Hey friends. Happy Friday to each of you!

Most of you have probably seen or heard that the inflation data today was not good; and, indeed, it was worse than projected. Americans are really feeling it in their pocketbooks too, especially at the gas pump. The news was not received well by a stock market already feeling less and less sure about how persistent inflation might be. Also, what will it take for the Fed to get a handle on inflation?

Articles today are headlined with “40-year high” in reference to inflation registering a 40-year high today. If we go back 4 decades, indeed inflation was extreme but our national debt was not in the stratosphere like today. With the national debt rising rapidly toward 31 trillion, we are in uncharted territory given what today’s inflation reading means for how the Fed responds in terms of raising its interest rate. We are going to see a chunk of government spending going toward interest on the national debt as the days pass relative to the nominal cost on the debt while the Fed’s interest rate was hovering around zero.

In my view, we are facing some tenuous times of great economic uncertainty. When it comes to the stock market, many attempt to “pick the bottom” when the market is having a really bad go of it. My thoughts are this present situation has enough uncertainty to warrant patience and if one buys a stock, being diligent in analysis and careful about only selecting real substantive value. Substantive value is intended here to be defined by the nature of asset fundamentals on the balance sheet as well as the essentiality of the products/services offered, regardless of the economic climate.

Since publishing my book, “Choose Stocks Wisely” in 2013, there’s been no greater moment than right now for heeding the message of careful analysis of the company’s balance sheet in evaluating a stock prospect. The theme of careful balance sheet analysis is always a critical theme, but, at times when many stocks are being lifted by a bullish market, it can seem the balance sheet isn’t so important. That’s a fallacy, though. That fallacy becomes painfully obvious when the party ebbs and a real financial “look behind the curtain” takes place. Lack of asset substance suddenly gets revealed when earnings stop sailing ahead.

There are many views as to what should be done to get a handle on inflation. I’m not going to delve into that and the pros and cons of raising rates this much or that and at what interval. But I’ll restate my view that it is a very tenuous situation today. Owning real substance and being patiently strategic with buying until we get some clarity seems a wise course.

See you next time.

Paul