Inflation Game Plan (Not Too Early to Start)

  • A stunning case of jaw-dropping hyperinflation
  • Zach Scheidt: “There’s still time to protect your wealth…
  • … from the ravages of inflation”
  • A BOATLOAD of economic numbers
  • Home prices reminiscent of 2006 (eek)
  • Ray Blanco on N.Y. medical marijuana companies
  • “Don’t we all… support fair and equitable elections?”… “Would you REALLY… get in bed with Jamie Dimon?”… And more!

The last time we mentioned Venezuela in any significant way, President Maduro was hyping a national cryptocurrency…

The “Petro” was part of a comprehensive effort to restructure Venezuela’s tattered financial system and bypass sanctions imposed by the U.S. and EU.

“All… state institutions which generate hard currency are instructed to immediately open petro wallets,” Maduro demanded in 2018.

This in a last-ditch effort (similar to what Chavez did in 2008) to curb sky-high inflation. To no avail…

In early March, “Venezuela’s central bank said… it would introduce a bank note worth 1 million bolivars,” Reuters says.

Printing the bank note comes after “years of incessant hyperinflation [that] continue to batter the value of the crisis-stricken South American country’s currency.

Republic of Bolivariana Money

Barely worth the paper it’s printed on…

“The new bank note will be worth just 52 U.S. cents at the current official exchange rate,” Reuters says. Or as one Twitter user puts it, 1 million bolivars can buy one liter of tomatoes at the local market.

As if that’s not stunning enough, “according to the central bank… interannual inflation was running at 2,665% as of January.” Which is down considerably from the height of inflation in 2018 — a stomach-dropping 65,000%.

Another example of hyperinflation?

“I remember the first time I saw what real inflation looks like,” says our retirement specialist Zach Scheidt.

“I was 16 years old and my dad and I were on a church trip to a refugee camp in Croatia,” he recalls. “This was a war-torn area and the camp was set up as a safe place for women and children to escape genocide in the region.

“One afternoon, we walked past a long line of people at the local commissary. I hadn’t seen a line at this place before, and my dad asked our translator what was going on.

“The translator told us that the camp residents received a check each week to help with basic needs,” says Zach. “And because inflation was so high, they lined up immediately to spend their cash as quickly as possible.

“After all, in a day or two, that money wouldn’t go nearly as far. Inflation was literally eating away at the value of their currency day after day…

“I’m remembering this situation as inflation fears start to rise here in the U.S.,” Zach says.

“Now, I’m not expecting any kind of runaway inflation like my dad and I saw in the refugee camp outside of Bosnia,” he clarifies. “But I do think that the risk of inflation is something you should pay close attention to and protect yourself from.”

So in just such an inflationary environment, Zach favors “owning stocks of companies that have tangible products and resources.

“For instance, companies that mine materials like copper, concrete and iron ore should do very well,” he says. “That’s because the physical resources that these companies own will be worth more as inflation causes prices to rise.

“If you own shares of these companies,” says Zach, “your retirement savings can keep up with inflationary pressures.” He proffers four companies — with “tangible products and resources” — to hedge against inflation…

“Rio Tinto (RIO) is a metals and mining stock that should benefit from higher copper, iron ore and other commodity prices,” says Zach. “Another name in this area is Vulcan Materials (VMC).

“You might also consider equipment makers that will benefit from infrastructure projects around the world,” he says. “Caterpillar (CAT) is sort of the go-to name in this category. And I also like Trex Company (TREX), which makes heavy machinery for construction and mining.”

Zach’s takeaway, then? “At this point, we’re still in the very early stages of inflation. That means there’s still time for you to invest to protect your wealth and keep your retirement safe.”

Now for a raft — nay, a boatload — of economic numbers (which lay the groundwork for the market’s action today)…

  • First up, the “Philly Fed” survey of mid-Atlantic manufacturing came in at 50.2 for April — firmly above the 42 that was forecast In fact, it’s the highest reading since 1971… when Three Dog Night’s “Joy to the World” topped the charts
  • Then there’s the Empire State Manufacturing Index, which measures manufacturing in New York state. Keep in mind, any number above zero indicates growth; given that context, the April number rose to 26.3 from 17.4 in March, trouncing the forecast reading of 20.

“Price pressures were evident in both reports,” MarketWatch says. “In New York, input prices hit the highest level since 2008 while selling prices hit a record. In Philadelphia, prices slipped only a bit after reaching a 40-year high in March.”

  • Next, retail sales erupted in March, according to the Commerce Department, up 9.8% for the month, opposed to the 6.1% economists anticipated.

“The gain in consumer spending — the biggest driver of economic activity — came as the government began distributing hundreds of billions of dollars of stimulus funds to households,” The Wall Street Journal says. “It was the largest monthly gain since last May, during the initial recovery from lockdowns early in the COVID-19 pandemic.”

  • And the Federal Reserve issued its March industrial production numbers this morning — up 1.4%, way more than expected. Of that number’s three components — factory output, mining and utilities — it was factory output doing the heavy lifting, up 2.7% over February.

These economic indicators, taken together, suggest “people going back to work, people seeing more income, people spending,” says RSM chief economist Joseph Brusuelas. “This is a good story about the American economy’s resilience.”

On the strength of these economic numbers, the market’s at all-time highs. The tech-heavy Nasdaq, in fact, is up 1.2% to 14,027. The Big Board? Approaching 34,000. While the S&P 500 is up 40 points to 4,166.

Commodities are joining in the rally: Crude’s up 22 cents to $63.37 for a barrel of WTI. As for gold — up almost 2% today to $1,767.60 per ounce. And silver’s a shade under $26.

Bitcoin’s up 1.2% at the time of writing to $62,490.

For our regularly scheduled Thursday reality check, the Labor Department reports first-time unemployment claims dropped to 576,000 for the week ending April 10.

A figure that happens to be the lowest since March 2020, and certainly lower than the 710,000 Dow Jones economists expected…

Shrinking Unemployment

“For 55 consecutive weeks, the number of Americans filing for unemployment benefits was worse than at any time during the Great Recession,” MSNBC reports. (Are you sitting down, readers?) “As of this morning, that’s no longer the case.”

We’ll find out next week if the positive trend continues…

The latest reading from the National Association of Home Builders (NAHB) Housing Market Index comes in at 83 this month, up 1 point from March.

For some perspective, a reading over 50 means builders are optimistic when it comes to single-family home sales.

NAHB Chairman Chuck Fowke says: “The supply chain for residential construction is tight, particularly regarding the cost and availability of lumber, appliances and other building materials.

“Though builders are seeking to keep home prices affordable in a market in need of more inventory, policymakers must find ways to increase the supply of building materials as the economy runs hot in 2021.”

As for existing home prices, they’re increasing at a pace not seen since 2006. Hmm…

“More than 40% of Americans now live in states that have embraced full [cannabis] legalization,” Politico says. And in case you’re keeping track, you can add the Empire State to that tally.

“On March 31, Gov. Cuomo signed a bill that will make it legal for adults to use cannabis in the state of New York,” says our pot stock authority Ray Blanco.

“The newly legalized industry is expected to… bring in $350 million a year in tax revenue,” he says. “But the bigger story — that no one’s talking about — is about the businesses that are expected to come out on top.

“I’m talking about businesses that have a foothold in New York’s medical market.

“Cannabis companies working under New York’s medical marijuana laws have several advantages over new players in the field,” Ray says.

“Under New York’s previous cannabis laws, medical marijuana companies were required to be vertically integrated to operate,” he says. “That means that from grower all the way to sale they had to go through the same company.

“Historically, vertical integration laws have been used to discourage monopolies,” says Ray. “But in the case of cannabis, they were necessary to make sure the product could be tracked and monitored the entire way through.

“Now New York is forcing recreational players to declare themselves as one category. They either must be a grower or retailer, not both,” Ray says. “The kicker here is that the N.Y.-licensed medical marijuana companies are able to get grandfathered into their previous deal — meaning they can save major costs by cutting out the middleman.”

There are also some sweet tax advantages for these medical marijuana outfits…

“So who are the companies that benefit from this grandfather clause?” Ray says.

“New York’s previous medical marijuana law divvied out 10 licenses to the following companies…

  • Acreage Holdings (ACRHF)
  • Columbia Care (CCHWF)
  • Cresco (CRLBF)
  • Curaleaf (CURLF)
  • iAnthus (ITHUF)
  • Etain Health (private)
  • Green Thumb Industries (GTBIF)
  • MedMen (MMNFF)
  • PharmaCann (private)
  • Vireo Health (VREOF).

Ray says: “If you look at these companies over the past couple years you’ll see some wild price swings as well as wildly different pricing and valuation.”

Wanna avoid the wild ride? Ray suggests: “A safer way to play this is through an ETF that holds several of the names on the list. One ETF in particular is the AdvisorShares Pure U.S. Cannabis ETF (NYSE: MSOS).

“Shares have cooled off initially since the surge in February,” Ray says, “but there’s still a lot of room for this industry to grow.

“Federal and local progress is being made all across the U.S. and if you haven’t jumped in the cannabis industry yet,” Ray concludes, “now’s as good a time as any.”

Yeah, about federal legalization: “President Joe Biden has been a conspicuous outlier among Democrats when it comes to supporting marijuana legalization,” Politico says.

On the other hand: “Senate Majority Leader Chuck Schumer [NY] really likes to talk about weed.

“He first introduced a bill to legalize marijuana in April 2018. It was part of his pitch for voting Democrat in the 2020 election, and now — with the majority in hand — he is putting together new federal marijuana reform legislation with Sens. Cory Booker (D-N.J.) and Ron Wyden (D-Ore.).

“Schumer said Biden’s reticence won’t deter the Senate from taking aggressive action to loosen federal restrictions,” Politico asserts.

“I want to make my arguments to [Biden], as many other advocates will,” says Schumer. “But at some point we’re going to move forward, period.“

Alrighty then…

The ad in The New York Times says it supports fair and equitable elections,” a reader writes. “Don’t we all?

“They fail to clearly identify how and why the Georgia law does not comply.

“Doesn’t voter ID assure that your vote is legitimate? So what exactly are these idiot CEOs objecting to?

“Actually, I think it is insulting… I doubt that there is a significant number of people who don’t have an ID. It’s purely a political ploy.

“Perhaps conservatives should employ the same tactics of ‘persuasion’ and remind CEOs that we represent half the country. We can use our shareholder voting power to ditch directors and make shareholder proposals.”

“How long are you folks gonna lean on Harry’s quote as your lame-a— justification for owning companies that are bad actors?” gripes another reader.

“Would you REALLY own JPM? And get in bed with Jamie Dimon? Really?

“I would suggest, if conscience matters more than money, that you eschew the purchase of equity stakes in despicable corporate entities. But hey, if all you care about is makin’ a buck any way you can, even if that comes via loathsome and quasicriminal or criminal activity, then welcome to the burgeoning criminal class. You’ll have plenty of company.

“And I thought you guys… were a cut above.”

We try to be, reader, we really do…

Lest you forget, our beat is somewhere at the intersection of finance and politics — not exactly squeaky clean enterprises. That said, we’ll have done our job if we expose the scoundrels… and help principled folks prosper…

Best regards,

Emily Clancy
The 5 Min. Forecast

Emily Clancy

Emily Clancy

Recent Alerts

Tesla = Pets.com?

Investing legend Jeremy Grantham says: “The thing about a bubble… it can keep going.” Read More

The $4.197 Trillion Threat

The Federal Reserve’s twice-yearly Financial Stability Report whistled past the graveyard where Archegos Capital Management will soon be interred. Read More

Digital Currency = Total Surveillance

“While China may be the leader in the race to build central bank digital currency (CBDC),” says Jim Rickards, “the Fed has not been caught napping…” Read More

Russia’s Long Game (Gold)

The Central Bank of Russia has been loading up on gold for years. “No one plays the gold market better,” observes Jim Rickards. Read More

Six Years (Max) to China War

If China forces Taiwan reunification, is the U.S. ready to go to war with China? Read More

Bloodbath Newbies

The mainstream is finally recognizing that a new era of the mom and pop investor has arrived. Read More

FinTech Meets Fine Art

“Financial technology (FinTech) — along with some good old-fashioned creativity — has opened an elite market to the masses,” says Zach Scheidt. Read More

Suburban Sticker Shock

“Even prior to COVID, moving to the suburbs seemed to make economic sense relative to higher city prices,” says former Wall Street banker Dr. Nomi Prins. Read More

American Entrepreneurship Is in Decline

As the number of American companies dwindles, George Gilder says: “Now [investors] have to find where the new value is really being generated.” Read More

Party Like It’s… 1996?

If the mainstream insists on beating this 1999 theme to death, we’ll insist on continuing to push back against it… Read More