A Few Questions and Answers
In this week’s update, I answer a few of the questions that I have received over the course of the last couple weeks. I hope you find my thoughts helpful.
1. How worried are you about inflation?
I am worried about inflation though I think panic is not necessary. I still believe that the inflation we are seeing now is more transitory. For that reason, once re-opening occurs, we believe inflation numbers will calm down. Despite this perspective, we have positioned portfolios in a way that factors in the possibility of higher prices and higher interest rates. This is an important consideration as higher interest-rates do impact bond prices.
2. Do you still expect an infrastructure bill to pass?
We do. This is a typical Washington process that will be drawn out, but in the end will result in a passage of some form of infrastructure bill. Included in this infrastructure bill will likely be tax increases which will be a headwind for economic growth. This headwind will likely keep inflation at moderate levels.
3. I see that oil prices have gone back up now that the economy is reopening. Do you think this is sustainable long-term?
The world will continually need fossil fuel energy for the foreseeable future. Those that suggest that oil will become irrelevant are perhaps looking at the world many years from now. Alternative energy will continue to be a significant growth area for the economy. Our long-term view on oil is that alternative energy will continue to chip away at the price in power that fossil fuel energy currently commands.
4. My son bought one share of GameStop and made hundreds of dollars of profit. Is this something I should do as well?
Probably not. GameStop and other more speculative companies are reacting to something called a short squeeze. A short squeeze is a situation that occurs in the market that can cause stock prices to move in a way that is not supported by fundamentals. We are a fundamental investment firm and the expected long-term cash flows of a company needs to justify share price expectations. We are not fond of speculating as we take our responsibility as a fiduciary very seriously.
5. What is a fiduciary?
A fiduciary is required to operate in a way that is in client best interests. We are proud to be a fiduciary and will continue to invest our portfolio strategies towards our clients’ goals.