The way to crush the bourgeoisie is to grind them between the millstones of taxation and
inflation. Vladimir Lenin
Inflation used to be viewed as transitory and now has become sticky. To beat the inflation demon central
banks have raised rates by more than 4%. Investors have become fixated on the risk of the next
recession. People are focused on GDP growth and employment as two gauges of the economy. The
problem with many economic statistics is they are delayed by a month or two. The question that must be
answered is, have interest rates risen enough to tame inflation without too much damage to the
economy? Hard to say but I agree with Lenin, inflation is a grind as wages often lag inflation.
We still see many stocks with attractive valuations. The problem is good stocks can still decline if
investors believe earnings will decline. In a previous commentary I mentioned how I was able to
purchase a Canadian bank stock with a 10% yield in 2009. Today the banks look attractive with 5% yields
and single digit price earnings multiplies but this does not mean the prices will not continue to drift lower.
Our clients continue to enjoy the dividends they receive from their holdings of banks, pipelines and
telecom stocks. They are being paid to be patient. When there is greater clarity, we will likely add to those
stocks. Many crypto currencies have also declined but I have no clear way of establishing a value on
those currencies so we do not pass opinions on whether they are attractive or not. We like sticking to
what we know has worked and will likely work over time.
