Keith Richards' Top Picks
Keith Richards, president and chief portfolio manager, ValueTrend Wealth Management
FOCUS: Technical analysis
The bottom line is economics 101: supply and demand.
On the supply side, years of modern monetary theory – money printing, easy rates and high taxation. We have a high supply of money flowing through both the U.S. and Canadian economies. On the demand side, there is a super tight labour market with increasing demand for housing, goods and services through immigration and prior supply constraints.
The result is sustained inflation. My guess is that the two per cent consumer price index (CPI) goal is not going to happen any time soon. Inflation is being stoked further by the circular pattern of record numbers of striking union workers demanding higher wages. Sure, this temporarily creates more spending power, but that money goes back into the system and also increases product prices as labour costs are passed on to consumers. This is all adding to spiralling inflation.
Meanwhile, we have millennial homebuyers who bought during the post-COVID-19 housing boom. Many are in three-year terms at three per cent. These terms will be coming due in the next year at six per cent, piling that management cost increase onto their higher gas and grocery bills. How much discretionary spending does this leave them? Less spending by consumers equals slower economic growth.
The combination of the above is called stagflation. The good news is that smart investors can make money in this environment. How so? Hard assets.
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PAST PICKS: August 1, 2023
iShares TSX Global Gold ETF (XGD TSX)
- Then: $17.42
- Now: $17.01
- Return: -2%
- Total Return: -2%
Nutrien (NTR TSX)
- Then: $89.10
- Now: $88.68
- Return: -0.4%
- Total Return: -0.4%
Wheaton Precious Metals (WPM TSX)
- Then: $58.20
- Now: $58.03
- Return: -0.3%
- Total Return: 0.1%
Total Return Average: -1%