Bill Smead: Beware The Two-Headed Investment Monster

Johnny HopkinsSmead CapitalLeave a Comment

In his latest newsletter titled – Two-Headed Investment Monster, Bill Smead discusses the two headed investment monster. Here’s an excerpt from the newsletter:

We are very excited about the zeitgeist which will develop as wolverine inflation emerges as a more permanent problem. Investors will chase companies that benefit from 90 million millennials replacing 65 million Gen-X Americans in the key 27–45-year-old age group. The 1970s were all about household formation among baby boomers and the liquidity created by the Federal Government to fight the Vietnam War and to fight poverty, with President Johnson’s Great Society legislation in 1968.

Household formation among millennials should drive a big increase in necessity spending, at the expense of discretionary spending. The stocks which did well from 2010-2019 were all about single people spending money on non-necessity personal pleasures. Necessity spending among the 27–45-year-old group could encourage investment success in oil and gas, real estate and residential housing.

The biggest problem investors have is their willingness to invest in former darlings being crushed by the first six months of this bear market. This bear market won’t die until there is a capitulation in the money flows into darling tech stocks, crypto and other speculative investments covered by Friedrich Von Schiller.

As we wrestle with the “Two-Headed Investment Monster” and position ourselves to benefit from “Wolverine Inflation,” we ask for your patience, thank you for your confidence in our discipline and always suggest that investors fear stock market failure!

You can read the entire newsletter here:

2Q22 U.S. Value Strategy Newsletter: Two-Headed Investment Monster

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