You're watching...
Warren Financial Services CIO Randy Warren on why it is a low-inflation environment and how investors can profit from it.
Also in this playlist...
Auto-advance: ON
Auto-advance
This transcript is automatically generated
The 85 billion dollars a month of money printing by our Federal Reserve or at least buying certain assets right has some worried that inflation is getting set to rear its ugly head -- As the economy starts to perhaps -- However we have someone now that says worries over upcoming inflation -- -- He's got ways you can play this low inflation environment Randy Warren is the chief investment officer warned financial service.
And I got to say it's not a joke for folks who were counting their pennies and have to pay.
Extra money for the bus to the subway or the tolls there are things that are going up that do hurt however.
Companies cannot afford to raise prices too much in this environment particularly manufacturers.
And that's -- -- talking about explain.
Exactly there's that kind of a Tug a war going on between inflation in the stock market and people are worried about baton is it too high and then inflation in the economy.
And -- people are worried about that -- The companies are not able to raise their prices too much because they're not enough to -- not enough demand so there there's a lot of good opportunities to buy some of these companies some of the commodity prices come down for some of the restaurants.
Things like when these Buffalo Wild Wings let's.
Get to -- -- undesirable but I want to address no wage pressures.
Okay this is extraordinarily important when it comes to lack of inflation credit don't see that pressure by employees to say.
-- anymore at least that it can't really read that at that point so not a lot of price hikes although yesterday we were talking about how we at Hertz and Avis raising their prices and people are paying it.
But in the aggregate down and an awful lot of wait -- -- -- high in the -- gonna have to get unemployment down around 6%.
Before you start to have any kind of wage pressure okay now to your -- throughout -- first know why what he's I'm assuming that's lower commodity price play.
Yeah they're doing a great job I mean they're really hitting America where they live and -- you know their commercials have been revamped they're doing a wonderful job in the stock prices up as a result.
And so and their input prices are down most of the commodities that go into their products are actually on the lower -- right now.
This year and that's true for Buffalo Wild Wings and chipotle as well exactly what we -- manufacturing nobody -- manufacturers.
Were producing -- a 100% of capacity.
That we would see inflation there's no question about -- all the money that the Fed has been trip but they are not there only -- they're only manufacturers 79%.
Break right now and that means what.
That means they have no pricing power.
-- they can't increase the price of whatever it is they're building whether that's cars or airplanes or Caterpillar tractors or whatever don't know if that's true why is Caterpillar and Boeing to pick for you.
Because -- the opportunity with the economy to expand to start to go up you wanna pick your industrials early.
I -- now -- -- good time to pick industrials because they've been out of favor in the recent past and they're probably gonna be coming into favor into the in the future.
Well Caterpillar today was the biggest point decline -- so that that release sliced off what gains -- more gains we could've seen with the Dow Jones industrials but you would say that a pullback of one and a quarter percent -- a real buying opportunity as a buying opportunity definitely for Caterpillar.
Or Boeing or Cummins engine like -- -- -- is.
So what do you think the future is gonna bring when do you think.
Inflation does play a role in this economy.
It's definitely gonna play a role when unemployment starts to drop.
But what you have to worry about is not so much is the economy -- is the stock market too high not to worry about that -- that is the inflation in the economy to -- -- -- a Tug of war between these two items but we do we have this tremendous amount of cash that that the Fed has been pumping out.
Most banks have been holding it because they have been lending it out because there's been a lot of demand for borrowing so what's this money begins to churn through the economy.
Then is it gonna be Katy bar the doors the Fed going to be able to control inflation.
And what you -- described it's called the velocity of money.
And essentially that money's just sitting on bank balance sheets.
And the Fed has a new method that they've introduced in the last couple years to control how much money is getting -- carriages which is the ability to actually paid banks.
To keep reserves at the Federal Reserve banks.
Which is knew this was did not happen in the in the fact in the future in the past.
A lot of people like Alan Blinder and Wayne -- are against that policy because he's I think it prohibits or at least -- suspends for the moment the ability of banks to lend money out his material -- get paid by the Fed it'll -- Down lending and that's exactly what you want when things get too hot.
Not now we don't have that inflation now but in the future when things do get to -- when the economy -- roaring you need -- tool like.
Randy Warren thank you wanna brand.
