It’s been doom and gloom.
We know the story, higher inflation is forcing higher discount rates and higher rates means lower present values.
That is the sell off in a nutshell.
Since it has dragged on and on (particularly for pre earnings tech investors which have experienced losses of 80%+) the mood has changed to one that we are on the brink of a recession.
We know the greatest investor of all time regularly is cited as saying, you can’t predict inflation and interest rates.
Let’s assume that Buffett is right, this means if you are buying something because inflation will do this, or interest rates will do that, you are inherently speculating.
If instead you look at free cash flow yields, you will see you are getting far more for your money then you were 6 months ago.
What else do we know?
supply chain pressure index turned over in March
Inventory growth is at all time highs combine that with the route in retail stocks for excess inventory, could we see lowering orders going forward?
Would that improve supply chain issues?
Would that lessen inflation?
Would that lessen the need for higher rates? Would that increase the value of stocks?
Maybe.
For certain we know you get more for your money buying stocks today than 6 months ago. For speculation there is a pathway to see stocks ripping should inflation cool and recession odds reduce
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