Strike While the Iron is Hot

This is a well-known, old proverb that is usually considered to be a suggestion to take advantage of favorable conditions.  Historically, this may have referred to blacksmithing.  Currently it seems to be reflective of the state of labor/management relationships, as many workers believe that this may be a good time to negotiate improvements in wages, benefits and working conditions.  Some workers seem to have taken the advice literally, and are currently on strike.

This is important to both investors and consumers.  It is highly likely that many companies are going to see increases in labor costs.  To the extent possible, most businesses will seek to pass any increases through to customers.  Consumers, get ready.  Investors should be assessing a company’s ability to pass on cost increases to customers as part of any portfolio decision.

In any event, while specific company and customer experiences may vary, the overriding investment consideration should be an assessment of how inflationary all this is going to be, and what portfolio adjustments may be warranted.

All comments and suggestions are welcome.

Walter J. Kirchberger, CFA