I was reminded the other day – not that I ever need reminding – about why I need to invest. The thing that caught my attention was a small sign that was taped onto a cash register at a drinks stall in Chinatown….
…. The stall holder informed customers that dessert prices would rise by S$0.20, and that canned drinks would go up by S$0.10. There was no apology. Just a statement of fact.
I doubt if the drinks-stall owner is alone in feeling the pinch from higher prices. I wonder how long it will take before bakers, dim-sum restaurants, pizzerias, and mee pok sellers are forced to raise prices, too, because of rising wheat costs.
And as I write, the price of nickel has risen parabolically to over US$55,000 a ton in just a matter of hours. Thank goodness I bought some spare calculator batteries when I did. Otherwise, I could be trying to relearn how to use my slide-rule again.
What about logistics companies. It is inconceivable that they could have seen oil prices climb above US$100 a barrel as quickly as it has. How are they going to cope with increasing fuel costs? I guess they will have to pass on the increases to customers, in the same way that the drinks-stall owner has had to.
Point is, inflation is seeping into just about everything that we do, everything we buy and everywhere we go. We might try to deny that it is happening. But rising prices is there for all to see.
Normally when inflation rears its head, we would expect central banks to act decisively. But that is unlikely to happen with the backdrop of a dangerous war in Eastern Europe taking place.
I kind of feel sorry for the US Federal Reserve. It has a difficult balancing act to perform that would involve keeping the world economy supplied with dollars and keeping a lid on inflation by raising interest rates at the same time. To try to do both would be tantamount to turning our aircon on full and opening the windows simultaneously.
The upshot is that we are on our own in our fight to keep our savings from being eroded by inflation. Our best bet is to look for companies like the drinks-stall owner who has decided that raising prices is the only way to stay relevant….
…. I sure am glad that the companies in my portfolio have pricing power. It is the only way that I am going to receive rising income, regardless of what happens to share prices in a turbulent market.
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David does not own shares in any of the companies mentioned.
