In these times of investing where inflation is rampant, there can be many shifts in mindset when it comes to what defines a great business. Nowadays, there are more hyped unprofitable companies than ever before with extreme price-to-earnings ratios. For instance, look at the tech sector, where there are overvalued companies just about everywhere you look. When interest rates and inflation are both low, many investors are likely to shun investing in these companies due to their lack of earnings. What typically investors harp on is the growth potential of said companies.
We define investing in great business very differently. Along with this, our mindset doesn't shift along with the changes in the macroeconomy. Whether a company is publicly traded or private, the main thing you need to look at is its management. Here are some pertinent questions to ask about the team running the business.
If one answered "no" to any of the above questions, the company is likely a good one to pass on. Other than management, it would be best if you looked to see whether or not the business has pricing power. This is something that can give the business options. Having options will lead you towards having better control over your investment as a whole.
In times of high inflation, investing in a good business with pricing power can effectively control its costs and consolidate more market share within the marketplace. To say it another way, the management can effectively tame inflation through internal measures and leverage inflation to maximize revenue.
That way, the business gets a boost from inflation. Also, if inflation ends up tapering down and deflation comes, a good company will have you covered, as well. In a period of deflation, cash is significant because it gets a boost during these times. Thus, any good company will throw around a lot of money to its investors during this period.
Investing in Gold in August of 2020, the metal managed to hit a high of $2,058. This was an all-time high, and since then, it's been trading lower. Now, Gold is nowhere near that mark. Likewise, Silver has managed to be pushed down even worse during these times. Silver is down as much as 50% from its high of $50, which dates back to April of 2011.
However, this is what makes these assets so incredibly attractive to investors. They are so undervalued that they make it a good bet. Precious metals are viewed as a good insurance policy to hedge against inflation. All of the chaos that can be unleashed due to governments printing money and central banks makes Gold and Silver overlooked assets.
The insurance is used for those just in case moments. After all, you never actually want to have to use your home insurance or even your auto insurance. However, you still have them, just in case. This is the same concept you can use by investing in precious metals. If the conditions present themselves, you want to have a hedge that will allow you to profit.
Therefore, if you are concerned about the money printer constantly being turned on and the coming crash, you'll want to invest in precious metals as a good insurance policy.
The truth is, the Fed can continue to keep their money printer on for as long as they want. They have a trading desk right on Wall Street. It's a corrupt enterprise, and equity markets will continue to rise until they stop buying.
Interest rates will be moving up when the Federal Reserve stops buying. Sadly, stocks are one area other than regular jobs where middle-class souls can still procure some wealth. And by the way, and while we are at it, the precious metal markets are manipulated. The prices of the physical commodity are descended from the derivative, in other words, Corruption.