Two Certainties: Taxes And Pipeline Inflation
Generally buoyant PMIs out of Europe helped brighten the mood at the margins on Friday, and a US proposal for a 15% global corporate minimum tax was plastered all over the front pages.
The Biden administration is bent on curbing what Janet Yellen derisively calls a "race to the bottom" for corporate taxes. Finance ministers from Germany, France and Japan welcomed the 15% proposal, which they called "progress."
This is a somewhat maddening debate. Most rational people seem to agree that it isn'
“(If you worked for decades to build a prosperous small business and managed to become a small-time millionaire, why should you have to pay more in taxes to cover what Amazon or some hedge fund billionaire got away with not paying? Oh, you shouldn’t? I’m glad you agree.”
Hell yes, I do. Enough of my largess to the big guys and the 15% rate on accrued interest crowd.
At this point, I think hints of slowing or easing prices will get more attention, among the investor class anyway, than more OMG INFLATION!!! news. How many Bloomberg articles about exploding prices can you read anyway?
In a month, or two, “inflation hedges” or some other term for it may even be the “most crowded trade” in the BAML FMS survey. And we know what that means.
Of course, something can be over exposed, over bought, over crowded, and overly loved by shoeshine boys and Robinhooders alike – and still be true.
I personally don’t think we’re headed for actually sustained high inflation – as distinguished from a violent but essentially one-time price shock – but whether the headlines and FMS say so or not has little information value, either way.
However, for short / medium term positioning – couple weeks to couple months, say – I do think that overbought themes that everyone is already trumpeting should be faded or at least treated cautiously.
I am buying “some” stocks with a commodity component, but only if they look fundamentally undervalued without need of assuming a “commodity supercycle”, and preferably if they also pay a nice yield.
Commodities themselves, having little fundamental valuation support (not just now, they never do) and no yield, aren’t generally that interesting – to me, that’s just my personal opinion. Maybe some specific commodity is, like lithium (all those bipolar crypto speculators will need medicating) or rare earths (but wait, those stocks are sucking) or penguin bellies, but that’s too deep for me.