As I noted yesterday, market momentum is squarely negative. So, even though the real estate investment trust Penn National Gaming (NASDAQ:PENN) is on the watchlist, I’m still steering clear on the sidelines and gathering cash. I’m waiting for the Fed announcement on Wednesday, retirement and institutional selling to complete, and this Friday’s options expiration date to shake out the market weakness.
Oh… and then there’s the whole inflation thing. On Tuesday, the markets took quite a gut punch with the latest inflationary news. Wholesale prices increased by nearly double digits over a month. The producer price index came in at 9.6% over the previous 12 months from November.
The last time we’ve seen these same numbers, the U.S. economy faced mile-long lines waiting for gasoline. Core PPI came in at the highest inflation level on record as well. Remember when the Fed said that all of this inflation was only going to be “transitory?”
They Really Called it Transitory 😂
Boy, was that a joke. I just didn’t realize that the punchline would be the evaporation of buying power for the American consumer at a time when assets are already hyperinflated across the economy.
Remember when I said to get ready for the goalposts to move earlier this year? It’s already underway. Soon, they’ll tell you that inflation is good for you because you can put your paycheck to work right away like you’re living in Argentina.
This isn’t going to let up, and even if the Fed takes action, the damage has been done. Companies aren’t going to lower their prices in the future, and wages are going to continue to rise. While that latter might not seem like a bad thing on the surface, it will resonate in either more automation or higher prices (or likely both.)
The Fed must take action on interest rates very soon.
This has gotten out of hand, and with little-to-no plan coming out of this administration (seriously, where is anyone addressing the American public about this calamity?), any rate hikes will pull back economic expectations for growth in the year ahead.
Politicians never admit error. The February/March stimulus wasn’t needed but was a perfect reason to throw cash out into the electorate. There were plenty of experts and pundits raising alarms about inflation all year… and now the excuses are flying because they didn’t listen.
Here we are. The problem for too many investors is that not many avenues exist to actually preserve wealth. Gold prices are still sitting at 2011 levels. Oil prices are pulling back because of weaker expectations for the market. Technology stocks are still overvalued. And utility companies are facing increased scrutiny due to ESG concerns and issues around carbon energy.
Look to Real Estate Investment Trust
The one place that investors might want to consider outside of the traditional box of bonds and stocks is in the real estate investment trust (REITs) space. Land and properties are natural hedges against inflation, but investors need to know that REIT companies are able to lock in higher rent prices.
Tomorrow, I’m going to talk about Triple-Net Leases and why they are important hedges against inflation and rising interest rates. We’ll also discuss one real estate investment trust that can act as a rampart against this ongoing calamity fueled by the Fed.