How to Invest During Rising Inflation and Scarcity

TL;DR

To invest during periods of rising inflation and scarcity, focus on sectors benefiting from structural changes, such as Canadian oil and gas royalties, global agribusiness, and asset management. Unique data and insights are crucial for gaining an edge, as traditional strategies based on previous years may not work. Understanding the difference between cyclical and structural inflation will help identify viable investment opportunities.

Transcript

the Paradigm has shifted dramatically and I think that people are that are looking at the past 30 years for guidance on how to invest for the next three months six months three years ten years uh are looking in the wrong place and today we're joined by James davolos he's the vice president and portfolio manager at Horizon kinetics all the ideas you... Read More

Key Insights

• ❓ The paradigm has shifted from abundance to scarcity, impacting investment strategies.
• 🥺 Seeking unique data and information can lead to differentiated views and value creation.
• ❓ Understanding the difference between cyclical and structural inflation is crucial for investment decision-making.
• 🫢 Investment opportunities exist in Canadian oil and gas royalties, global agribusiness, and asset management sectors.
• 😘 Canadian oil and gas royalties offer high cash margins and low capital intensity.
• 😋 Rising food scarcity drives increased demand for agribusiness products.
• ❓ Brookfield Asset Management benefits from its exposure to distressed real estate and offers potential growth opportunities.

Questions & Answers

Q: What is the main reason for the shift from an era of abundance to scarcity?

The shift is driven by factors such as supply chain disruptions, rising GDP per capita in developing countries, and increased competition for resources between nations.

Q: Why is unique data and information important for investors?

Seeking out unique data and information allows investors to have a differentiated view and formulate unique opinions that are not solely based on consensus. This can lead to unlocking value and gaining a competitive advantage in investing.

Q: What is the difference between cyclical and structural inflation?

Cyclical inflation is temporary and driven by factors such as money supply growth and supply-demand imbalances, while structural inflation is long-term and influenced by factors such as rising energy costs, food prices, and raw material demands.

Q: Why is Canadian oil and gas royalties an attractive investment opportunity?

Canadian oil and gas royalties offer a unique business model with high cash margins and low capital intensity. As global energy demand rises and supply chains face disruptions, royalties provide a revenue interest in oil production without the capital-intensive risks of exploration and extraction.

Q: How does the global agribusiness sector play into rising food scarcity?

Rising global GDP per capita leads to increased demand for higher calorie and diverse food products, driving up food prices. Agribusiness companies like Archer Daniels Midland benefit from higher crop prices and the ability to pass on cost increases to intermediate products.

Q: What sets Brookfield Asset Management apart as an investment opportunity?

Brookfield is a leading asset manager of real assets, including real estate, renewables, and infrastructure. Its unique structure includes permanent capital and co-invested capital, providing stable cash flows and potential growth opportunities. Distressed periods and rising interest rates can offer favorable conditions for Brookfield's investment strategies.

Summary & Key Takeaways

• The paradigm has shifted from an era of abundance to scarcity, driven by factors such as supply chain disruptions, rising GDP per capita, and increased competition for resources between countries.

• Traditional investment strategies based on the past 30 years may be inadequate for the current and future market conditions.

• Key insights include the importance of unique data and information, the distinction between cyclical and structural inflation, and the potential opportunities in industries such as Canadian oil and gas royalties, global agribusiness, and asset management.