8 August 2020
Dear Fellow Investor,
Inflation/Deflation ?
Weekly chart of the TIP or Treasury Inflation Protected bond ETF. It is the US treasury bond but is benchmarked to the CPI or consumer price index.
If inflation goes up bondholders are protected as the Federal reserve will raise the TIP interest rate to match inflation. Pension funds and institutions buy TIPs to protect their shareholders from inflation. Since November 2018, the capital value of the TIPs fund is up over 19 %.
It means that despite the rosy interest rate outlook by the US federal reserve, professionals are betting on inflation.
Weekly chart of the CRB Index which represents a basket of the world’s leading commodities. It is up over 19 % since the 2019 April lows.
It is a sign that inflation is returning and will benefit shares with commodity exposure. This includes plantation and metal producers. Energy shares should also benefit.
Of course, we must focus only on those companies that have strong financials, low debt and increasing free cash flow. United Plantations which we hold fits the profile.
I spoke with a planter last week and asked him about the locust problem and would it effect the oil palm plantations in Malaysia. He said it would not because the locusts have difficulty eating the palm leaves unlike other oils seeds in India or other countries producing oil seeds. This will benefit oil palm producers.
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| Weekly spot gold chart |
The strongest inflation indicator is gold. Gold has maintained purchasing power and held value for over 2000 years. No asset can equal the stability and durability of gold. With zero interest rates and massive money printing by all Central Banks worldwide, it seems unstoppable. Bank of America has an 18 month price target of USD 3000 per ounce.
Tomorrow we hold a Zoom Market Watch meeting at 11 am.
Below is the link see you there
https://us02web.zoom.us/j/
Bill
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