Crescat Capital September 2021: The Psychology Of Inflation – ValueWalk
Crescat Capital’s commentary for the month ended September 2021, titled, “The Psychology Of Inflation.”
Get The Full Henry Singleton Series in PDF
Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues
Q3 2021 hedge fund letters, conferences and more
Rich Pzena Profile: In The Footsteps Of Graham And Dodd
Rich Pzena of Pzena Investment Management is doing what he loves to do. In fact, he has always had an interest in investing, just like his father. In an interview with Raul Panganiban of ValueWalk, Pzena said the financial markets were always a focus of conversation at home when he was growing up. Q 2021 Read More
The Psychology Of Inflation
Today’s macro environment is indeed very different than any other period we have experienced in the last four decades. Inflation is infiltrating the mindset of US households in a way not seen since the wage-price spirals of the 1970s. Prices for the goods and services that individuals require to meet basic needs have been increasing at an accelerated pace. These necessities include shelter, food, energy, and transportation. The rising cost of living is due to both supply constraints and increased demand from fiscal and monetary stimulus. In the mix, net profit margins for S&P 500 companies at large are at record highs today, because these firms have been able to pass rising costs onto their customers in the short run.
These windfall profit margins are unsustainable and poised to reverse quickly in our analysis. The two biggest costs of running a business that affect net profit margins are on track to rise imminently: taxes and labor. Corporate tax rate hikes are almost certain with the legislation now under consideration by the Democratic-controlled Congress and White House. Even less discounted by today’s buoyant stock market in our view is an impending rise in labor costs. Individuals and families cannot rely on continued government handouts to the degree they were provided during the pandemic lockdowns and the US government cannot afford to provide them. We believe a new and well-justified psychology of rising inflation will be forcing more of …….