Planetdrum6

4 Comments

    • TIPS: Great or Terrible? [view article]
      I noticed that yesterday too, and laughed -- seemingly conflicting information from our friends over at News Corp.

      To be fair the first article actually advocates going short treasuries and long TIPS, but the fact that both appeared on the same day is just one more data point to support the decline of overall editorial quality at WSJ. It would be easy to pin it on Murdoch, but in reality the editorial slide started long ago -- I've noticed many more copyediting errors over the last few years, even right on Page 1. And I don't know when, but at some point they amended their style sheet so that now at the first mention of either bond prices or yields in a given story, they are obligated to point out that when bond prices go up, yields go down and vice versa, which I find a little insulting of my intelligence.

      I haven't dumped my WSJ subscription yet, but it won't take a lot more to push me over the edge.
      Feb 22 11:31 AM
    • Kraft Foods: Buffett's Commodity Prediction [view article]
      I agree with you, Eric, on Tobacco, Spirits and (mostly) Natural Gas. The first two have the wonderful wide moat of addiction protecting them, a la Peter Lynch.

      I don't agree on the Pharma parallel (though certainly a big generic drugs producer should also act as a great inflation hedge barring congressional meddling...). Branded consumer staples are vulnerable to "trading down" in tough times, but if the relative gap between premium brands and value brands stays the same in an overall rising price environment, the impact should be muted. Your comment about the $5 cereal vs the $8 cereal illustrates this. In an $8 cereal world, milk would cost $10 a gallon and the median US income would be $65K/year. Everything would stay relatively in line, and brand-buyers would just keep on buying brands.

      Of course if food prices rise but wage levels don't, you have a very good point. I just don't think that will happen long-term. And anyway if it does, KFT's share price is low on my list of worries -- at least somewhere below finding a second (or third) job...       Feb 20 08:38 PM
    • Kraft Foods: Buffett's Commodity Prediction [view article]
      Yeah, the "miraculous trick" up Kraft's sleeve is simply to raise prices. If overall food price levels are going up, Kraft should be able to pass that on. After all, consumers are paying more for everything else at the grocery store too.

      This mitigates the margin erosion that's priced in to the shares today. Buffet (and anyone else who takes a moment) is smart enough to know that either commodity prices will drop or Kraft will raise prices under cover of overall consumer price inflation. In any case, they aren't just going to grin and bear it until their margins go negative...

      Basic consumer staples are a great inflation hedge when the usual hedges (real estate, gold, oil) are probably overpriced heading into crunch time.
      Feb 20 07:43 PM
    • A Take On What's Ailing The Markets [view article]
      Sounds unfair, doesn't it? Well, the taxes that we ants pay to bail out the grasshoppers are likely a bargain compared to the consequences of total market failure. Two weeks ago, markets reacted strongly to a minor player in money markets suspending redemptions in a couple of smallish funds. Can you imagine what kind of chaos would ensue if several major money market funds broke the buck, or if banks, lacking access to the Fed's (tax-subsidized) discount window, seized up and failed? If money market funds aren't safe and banks aren't safe, perhaps currency itself is not safe. Then what? (Hint: Hey, I'll trade you some gasoline for that can-opener).

      No, I'll pay my taxes thanks. And I'd still rather be an ant than a grasshopper. With the savings I've accumulated (that taxpayers have helped keep "safe" even during market turmoil), I will buy up the cheap assets of those suddenly under the yokes of their creditors.       Aug 28 07:21 PM
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