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Ted Oakley: Coming Inflation Will Be Well Above Targets

Tom welcomes Ted Oakley, Managing Director and Founder of Oxbow Advisors, back to the show.

Ted discusses the rampant speculative activity in the stock markets. Many investors are buying anything and are hoping that it will all work out. However, Ted says “It isn’t different this time.”

China has cut-off their potash and phosphate sales which will keep the pressure on fertilizer prices. There portfolio includes agricultural products along with other commodities that will do well in an inflationary environment.

In the early 80s you couldn’t buy a house because rates were too high and down payments were large. Today, prices for homes are overpriced and eventually this should revert.

Ted give us his thoughts on Fed Chair Powells renomination and where their policy may head from here. Inflation is likely to persist at a higher than normal rate for some time. Inflation in basic necessities like food, energy, and housing will persist.

Indexes have become a growing fad and owning these mean you hold a basket of companies. Many of these companies are not profitable. When the bear market comes these indexes will perform badly.

Market correction effects will spill over into real estate and the economy. When people feel poorer they aren’t as likely to buy a new home. Many retirees are holding too many stocks when they should be holding more cash. He discusses what they consider to be reasonable passive investments.

Gold plays an important role in some of their strategies and he believes gold will make new highs in 2022. Today’s politicans have no idea what a trillion dollar represents. Negative real rates are probably going to stay which will be good for gold.

Ted is not against green energy but governments seem overly ambitious in their targets.

Lastly Ted outlines what they look for in companies. They want those with good growth potential over longer timeframes. They aim for returns of at least three points over inflation.

Time Stamp References:
0:00 – Introduction
0:30 – Russell Earnings Chart
1:30 – China and the U.S.
3:30 – Housing & CPI
4:45 – GDP & Debt
5:30 – Bonds
6:45 – Powell & Taper
8:45 – Inflation Hedges
11:05 – Persistent Inflation
13:10 – Assets or ETFs/Indexes
14:50 – Markets & Real Estate
15:39 – Equities & Boomers
18:07 – Passive Money
19:15 – Miners & Physical Gold
21:15 – Cash Flow Strategies
23:30 – Oil & Green Energy
24:50 – Evaluating Companies
27:40 – Concluding Thoughts
30:00 – Wrap Up

Talking Points From This Episode

  • Valuations in equities reaching bubble levels.
  • China’s policy and potential impacts on the United States.
  • Real estate valuations and eventual reversion to the mean.
  • Importance of holding gold and resources in a negative real rate environment.

Guest Links

J. Ted Oakley, CFA, CFP, is Managing Director and Founder of Oxbow Advisors. Ted has over thirty-five years of experience in the investment industry. The “Oxbow Principles” and the firm’s proprietary investment strategies were developed as a result of the unique perspective Ted gained throughout his almost four-decade tenure advising high net worth investors.

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