation any time soon.

[sugarwood]

Tabs has been calling for hyper inflation and the collapse of the fiat for his entire adult life.
He is mentally ill.

[jyl]

Things I am interested in for 2021, at least the start of the year:
1. Inflation hedges. I am doubtful of sustained inflation, but I think we may see a short period of inflation as economies reopen and demand responds. This could be TIPS or commodities, or certain stocks that benefit from inflation. Not gold, I think.
2. Emerging markets stocks. I’m not a believer that emerging markets always deserve a large allocation. But emerging market stocks tend to have more commodity exposure, be more cyclical, have less tech exposure, and be less influenced by the options-trading speculation that has inflated many US tech and tech-ish stocks. And a falling USD will be good from a pure FX standpoint.
3. Chinese stocks. China’s tech/internet giants are half the market cap of the US equivalents, with at least as good a growth outlook. This thesis has gotten shakier, with the Chinese government crackdown on Ma, Ant and the internet leaders, the US blacklist of Chinese semi companies, the Chinese government’s new willingness to let SOEs default on their bonds. The perennial warnings about China’s demographic, debt, and top-down control problems seem more serious every year. But China needs to boost its consumer economy and get its people to spend more, and the government still has all kinds of levers to pull and covers to sweep bad news under. Plus, weak USD.
4. Selected beat to crap cyclicals stocks in the US. I bought the stocks that were hardest hit by Covid, as long as they had the balance sheet and borrowing capacity to survive the pandemic. So, not all movie theater stocks, but one of them; not all airlines and hotels, but a few of them; not all department stores, but one of them; and so on. Most of these are +50% to +90% from then, and some still have another +30% to +50% in my view. I don’t need to think that the stocks should trade at 50X revenues or that the companies will grow to 5-10X their current size or other dreamy stuff. All I need is for the virus to be defeated, some of their competitors to go under, and for their own revenues to recover to 80% of pre-pandemic levels. Which I think is pretty likely.
5. Selected REITs. Real estate is an inflation hedge, unless local rent control is extreme. There are still some classes of REIT trading at -20% to -40% discount to pre-pandemic levels. There is tons of money looking for investment opportunities so they can resume growth when they are ready. I’m not interested in a Manhattan office building REIT (yet?) but a multifamily REIT with mostly Sunbelt exposure is a different story.
6. Green stories. Some valuations are really high but there’s a lot of money with “green” mandates and, unlike generic ESG, the number of solar, wind, hydro, etc stocks is pretty limited. Government policy favors non fossil fuel energy in many countries, and economics favors it in many other cases. Some of the green yieldcos actually have decent dividend yields, it’s not all crazy-priced Chinese dollar panel makers.
7. No-yield to Yield stories. There’s a bunch of companies that were prohibited by the government regulator from paying dividends and/or from buying back stock, but are doing fine in the pandemic, some are rolling in excess cash. If/when they resume or increase their dividends, or resume buying back stock, their stocks could benefit. These are, of course, the banks. Some banks.
8. Yield. I think that a pretty safe 4-5% will look really good in 2021. I don’t know many places to get that, but one is preferred stock from big banks that are doing fine. Preferreds from BAC, JPM, GS, etc still have yield-to-worsts of 4%+. There are some utilities worth looking at, and some dividend stocks with significant (though fast declining, as stock prices rise) yields.

[McLovin]

Bitcoin

[Z-man]

Originally Posted by jyl

Things I am interested in for 2021, at least the start of the year:
4. Selected beat to crap cyclicals stocks in the US. I bought the stocks that were hardest hit by Covid, as long as they had the balance sheet and borrowing capacity to survive the pandemic. So, not all movie theater stocks, but one of them; not all airlines and hotels, but a few of them; not all department stores, but one of them; and so on. Most of these are +50% to +90% from then, and some still have another +30% to +50% in my view. I don’t need to think that the stocks should trade at 50X revenues or that the companies will grow to 5-10X their current size or other dreamy stuff. All I need is for the virus to be defeated, some of their competitors to go under, and for their own revenues to recover to 80% of pre-pandemic levels. Which I think is pretty likely.

That was my approach in March. My "Lockdown Stocks" are up 52% overall, with none in the negative at this point. Unicorn of the bunch was KSS with a 128% return thus far since mid-March. Not a bad for a 9 month investment. I'm planning on riding that wave as much as possible until it levels off.

5. Selected REITs. Real estate is an inflation hedge, unless local rent control is extreme. There are still some classes of REIT trading at -20% to -40% discount to pre-pandemic levels. There is tons of money looking for investment opportunities so they can resume growth when they are ready. I’m not interested in a Manhattan office building REIT (yet?) but a multifamily REIT with mostly Sunbelt exposure is a different story.

Absolutely. Especially REITs with less investments in NYC & hospitality and more in commercial and multi-family homes. I augmented REITS with some conventional RE stocks - focusing in on developers & builders, which have held their ground. I am hoping to see some nice steady increases starting in the springtime. I also think NYC RE will drop more before it beings a slow climb...

6. Green stories. Some valuations are really high but there’s a lot of money with “green” mandates and, unlike generic ESG, the number of solar, wind, hydro, etc stocks is pretty limited. Government policy favors non fossil fuel energy in many countries, and economics favors it in many other cases. Some of the green yieldcos actually have decent dividend yields, it’s not all crazy-priced Chinese dollar panel makers.

I invested a little into this sector, given the new admin's desire to push more green initiatives. I don't expect a huge bounce like Retail, hospitality RE, and travel investments will see, but I hope to see steady growth as this area matures.

Besides what's been mentioned above, including Tabs warning (the guy has valid arguments here), this is what I see: The most gains I have seen in my non-retirement portfolio has been in technology and "biotech" stocks.

1. I don't think tech is over-hyped just yet - and there should be more room for growth. I am avoiding stocks that had huge gains due to the constraints of the pandemic like Zoom and Electronic gaming stocks. I feel they will grow, but not at the same significant rates as other stocks in the tech sector. Stocks like ROKU, on the other hand, was already on a tear prior to the pandemic, and I suspect it will continue to see growth.

2. Biotech is another story. It has always been one of the strongest sectors in my portfolio. And I'm not talking about pandemic related stocks, but rather companies that have been successful with incorporating more technologies to improve the conditions of people with chronic conditions. For example - DXCM - they produce CGM's (Continuous Glucose Sensors) for diabetics that are using closed loop insulin pumps to manage their insulin levels. This is the most accurate CGM out there, and it integrates with insulin pumps made by the biggest companies (Tandem, Omnipod, and Medtronic). Diabetes isn't going anywhere post-Covid, and more and more folks, including non-pump wearing Type 1 & Type 2 diabetics, are turning to this technology. The focus here should be to see where the companies are in their product line, and if their product lines are due for an upgrade sooner than later. New devices and tech launches always give these stocks a nice bump. I expect to see more integration with such devices with other wearables and smart devices. (Example: if the Dexcom triggers a low blood sugar alert and the diabetic doesn't respond to the alert on his or her smartphone, it will run an ITTT script to turn on the bedroom lights and play death metal music on their BT speaker. If 30 minutes later, still no response, send a message to 911. This integration is already half-way there - DXCM uses bluetooth to communicate with cell phones and insulin pumps)

Other than that, I'm not sure what to invest in. As always - one size does not fit all. Your mileage may vary, Serving suggestion - keep frozen. Research and familiarity of the investment sector goes a long way...
-Z

[tdw28210]

Originally Posted by MRM

All the factors Tabs outlined are deflationary. Insolvent or not, the US economy is not going to experience inflation any time soon.

To borrow a phrase...The US economy is STILL the best looking horse in the glue factory.

[KFC911]

Originally Posted by McLovin

Bitcoin

LOL ... If I had just purchased Bitcoins instead of Canadian Pot (stocks)... I'd be Tabbyish

[KFC911]

Originally Posted by tdw28210

To borrow a phrase...The US economy is STILL the best looking horse in the glue factory.

That's what Uncle Elmer sez

[NoRush993/951]

Commodity boom coming. Pick any of them. Multi year run setting up.

[sugarwood]

Originally Posted by MRM

There won’t be an inflationary effect. Experience has shown that an increase in money supply doesn’t result in inflation. The Fed has been doing its best to trigger inflation by printing (and inventing) money for years, with no effect. Inflation is caused by a lack of confidence in the economic and political system and the market’s collective belief that prices will be higher tomorrow so spending today is a form of savings. For the foreseeable future there is confidence in our economy and an expecting that prices will be stable or lower. The bigger risk is deflation, triggered by technological improvements and the declining need for labor.

Can you post some reading on this topic? That inflation is really a function of confidence rather than money supply. This contradicts the entire argument of crypto fans.

[Aurel]

Bitcoin, silver, gold, foreign investments are all edges against inflation.