20 Feb 2021

Dear Fellow Investor,

Inflation ?

Weekly chart of the TLT which represents the 20 year US treasury bond. Since December 2020 prices have trended down meaning professional investors who dominate this space anticipate a further rise in  US interest rates to compensate for inflation.

The talking heads including CNBC analysts and federal reserve officials say not to worry about inflation but the charts of interest rates and commodity related shares say otherwise.  

Weekly chart of Chevron of which Warren Buffet bought USD 48 billion worth of shares in the 4^th quarter of 2020.

Chevron has an impressive portfolio of assets. The company had a difficult 2020, however, the company had an incredibly respectable 2019. The company has numerous investment opportunities and an incredibly strong balance sheet. Its 4Q 2020 performance was respectable, but its 2021 performance is much higher potential. We expect the company's production to grow 30+% over the next decade. Combined with the company's peer leading low cost production, the company expects ~5-6% dividends + dividend growth, continued share buybacks, and debt paydowns. Warren Buffett, looking for a place to invest and generate steady cash flow, has found a great opportunity in Chevron. From Seeking Alpha

Buffet locked in a 6 % dividend yield in a major energy  share he believes will appreciate. His money does the talking and he is betting on higher oil prices and inflation.

Weekly chart of  DBA which is an ETF holding agriculture commodities such as corn, wheat, soybeans and related products.

The strong rise in DBA is inflationary as it signals higher food prices.

This will benefit the plantation sector.

As selected economies recover from the pandemic, pent up demand for travel will increase. This is inflationary and we will see air line ticket prices rise.

One of our core holdings is SATS an airline caterer which is a proxy for the travel industry.    

 

Notice the green arrows. They identify insider buying . Price has risen from the lows and those insiders who bought anticipate more upside.   

In summary, the balance of evidence signals higher interest rates with rising commodity prices, more stimulus and consumer spending. I as Warren Buffet would bet on investments which benefit from this rising inflation trend.  

Take care

Bill

Below is a Russian eagle platinum coin. Platinum has risen over 40 % in the last 6 months as it has risen with the big rise in industrial metals.  Another sign of possible inflation.

Russia, Nikolaus I., 1825-1855, 3 Rubel 1829

 

Material: Platinum   Full Weight: 10.25 grams