The Best of Kass
Among his posts this week, Kass discussed the implications of the latest inflation data, revealed a change in his strategy on bank stocks and wrote that the bull market in gold is over, at least for a while.
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If You Don't Eat or Drive, Inflation Is Low
Originally published on Friday, March 16 at 9:30 a.m. EDT.
The core CPI came in slightly below expectations this morning at +0.1% (month over month) vs. expectations of +0.2%.
By contrast, the headline CPI was +0.4%, matching consensus. With the core CPI rising at a slower rate than core PPI, a headwind to corporate profit margins lies ahead this year.
And, with unit labor costs rising by +3.0% in the fourth quarter 2011, up from +2.0% in third quarter 2011 and only +0.1% in second quarter 2011, the consensus view that margins could be flat to slightly better (incorporated in most strategists' 2012 S&P profit forecast) is in jeopardy.
Originally published on Friday, March 16 at 12:43 p.m. EDT.
Gun to my head, the banks need to rest now -- too much too fast.
At the time of publication, Kass was short JPMorgan .
Originally published on Friday, March 16 at 7:39 a.m. EST.
The second major category of investments involves assets that will never produce anything but that are purchased in the buyer's hope that someone else, who also knows that the assets will be forever unproductive, will pay more for them in the future. Tulips, of all things, briefly became a favorite of such buyers in the 17th century....
This type of investment requires an expanding pool of buyers, who, in turn, are enticed because they believe the buying pool will expand still further. Owners are not inspired by what the asset itself can produce -- it will remain lifeless forever -- but rather by the belief that others will desire it even more avidly in the future....
The major asset in this category is gold, currently a huge favorite of investors who fear almost all other assets, especially paper money (of whose value, as noted, they are right to be fearful). Gold, however, has two significant shortcomings, being neither of much use nor procreative.
-- Warren Buffett, 2012 Berkshire Hathaway Letter