Worthless James Mackintosh Wall Street Journal column on inflation
Posted by John T. Reed on
There is a column by James Mackintosh in Today’s WSJ: “Five Tactics to Investing Amid Rising Prices.”
You gotta be kidding me. His first section about gold is worthless. Here is the truth about gold and inflation: https://www.johntreed.com/blogs/john-t-reed-s-hyperinflation-deflation-blog/60940227-disadvantages-of-gold-as-an-inflation-hedge?_pos=3&_sid=c3f3b2fe3&_ss=r
Second section says commodities rise the most in price during inflation. Uh, how do you invest in commodities? He says mining, oil producing, and agricultural stocks do not do as well as the prices of what they produce. Yeah, I figured that. Then he says you need an oil tanker or a warehouse to store commodities. Yeah, I have been writing about that regarding copper and nickel and such.
Then he says what first came to my mind when I saw him discuss commodities. You can only trade futures contracts which are short-term and are not bets on prices. Rather they are bets on bets on prices. A loop called contango can render those markets useless for protecting yourself from inflation.
Then he goes to stocks with “low pricing power.” What is pricing power? Buffett talks about that. Low pricing power is the opposite of monopolies and oligopolies and brand names. Mackintosh says one study found that weak companies outperformed stronger ones is the first 3/4 of post WW II inflations. Oookay. That is a bit fuzzy and “outperformed” is a rather lame benefit when people are starving to death.
When you read diaries on people in hyperinflation, they are not talking about which stocks did better than others. They are bartering away their silverware.
He then says TIPs bonds are the best inflation protection. Wow! When I read their fine print, I instantly sold all $250,000 of them that I owned and put that money abroad into foreign currencies. They are a cruel joke—a thoroughbred horse in an Indianapolis 500 race.
He says to get Series I bonds instead because they pay the inflation rate at maturity compared to .9% below inflation for TIPs. Uh, folks. Those bonds will be defaulted on long before maturity. There is not enough money on earth to compensate you for hyperinflation, or hyperinflation minus .9%.
During WW I, Americans remembered the hyperinflated Greenback Dollars of the Civil War. “I don’t give a damn about a Greenback Dollar. Spend it fast as I can.”
They refused to buy WW I war bonds. So the government had to make them gold certificates. That meant they paid off in gold coins. So people trusted and bought them. Then in 1933, FDR issued Executive Order 6102. https://en.wikipedia.org/wiki/Executive_Order_6102 It reneged on the promise that you could redeem the gold certificates in gold coins.
Then Mackintosh says it is good to owe a 30-year fixed-rate mortgage during inflation. What? Actual partial sound advice! It is only good if the proceeds of that mortgage are in a non-dollar-denominated asset like a house. If you borrow money and invest it in something that is not an inflation hedge, owing money does you no good.
Mackintosh then “puts it altogether” by giving a free ad to an ETF created by Horizon Kinetics. That somehow indexes stocks that benefit from volatility. But then he says it is untested and unlikely to do much good even if it works.
That was the most disappointing financial article I have ever read in my life given its title. Talk about promising more than you deliver.
If you were unfortunate enough to read that article, read my book How to Protect Your Life Savings From Hyperinflation & Depression to restore your brain to normal functioning.
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