In his latest Q2 2021 shareholder letter, David Einhorn discussed why he believes inflation is not transitory saying, “we remain positioned on the other side, as there are and we believe there will continue to be too many dollars chasing too few goods and services.” He also discussed why value stocks are being starved of capital saying:
The enormous emphasis on investing in often money-losing businesses in disruptive areas like technology has left traditional industries starved for growth capital. The result is they haven’t grown capacity and now they cannot meet demand. The more these “value” stocks are starved of capital, the higher prices are likely lo go and the longer the inflation is likely to last.
And this doesn’t even begin to address the rising cost of labor. Currently, there is a labor shortage and there are approximately 9 million open jobs according to the latest government data. In the coming months unemployment benefits will be cut.
This will drive some of the unemployed back into the workforce. Deflationists believe it will be enough to end the labor shortage. However, since people can collect benefits without being required to look for work, it is unclear how many benefit collectors are happy to receive benefits, but have no plans to rejoin the labor force. It will take lime to determine how much of the labor shortage is structural.
You can read the entire letter here:
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