Keeping You Up At Night

Grocery bills, gas prices, the stock market, the possibility of a nuclear war...

(Andean Condor. Source: Getty Images)

Joel Bowman, reckoning today from Jorge Newbery Airport, Buenos Aires...

No time for lofty pontifications today, dear reader... we’ve got a plane to catch and, as usual, we’re running late! 

There will be plenty of opportunity to update you from the road... the “end of the road,” that is... from Bill’s ranch, up in Gualfin (literally translated: the end of the road). 

Our wandering party numbers three – yours truly, plus wife and six-year-old daughter (in reverse order of command). We’ll spend the week catching up, touring the estancia and visiting some of Bill’s vineyards. 

Word is, there might be a bottle or two of high-altitude Tacana Malbec passed around the dinner table, too. (Obviously dear daughter won’t be partaking - someone has to be the designated driver!)

As we join the throng presently converging on our departure gate, we’ll leave you in the capable hands of our BPR Investment Director, Tom Dyson, who had this to say to paid readers in his weekly update on Wednesday...

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What keeps you up at night? Grocery bills? Gas prices? The stock market? The possibility of a nuclear war? 

Many investors are worried about inflation. The latest headline inflation numbers were 7.9% in the USA, 5.5% in the UK and 5.1% in Europe. These were the highest readings in 40 years. 

And those inflation readings only include four days of price rises triggered by Russia’s invasion of Ukraine, which happened on February 24. It’s almost certain inflation readings for March will be even higher (producer prices were up 10% year-over-year in January, which means even bigger consumer price increases to come as companies pass on those costs).

I understand why investors are worrying about inflation. But inflation doesn’t worry me, at least, not for the next few months. I think it might even be a red herring from the real, more urgent issues we face. Like what?

Defaults, bankruptcies, margin calls

What keeps me up at night are the things no one’s talking about – defaults, bankruptcies, margin calls, bank failures, disorderly credit markets and falling stock prices. Most of the great financial panics start in the dimly lit corners of the financial system. By the time you see them in broad daylight, it’s too late.

Inflation volatility–one theme I’ve returned to over and over again in these messages–is likely to lead to any or all of the things I’ve listed above. You’ll see pulses of high inflation, like we have today, followed by inflation crashes. Traders, businesses, and investors caught out by the big swings will face big losses. I think that’s exactly what’s coming.

These sudden inflation reversals will be very hard to anticipate. We’ll have to watch the price action in the markets closely for clues. Who they affect most and what that effect will be are also hard to predict. But the market action gives you clues. 

Is the oil market bringing us a message? Russia invaded Ukraine on February 24. The US Oil Fund [USO] was at $66 that day. It quickly soared to $85 last week. And then fell back down. It's $67 today. If USO falls below $66, lower than the price it was when Putin invaded Ukraine, we’ll take it as a sign of economic weakness… that oil may be signaling a coming recession.

My job is to guide our investment strategy, not to report on the news. Inflation is definitely a risk. But any time it's in the headlines and the experts are telling you it's the main risk ‘right now,’ that means you should probably be paying attention to something else. Right now, I’m ignoring the inflation headlines and I’m positioning our investment strategy for a recession and a bear market in stocks.

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As we’ve mentioned in this space before, Tom has the BPR portfolio squarely in “Maximum Safety Mode” for the time being. That means sticking to precious metals - mostly gold; some silver - and keeping plenty of powder dry for when investment opportunities do arise.

On that front, Tom’s keeping an eye on “Old Economy” value plays, the kind of companies that operate in high cash flow industries, making and delivering real world goods to real world people... the kind of businesses that were largely overlooked over the past decade as speculators clamored for the next shiny object. 

As of today, Tom is tracking five stocks for the BPR portfolio, all of which are currently rated “buy.” (And all of which have handily outperformed the broader market since he recommended them through January and February, exactly as they were selected to do.)

If, like us, you see turbulent times ahead... and you’d like to begin preparing your own portfolio for more “inflation volatility,” you can subscribe to BPR’s premium content below. You’ll immediately gain access to all of Tom’s latest recommendations, plus Dan Denning’s archive of in-depth reports and weekly updates. There’s also private zoom calls with Bill’s network of analysts and experts and plenty more besides. 

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And now for Bill Bonner’s missives from the past week...

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Finally today, we recently caught up with our old friend - and Bill’s co-author on a pair of New York Times bestsellers - Addison Wiggin... 

Over the course of a meandering hour or so, we discussed our bizarre ‘time travel’ to a political separatist region behind the iron curtain, the ongoing situation in Ukraine, how knee-jerk sanctions are having unintended consequences for private citizens on both sides of the conflict, and how crypto might play a role in keeping the lights on and the money flowing. You can catch the whole thing, here...

That’s all from us for this fine, high-flyin’ travel day. Tune in tomorrow for your regular Sunday Sesh, where we muse on the Illiberal World Disorder running your economy and ruining your money. 

We also catch up with British investor, comedian and libertarian writer Dominic Frisby with the return of your Fatal Conceits podcast. 

Until then...

Cheers,

Joel Bowman