Teal Linde

Letting inflation run will reduce government debt value? It's a possibility. In the last 3 years, we've been grappling with a pandemic, war in Europe, surging interest rates, worst inflation in 40 years, climate disasters, dictatorships. Today, the US has the highest debt-to-GDP ratio of all western countries. In the 10 years after WW2, US inflation averaged 4.2%, and debt to GDP fell by 40%. In France, inflation was 50% after the war, which melted away the debt but also people's cash values. Inflation is interesting, because investors can actually do something about how they allocate their capital. The key is that investors need to own companies that have pricing power.

4 tools when a country's debt is elevated. Implement austerity. Raise taxes. Declare bankruptcy. Inflate their debts away, and this one is the least painful for politicians and governments. Governments can never come out and admit to this, because there would be a revolt from all their lenders.

What about the independent central banks that are supposed to prevent inflation? Yes, but this time around they didn't inject it just into the banking system. Stimulus was injected into the economy at large. In hindsight, it appears that they overdid it. During the 2008 financial crisis, the governments injected several hundred billion dollars as a bailout. Then during the pandemic in 2020, governments and central banks wanted to get ahead of the situation and injected 5 trillion dollars into the US economy. This is more than was spent during WW2, adjusted for inflation.

Struggling because of supply chain shortages. Stopping production for a couple of weeks, which reduces cashflow. Running up against bank covenants. Dividend could be cut or equity raised. Record bidding activity and opportunities. If they can overcome this hurdle, quite a bit of upside. Liquidity is fine.

At 8x earnings, discount to historical range and to its peers. TD is 10x, RY is 11x, CM and BMO are 9x. Struggles in recent years, mainly due to international operations. CEO from outside signals desperate times. See his Top Picks.

CCL vs. RCL Before Covid, cruise business was great, a cosy oligopoly. Barriers to entry are high. RCL is best in class for management, brand, ships, and customer mix. At some point everyone has to get on a plane, but not everyone needs to go on a cruise. It's a completely discretionary item. He's sticking with airlines. With these tough times and a recession, stick with companies that have pricing power.

RCL vs. CCL Before Covid, cruise business was great, a cosy oligopoly. Barriers to entry are high. RCL is best in class for management, brand, ships, and customer mix. At some point everyone has to get on a plane, but not everyone needs to go on a cruise. It's a completely discretionary item. He's sticking with airlines. With these tough times and a recession, stick with companies that have pricing power.

Gold. Always considered the ultimate hedge. A real disappointment that it hasn't done much even with highest inflation in 40 years. Not sure that the decline in crypto would benefit gold. Younger demographic is invested in crypto, and if they weren't, they might find something more speculative than gold to put their money into.

Humbling. Aggressive growth profile. Highest torque to gold prices. Gold is stagnant, production has come off, costs rising, lower grade production, weather impact in Brazil. Lower USD benefits gold price. Boom around the corner. Ontario project doing well. Keep.

Aggressive growth by acquisition tripped it up. Recent acquisitions have not delivered on expectations.

(A Top Pick Nov 15/21, Down 36%) Unable to pass through inflation costs quickly, but they'll get there. High debt hurt by rising rates. In 2015, invested heavily, and stock went up 4x in years after, though inflation will dampen this type of result. With price set on brands, once input costs drop, margins will expand. He's still buying.

(A Top Pick Nov 15/21, Down 28%) Growth stocks sold off globally. Been around for decades. Management delivered 19-20% annualized return over 25 years. Solid. Unique acquisition strategy of leaving 25% shares in hands of original owners, so motivation is more entrepreneurial. He's buying.

(A Top Pick Nov 15/21, Down 18%) Been around for decades. Sharp pullback. If it could just have a normal year without all the headwinds, EPS would be about $10. Insider buying. Riding EV wave. 71% of new business is for EVs.

Delivering on projects but can't get market respect, as it's a small cap, plus refineries don't trade at high valuations. Next year, renewable diesel project, which couldn't come at a better time with current shortages from war in Europe. If you own it, hold; if you don't, worth a buy.

More money to be made in resource extraction businesses by trading, than owning long term. It's run up, so time to take some money off the table.