Clean up – Aisle 5 

 

My last missive declared that the market was “ a traffic accident waiting to happen”. Click here to read previous article. Well, voila. Everyone seems to have stepped into something unpleasant. For the last ninety days, pretty much the whole world has experienced lousy outcomes. Leaders who thought themselves special, countries thinking they were above average, rich and poor citizens everywhere experiencing various degrees of upset, tragedy and horror, stocks and bonds falling. It’s a mess.  

“When I despair, I remember that all through history the way of truth and love have always won. There have been tyrants and murderers, and for a time, they can seem invincible, but in the end, they always fall. Think of it–always.” Mahatma Gandhi 

I risk seeming insensitive when I state that the ‘Stock Markets’ don’t much care about Mr. Putin and his war. I say this because most stocks are back to where they were the day prior to his madness some 40 days ago. Stock markets are said to foretell the near future fairly well, and Mr. Market is saying that Putin is not much of a factor in 6 months.  All leaders, Gandhi included have their careers cut short unexpectedly, and often by the tiniest of events. Russia is being pounded into the economic stone-age and the only ones to solve that problem are the Russian people. They have a history of cleaning up big messes.  

Many are surprised with the resiliency of stock markets as interest rates rocket higher. The move to higher interest rates has been swift and brutal. In many respects, interest rates have already risen to levels that the governmental authorities project must be attained by late next year. One has to question why they don’t just get it over with and raise the ‘administered’ rate to where the real world is. If you walk into a market and the list price of eggs says $5 for a dozen but the cashier charges you $10, then the price is $10 not what the posted rate is. Let’s tell the truth! 

Interest rates are rising because absent war, everything else is working ok- so far- in spite of rising prices. As we said in our last note, as long as you own the things that benefit from rising prices, the world is working correctly. Owning companies that can raise prices is a good thing.  

Now, lest you think I only see the world thru Mr. Gandhi’s spectacles, I am also painfully aware of how his life ended. Quickly and unexpectedly. If interest rates continue to rise at the pace they are presently, and they may for a period, then there will be an accident on aisle 5. 

The thing about accidents is they happen all the time, and by their nature are random and unexpected. That’s why someone invented seat belts.  

2 thoughts on “Clean up – Aisle 5 ”

  1. Thanks for the insight, the war may not have had a substantial effect yet but the impact on commodity area will come to roost and being aware is prime.

  2. 100% Doug, one need always be mindful of the price of everything. One way we try to protect purchasing power is to ensure the businesses you own have pricing power. As an example, if the price of beef rises because of higher feed costs, one would hope that McDonalds would be able to offset that increased cost by razing prices at their store, and in fact that is what we are seeing. One persons input is another’s output and not all things are linear.

    2 years ago the price of energy was negative today its $110 per Bbl. The markets perception is a constantly changing bogey.

    None the less, our last sentence says it all, driving is dangerous always wear a seat belt!

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