Wednesday, June 3, 2020

How To Prepare for the Coming Price Controls

Rob H. emails:
My ears perked up immediately in a recent EPJ Daily Alert when you hinted at price controls as a response to future price inflation. Based on the public outcry and shaming of "hoarders" and "price gougers" in response to the recent toilet paper shortage, I think your analysis is spot on and price controls will be an inevitable outcome of any serious price inflation in essential goods. Price controls will of course then lead to shortages. I expect food shortages, so have started building up a 3 month supply of food (in addition to physical precious metals and some cash). Does storing food sound wise to you? And do you recommend storing up any other types of goods in preparation for future price controls?
Thanks as always for the fantastic investment advice. My SPY options purchased at the end of March have already almost tripled in value.
RW response:

The first thing to keep in mind is that price controls are still a bit in the distance.

We haven't even seen the price inflation that I expect yet so the earliest we could see price controls is sometime in 2021.

The price inflation rate will very likely hit 5% annualized, but it could very well be much higher, maybe 10% plus.

It should be remembered that when President Richard Nixon imposed a wage-price freeze on August 15, 1971, the price inflation annualized rate was only 4.4%.

Price inflation is currently under 2.0%. It will start to climb in a month or two but it will take months before it is considered a serious problem.

This gives us plenty of time to prepare.

I will in the coming months be reporting in the EPJ Daily Alert more details on the best way to prepare for  (and profit from) price controls.

1 comment:

  1. I think they will just spin inflation as a good thing and not draw attention to it.