Richard gives an articulate and refreshing perspective on the evolving economic environment that we find ourselves in. Consuela is a tremendous interviewer and host! Very thought-provoking stuff, far better than you find on most of the financial/investing media out there today.
Wealthtrack is one of the best financial education programs i have seen. Ms. Mack is a skilled interviewer who always asks the exact questions i want to ask the interviewee myself. Learned so much from listening to Mr. Bernstein and his way of thinking and verifiable from my own technical studies. Thank you both!
I learned two things: how lowering interest rates makes higher p/e companies better investments, and that banks stop lending when the yield curve inverts. Very helpful information. Thank you.
Your guest was very informative and articulate. I hope that Santa gives me some Exxon stock this year - just a quick thought, some coal in the stocking might not be so bad after all!
If you buy and hold the whole market, you hold both growth and value, for both high inflation and low inflation times. I do tilt toward stocks that do well in rising rates (value oriented, dividend paying stocks, but that is because I am preparing for retirement). In general, buy and hold the entire US market.
Not all central banks will successfully snuff out inflation locally. Since inflation is in most countries, it's gonna weigh on future inflation worldwide.
Virtually nobody is a pro-inflation investor? Well, I am. Gold, commodities, real estate, TIPS, silver, etc. (no crypto) are all a part of my portfolio and in a big way right now. I fully agree with Mr. Bernstein. Times are changing.
Go too Treasury bonds all day long. Straight cash is the best way to go. The 30 year bond will be safer for you anyway. Robert Kessler has been my favorite for investing advice.
Dear Mr. Richard, I learn a lot from you in this video. Thank you so much .. would you please recommend some top books about investment for a beginner to read.
I'd argue that nearly all stocks are good hedges against inflation, a good and profitable business retains its fundamental value even if the dollar number next to the stock ticker changes. Take Apple for instance, is the company worth 3 trillion, or 5T or 6T tomorrow? Well, the business is fundamentally rock solid and the answer depends on how much one dollar is worth. Hence the company is pretty inflation proof. Basically invest in outstanding business and you won't have to worry if it's an inflation or no inflation climate. Sometimes simpler is better. What an inflation climate could mean is however is that you should reduce cash allocation, and that is something I'm doing myself.
There are only 5 ways for companies to increase their return on equity during times of inflation. 1. Increase asset turnover (ratio between sales and assets) 2. Widen operating margins. 3. Pay lower taxes. 4. Increase leverage 5. Use cheaper leverage. 1. Increase asset turnover: In this approach, 3 kinds of assets are analyzed: accounts receivable, Inventories, and fixed assets plant and machinery perand machinery. Accounts receivables will rise proportionately as sales rise, whether the rise is a result of unit volume or inflation. We cannot improve return on equity from this angle. Inventories are not a simple. An increase in sales can expect an increase inventory turnover ratio. Over shorter periods, inventories can be volatile due to many factors including supply disruptions and cost changes. Companies that use last income a first out inventory methods can improve returns on equity during inflationary times. But even during the 10 years ending with the 1975 when inflation was generally rising, Turnover ratios of the fortune 500 increased only from 1.18 to 1 to 1.29 to 1. Inflation will have a tendency initially to increase turnover ratios when compared to fixed assets. Because sales will rise sooner than the fixed assets are depleted, high turnover ratios are to be expected. However as these fixed assets are replaced, turnover ratios was slow until the rise in inflation matches the rise in sales and fix assets. 2. Widen operating margins: Most managers figure there's always a possibility of increasing operating margins. Wide margins will increase returns on equity. However inflation does little to help managers control costs. Major non interest, non tax costs that companies confront or raw materials, energy, and labor costs. During inflationary periods, these costs are usually escalating. During the 1960s manufacturing companies achieved an 8.6% pre tax margin on sales. By 1975, this same universe of companies achieved a pretax margin of 8.0%. Despite rising inflation, margins declined. 3. Pay lower taxes: With regard to lowering income taxes, imagine that investors in US corporations own class D stock. Class A, B, and C stock is owned by federal, state, and local governments and represents their separate tax claims. While class A, B, and C owners do not have a claim on the corporations assets, they do get a major share of the corporations earnings. Class A, B, and C owners can vote to increase their interests in a corporate Earnings. Obviously, when class A, B, & C owners do so, the class D owner's share of earnings declines. Hence return on Equity declines. During periods of rising inflation can you assume that class a, B, &c owners will vote to reduce their share of the company's earnings? 4. Increase leverage A company can increase returns on equity by increasing leverage or by using cheaper leverage, lower interest rates. However inflation will not cause borrowing rates to the decline. On the contrary, as inflation increases, capital needs increase, forcing loan demand higher. Additionally as inflation rises, lenders, distrustful of the future, require a premium for their lonable funds. Even if interest rates do not increase substantially, the cost of replacing lower interest rate debt that has matured with slightly higher rates will become an expense for corporations. An irony and business is that those companies who can best afford that usually require little, and those companies that struggle to remain profitable are always standing in front of the bank's window. Even so, corporations anticipating higher capital needs due to inflation tend to load up on that period in cases where business slows and capital needs increased, companies can continue to operate without going to the equity market for additional money or, in more dramatic cases, cutting their dividend. Increasing leverage, if managed properly, can increase returns on equity. However during periods of rising inflation, the benefits of greater leverage are offset by the cost of higher interest rates.
I am in my 30*s and i have onely the types of companies he talks about. and i have never had a tech stock in my life. i am enjoing around 20 000 in dividends a year.
A Paul Volker Fed would run into a profound problem: US government debt in relation to the size of the economy is four times what it was in the late seventies. So every interest rate percentage increase costs four times as much in terms of the US budget deficit. The truth is the Fed will cause a government budget crisis if it raises interest rates a lot for a significant period of time. Our policy makers are not being honest with the American people about the implications of this situation.
Excellent compounder of capital and cheap you can’t beat that. BEPC A big percentage of my portfolio. A sea change coming in solar and wind. NCM batteries are too expensive to use to back up the grid. LFP batteries manufactured in China are half the price of NCM batteries and not raw material constrained but are being put into EVs as fast as they can build them. CATL is going into commercial production, this year, for sodium ferrous phosphate batteries. SFP Are heavier per kWh than LFP but perfect for backing up the grid. Price will be, in my opinion, 33% of the tesla power wall per kWh. Game changer in my opinion for solar and wind projects.
What do you think we should all own a little of? Copper, Silver and Canadian oil sands stocks. Oil sands companies are working hard on carbon sequestration.
Real assets . Gold down livestock down . Bonds down commodities down. Materials down industrials down however energy not good compared to infotech so wtf
The problem with these types of people is that they always limit themselves to equities. It's the 2020s. You can hold commodities funds or other assets directly. If you are guessing at inflation and require equities, just run with small cap value and call it a day.
If prices get too high and Americans can't afford the inflation and employers are unwilling to pay more to their employees, don't you get disinflation?
![Financial Planning in Inflationary Times [2022]](http://i.ytimg.com/vi/qteqylpPfu0/mqdefault.jpg)
![Financial Planning in Inflationary Times [2022]](/img/tr.png)
![Financial Markets Are Dangerous for Investors: What You Need to Know [2022]](http://i.ytimg.com/vi/-Vjez85LlNE/mqdefault.jpg)
Richard gives an articulate and refreshing perspective on the evolving economic environment that we find ourselves in. Consuela is a tremendous interviewer and host! Very thought-provoking stuff, far better than you find on most of the financial/investing media out there today.
Wealthtrack is one of the best financial education programs i have seen. Ms. Mack is a skilled interviewer who always asks the exact questions i want to ask the interviewee myself. Learned so much from listening to Mr. Bernstein and his way of thinking and verifiable from my own technical studies. Thank you both!
She’s a very good interviewer bc she allows the person whom she is interviewing to speak. There’s not a bunch of interruptions
Thank you, Ms. Mack.
Mr. Bernstein gave the most intelligent, common sense and accurate take on the current investing environment I've heard in months. Awesome interview!
I learned two things: how lowering interest rates makes higher p/e companies better investments, and that banks stop lending when the yield curve inverts. Very helpful information. Thank you.
The problem with tactical AA changes is they rarely work out.
so very grateful ty .it seems the buying in the pro-inflation and energy sectors is visible most on down equities days.
Every investor should be required to listen to this. It is playing out right now.
Your guest was very informative and articulate. I hope that Santa gives me some Exxon stock this year - just a quick thought, some coal in the stocking might not be so bad after all!
Hit me up directly☝☝
For more guidance and advice on investments..
If you buy and hold the whole market, you hold both growth and value, for both high inflation and low inflation times. I do tilt toward stocks that do well in rising rates (value oriented, dividend paying stocks, but that is because I am preparing for retirement). In general, buy and hold the entire US market.
Not all central banks will successfully snuff out inflation locally. Since inflation is in most countries, it's gonna weigh on future inflation worldwide.
FAs should send these videos to their clients!
Virtually nobody is a pro-inflation investor? Well, I am. Gold, commodities, real estate, TIPS, silver, etc. (no crypto) are all a part of my portfolio and in a big way right now. I fully agree with Mr. Bernstein. Times are changing.
Go too Treasury bonds all day long. Straight cash is the best way to go. The 30 year bond will be safer for you anyway. Robert Kessler has been my favorite for investing advice.
Glad your feeling better. 😇👑🌍🌏🌎💚💋
Dear Mr. Richard, I learn a lot from you in this video. Thank you so much .. would you please recommend some top books about investment for a beginner to read.
Dope talk
He doesn't just speak, he teaches!
I'd argue that nearly all stocks are good hedges against inflation, a good and profitable business retains its fundamental value even if the dollar number next to the stock ticker changes. Take Apple for instance, is the company worth 3 trillion, or 5T or 6T tomorrow? Well, the business is fundamentally rock solid and the answer depends on how much one dollar is worth. Hence the company is pretty inflation proof. Basically invest in outstanding business and you won't have to worry if it's an inflation or no inflation climate. Sometimes simpler is better. What an inflation climate could mean is however is that you should reduce cash allocation, and that is something I'm doing myself.
There are only 5 ways for companies to increase their return on equity during times of inflation.
1. Increase asset turnover (ratio between sales and assets)
2. Widen operating margins.
3. Pay lower taxes.
4. Increase leverage
5. Use cheaper leverage.
1. Increase asset turnover:
In this approach, 3 kinds of assets are analyzed: accounts receivable, Inventories, and fixed assets plant and machinery perand machinery. Accounts receivables will rise proportionately as sales rise, whether the rise is a result of unit volume or inflation. We cannot improve return on equity from this angle. Inventories are not a simple. An increase in sales can expect an increase inventory turnover ratio. Over shorter periods, inventories can be volatile due to many factors including supply disruptions and cost changes. Companies that use last income a first out inventory methods can improve returns on equity during inflationary times. But even during the 10 years ending with the 1975 when inflation was generally rising, Turnover ratios of the fortune 500 increased only from 1.18 to 1 to 1.29 to 1. Inflation will have a tendency initially to increase turnover ratios when compared to fixed assets. Because sales will rise sooner than the fixed assets are depleted, high turnover ratios are to be expected. However as these fixed assets are replaced, turnover ratios was slow until the rise in inflation matches the rise in sales and fix assets.
2. Widen operating margins:
Most managers figure there's always a possibility of increasing operating margins. Wide margins will increase returns on equity. However inflation does little to help managers control costs. Major non interest, non tax costs that companies confront or raw materials, energy, and labor costs. During inflationary periods, these costs are usually escalating. During the 1960s manufacturing companies achieved an 8.6% pre tax margin on sales. By 1975, this same universe of companies achieved a pretax margin of 8.0%. Despite rising inflation, margins declined.
3. Pay lower taxes:
With regard to lowering income taxes, imagine that investors in US corporations own class D stock. Class A, B, and C stock is owned by federal, state, and local governments and represents their separate tax claims. While class A, B, and C owners do not have a claim on the corporations assets, they do get a major share of the corporations earnings. Class A, B, and C owners can vote to increase their interests in a corporate Earnings. Obviously, when class A, B, & C owners do so, the class D owner's share of earnings declines. Hence return on Equity declines. During periods of rising inflation can you assume that class a, B, &c owners will vote to reduce their share of the company's earnings?
4. Increase leverage
A company can increase returns on equity by increasing leverage or by using cheaper leverage, lower interest rates. However inflation will not cause borrowing rates to the decline. On the contrary, as inflation increases, capital needs increase, forcing loan demand higher. Additionally as inflation rises, lenders, distrustful of the future, require a premium for their lonable funds. Even if interest rates do not increase substantially, the cost of replacing lower interest rate debt that has matured with slightly higher rates will become an expense for corporations.
An irony and business is that those companies who can best afford that usually require little, and those companies that struggle to remain profitable are always standing in front of the bank's window. Even so, corporations anticipating higher capital needs due to inflation tend to load up on that period in cases where business slows and capital needs increased, companies can continue to operate without going to the equity market for additional money or, in more dramatic cases, cutting their dividend. Increasing leverage, if managed properly, can increase returns on equity. However during periods of rising inflation, the benefits of greater leverage are offset by the cost of higher interest rates.
Just follow Warren Buffett. ;) Reduce cash allocation?
So, the answer is to buy Dogecoin? Actually, this was a pretty good presentation. I like Mack's interview style. Great channel.
I love vilified industries that everyone needs, but mainstream media can’t stand. Thank you, Consuelo
I am in my 30*s and i have onely the types of companies he talks about. and i have never had a tech stock in my life. i am enjoing around 20 000 in dividends a year.
A Paul Volker Fed would run into a profound problem: US government debt in relation to the size of the economy is four times what it was in the late seventies. So every interest rate percentage increase costs four times as much in terms of the US budget deficit. The truth is the Fed will cause a government budget crisis if it raises interest rates a lot for a significant period of time. Our policy makers are not being honest with the American people about the implications of this situation.
so i hold most of my money in an s&P index fund and total market index fund; Is that better or worse for the coming decade?
For those who want to stay out of carbon energy, renewable energy is also an option. BEP is at reasonable prices.
Excellent compounder of capital and cheap you can’t beat that. BEPC A big percentage of my portfolio. A sea change coming in solar and wind. NCM batteries are too expensive to use to back up the grid. LFP batteries manufactured in China are half the price of NCM batteries and not raw material constrained but are being put into EVs as fast as they can build them. CATL is going into commercial production, this year, for sodium ferrous phosphate batteries. SFP Are heavier per kWh than LFP but perfect for backing up the grid. Price will be, in my opinion, 33% of the tesla power wall per kWh. Game changer in my opinion for solar and wind projects.
smart guy!
4:08 production moved where it is more efficient! Hahahahha no it moved where it is cheap :-)
She did not ask the critical question. Is bitcoin a real asset?
What do you think we should all own a little of? Copper, Silver and Canadian oil sands stocks. Oil sands companies are working hard on carbon sequestration.
Inflation will persist at a higher level because of deglobalization and money printing for a generation
Somewhere from west side story
Portfolio for the new world order: beans and lentils.
Real assets . Gold down livestock down . Bonds down commodities down. Materials down industrials down however energy not good compared to infotech so wtf
The problem with these types of people is that they always limit themselves to equities. It's the 2020s. You can hold commodities funds or other assets directly. If you are guessing at inflation and require equities, just run with small cap value and call it a day.
If prices get too high and Americans can't afford the inflation and employers are unwilling to pay more to their employees, don't you get disinflation?
Sector funds. Sigh
Since this interview he's been relatively wrong. 😂
In retrospect, spectacularly wrong on everything
After this guy talks wait a year
Um, blaming inflation on covid and a war?