Anthony Speciale Stock Market Analyst

Better Way to

Play Video

How to protect your portfolio from rising inflation and interest rates

Speaker 1 (00:00):

Hi, I’m Tim Melvin. We’re back once again, with a better way to wealth. Yesterday we talked about inflation and the different views that are out there by some folks that have a pretty good view of the economy. And today we’re going to talk about what you have to do with your portfolio to get ready for the possibility of much higher inflation and interest rates. Now, the first asset that I think you’re going to want to add to your portfolio is real estate real estate

Speaker 2 (00:25):

Does very well in times of high inflation.

Speaker 1 (00:28):

We’re going to gain the system a little further. We’re not just going to buy

Speaker 2 (00:33):

Any piece of real estate. Okay. We’re going to buy [inaudible] real estate,

Speaker 1 (00:39):

Industrial real estate. What does that, anytime I say industrial real estate, I want you to hear the word Amazon and e-commerce industrial

Speaker 2 (00:47):

Real estate. Is it

Speaker 1 (00:49):

Shipping space? It’s warehouse space. It’s anything that’s involved

Speaker 2 (00:54):

In getting stuff from one place to another, as part of industrial

Speaker 1 (00:57):

Real estate. Another key component is the supply

Speaker 2 (01:00):

Chain of the United States. If you think back to 2020,

Speaker 3 (01:05):

We were out of everything in the stores and

Speaker 1 (01:06):

There was still stuff in the factories. They just couldn’t get it to the stores because everybody had always practiced just in time. Inventory inventory went from the factory to the store just as it was needed. Yeah, that’s

Speaker 2 (01:18):

Not good. It happened anymore because of the way we had deal with everything being short supply in 2020,

Speaker 1 (01:23):

There’s going to be a much larger

Speaker 2 (01:25):

Demand for local real estate.

Speaker 1 (01:28):

Now look, most of these industrial real estate investment trends, they didn’t miss a beat during the pandemic. You know, shipping was still going on. People were desperate for warehouse space, high, 90% occupancy. All the rent was getting paid. The dividends were flowing through to shareholders. So industrial real estate will go Dane massively. If we do see high inflation, you know what industrial real estate is going to do really well, even if we don’t

Speaker 2 (01:56):

Have high inflation. So it’s

Speaker 1 (01:58):

An inflation hedge. You can add to your portfolio. That’s not going to lose value if we don’t get inflation.

Speaker 2 (02:05):

And in fact, your own power turns out to be quite correct about all

Speaker 1 (02:08):

The other asset class that you can definitely add to a portfolio that will help offset inflation and still make you money. Even if inflation doesn’t happen is regional bank stocks. Well, we get inflation interest rates move higher. When interest rates move higher, you get a steeper yield curve. And remember banks make money by borrowing at one low cost from the fed or by making deposits at a very low cost and lending it back out at a much higher rate. The steeper that curve more money they make the higher interest rates go. The steeper that curve

Speaker 2 (02:43):

Ken’s to get and banks become very, very profitable.

Speaker 1 (02:47):

Banks may get hurt if you saw runaway spiring inflation, but if you just see steady inflation, that’s taken the yield curve up. Banks are going to see bent Hastick profits piling up in the, in the vault

Speaker 2 (03:01):

As it were. And the stock prices will go much higher.

Speaker 1 (03:04):

Now what’s going to happen if we don’t have inflation, well, bank earnings will continue to be compressed. When bank earnings are compressed, shareholders get mad. And when shareholders get mad executives, well, they get fired. So what’s going to happen to CEOs are gonna look around. They know they need to grow. The economy is not growing. The interest rates are staying the same. There’s only one way to grow that bank and that’s by buying another bank. So you’re gonna see a wave of M and a just like we’ve been seeing for the last

Speaker 2 (03:33):

Decade, roll through the banking industry and create profits for bank shareholders. So

Speaker 1 (03:39):

Both of these are win-win, they’ll help you deal with the ravages of inflation, whether drum pals, right, or whether Jamie diamond is right. And we actually

Speaker 2 (03:47):

Get a steady, the increase in inflation over the next couple of years,

Speaker 1 (03:52):

Don’t let the headlines scare you. There’s still opportunities to make money, just consider adding high quality industrial real estate investment trust to your portfolio, by

Speaker 2 (04:01):

The way they pay nice dividends well above what you could get, you know, bank or from the treasury, or even from corporate bonds. So they’re fantastic for that purposes.

Speaker 1 (04:09):

It starts selectively buying regional banks while they’re trading down here at just eight and nine times earnings. In some cases, you know, guys, I’m Tim, Melvin, that’s a better way to wealth. Thanks for listening. And I’ll be back to talk to you tomorrow.