The current economic mess, the creation of all central banks over the past decade, is starting to be unwound. Raging inflation has laid bare just how incompetent the guardians of our monetary systems have been. Consequently, after providing virtually free money for years, they are now aggressively raising interest rates in order to control runaway prices. All of them are talking a good game but the stiffest task lies ahead. It’s a bit late to be burnishing previously invisible inflation fighting credentials but only in the teeth of a stagflationary recession will we see just how determined they are because the slaying of self inflicted inflation will likely require some very unpopular decisions.
From our perspective, little has changed. We knew this process would come to pass and the only surprise is how long it took. We remain committed to owning high quality businesses that, in our view, possess long term pricing power. We are also more than comfortable holding cash if such businesses are not available at prices we wish to pay.
