The Dollar, Inflation, and Risk to One’s Purchasing Power
In light of the large amount of credit creation, quantitative easing, and dollar printing that has recently taken place in the United States, it is reasonable to be concerned about the future buying power of the dollar and the prospect of higher interest rates that will be necessary to induce investors to purchase Treasury securities. Some investors have chosen to hedge these risks by buying gold. In that gold does not generate cash flow, it does not have any intrinsic value in our opinion. Thus, we have chosen to reduce the interest-rate risk and dollar weakness risk of our portfolio by owning high quality businesses that have pricing power due to market position and/or business model, and/or that earn their profits globally.