Well, we were told that the 178 million people infected and 3.85 million people who have died are all casualties of a virus that came from a single bat bite. So why wouldn't we believe it when we're told that we're seeing a "transitory" state of inflation?
OK, that's not totally true. There I am conflating Dr. Anthony Fauci with Fed Chief Jerome Powell, but, these days, that is very easy to do. When it comes to Washington and the absolute parade of nonsense that is emitted from its residents, it is almost impossible to discern the players. Even with note cards.
So, the answer? Just ignore them.
You can feel free to believe, even without a single shred of zoonotic evidence, that COVID-19 stemmed from a bat near Wuhan, which just happens to be home to one of the world's largest laboratories dealing with bat-related coronaviruses. And you can believe Powell that inflation is not a problem for the U.S. economy. Just keep buying stocks!
As for me, I think we all need to heed Stanley Kubrick's advice and stop worrying and learn to love the ... inflation. Seriously. Inflation is very good for a range of companies. None of them are in Silicon Valley, by the way, despite today's market action.
What companies are aided by inflation? Companies whose input costs are mostly fixed and outputs are determined by external forces. Yes, I am looking at you, Darren Woods and Exxon (XOM) . Energy is so attractive right now, with Brent at $74/barrel and WTI at $72 a barrel, that I have run out of superlatives. Just buy some XOM and we can revisit that call in six months.
But it is not just energy. Powell and his equally feckless cronies at the world's other central banks have unleashed an inflation monster the size of which we haven't seen since the late 1970s. There are companies that will win from this. Energy, food and agriculture, chemicals, shipping -- and of all the aforementioned commodities -- the list is not a short one. But these companies get, or have gotten, very little attention from the talking heads on CNBC. Ignore them, just as you, I hope, ignore Powell and Janet Yellen and the rest of those in D.C.
So, that's your mission, and I hope you will choose to accept it. Fade the Nasdaq and learn to love commodities. Stocks, as an asset class, are terribly overvalued here. No amount of jawboning from feckless buffoons in Washington can change that. Does that mean you should dump all of your holdings? Of course not. And it is not just Exxon. Companies like Apple (AAPL) and Microsoft (MSFT) continue to produce returns well in excess of their costs of capital -- and return some of those returns to shareholders in the form of dividends and share repurchases -- and, even if their stocks are ahead of themselves, there is no compelling reason to sell them now. Just sit tight.
But, to use one of my favorite cliches, there is a great big world out there. The countries in it that benefit from higher commodity prices -- basically all of them outside the U.S., China and Western Europe -- are suddenly doing much better in the current inflationary environment.
I guess I should create a spreadsheet. Hah. If you have been reading my columns, you know that is one of my hobbies. Look to some resource companies listed on the Toronto exchanges. There are some incredibly interesting smaller companies you can find. Check them out, do some research and buy the stocks. Your portfolio will thank you.