T2 Partners' founder and Tilson Focus manager Whitney Tilson says the government's stimulus money is being poured into a very deep hole, which should keep near-term inflation in check.
Ryan Leggio: My last question really centers around a concern maybe a few years hence, which is inflation. You don't talk about it explicitly in the book, but it sounds like that may be something that comes out of the mortgage meltdown.
Can you talk a little bit about your expectations for inflation, and what investors can do to protect themselves if we see another 1970s-type inflation rate?
Whitney Tilson: Sure. Look, moderate inflation, 5% or 6% inflation, isn't necessarily bad for stocks. Now if you own companies with pricing power and who can raise their prices if there's moderate inflation, we don't spend too much time worrying about it because we own a lot of good companies that have pricing power.
Also, in the near term, meaning the next couple of years, a lot of the stimulus money the government's pouring in would normally be inflationary. Historically, I would tell you that significant inflation could result.
The problem is that money is being poured into a very deep hole, and the money's just trying to fill that hole, so I don't think it's going to be inflationary in the near term. We do worry about inflation; if the government doesn't turn off that spigot eventually, it could lead to substantial inflation.
But for now, I think actually the deficits the government is running, all this excess spending, is what has staved off Armageddon. I'm glad they spent the money, given that I still think our economy is largely on life support.
Armageddon is largely off the table, but I still think we're looking at a very weak economy for the next couple of years. I think the government's going to have to continue to spend at a fairly high level to offset the declining consumer spending and business spending.
