3 Things 12-15-25

Thing One

Plain Talk From A Politician On Inflation

The following is a transcript from a town hall where conservative Canadian politician, Pierre Poilievre, was asked a question about inflation.  In answering it, he explained the concept in a way that can be easily understood by anyone.  See below:

Questioner (off-camera): What are the steps I need to take in fixing the damages done by inflation?

Pierre Poilievre: “First and foremost, stop the overspending. Inflation, high taxes, deficits, high interest rates—they're all symptoms. The disease is overspending.

When governments spend too much money, there's only three ways to get it. One is to raise your taxes. The other one is to borrow—which means they'll tax you more later on. And the third way is to print money.

Printing money seems like a painless way to pay for things. But it's very simple. If you have 10 apples and $10 in the economy, it's a buck an apple. You double the number of dollars in the economy to 20? You still only have 10 apples. You're not twice as rich—just that each apple costs twice as much.

And that is a tax on working people, because it chews up the purchasing power of your paycheck, only to pay for government excess—government spending. And it balloons the asset values of the billionaires. So it's a real transfer from the have-nots to the have-yachts.

Inflation is the worst and most immoral tax. It always results from government creating cash. Our government has created about $700 billion of cash in the last three years. So we used to have $1.8 trillion of bills, coins, and bank deposits—that was three or four years ago. Now it's up to 2.5 trillion. So that's extra cash.

But the economy is only grown by 4%. The real things in the economy have only grown by four percent. Cash has grown by 40%. The money supply is growing 10 times faster than the stuff money buys—which creates a bidding war. And that's what's driving up inflation.

We have to cap government spending with a dollar-for-dollar law that requires my ministers to find $1 of savings for every new dollar of spending. So they go into their departments: find waste, mismanagement. They want to spend more here? Or they have to spend less there. Or get a bargain here and there to bring both under budget.

Then—and only then—when we stop the money printing, borrowing, over-taxation, and wrestle inflation to the ground...”

Thing Two

If I Had Known Then

I was speaking with a friend this past Saturday morning and he told me about how he was standing in line (as we spoke) hoping to be one of the lucky few people given the opportunity to buy a very expensive pair of Nike Air Jordan basketball shoes as a Christmas present for his daughter. His situation reminded me of an article in this newsletter from a couple of years ago about investing in Nike stock as opposed to buying Nike shoes.  See below for a reminder and a Christmas gift idea:

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After reading in the Wall Street Journal about Michael Malekzadeh, the self-described sneakerhead (ask a kid what that is if you don’t know) who built a $300 million sneaker empire which turned out to be a Ponzi scheme, I was reminded about the revelation I had about my first purchase (with my own money) of an expensive pair of Nike basketball shoes.

I bought them for $100 when I was a senior in high school.  They were a pair of white leather high tops trimmed in blue and black called Revolutions.  Nike had a big ad campaign around the shoes featuring the Beatles’ song of the same name.  I loved those shoes and wore them every day.  They were my school shoes and my play shoes.  But after about a year, they were only fit to cut grass in.  They weren't completely worthless, but they were close to it and getting closer each time I cranked up the lawn mower.

At the time I bought my Revolutions, Nike's stock price was around $.37/share (adjusted for the seven 2-for-one splits that have happened between then and now).  Had I bought $100 worth of stock in 1988 instead of 1 pair of shoes and held that stock until this week, when the price closed at $124.53, I would have around $33,000 to show for my original purchase (not counting dividends) instead of, well, nothing. The compound annual growth rate (CAGR) of Nike over that period of time was around 18.66%.

I shared all this with my kids.  Of course, there are lots of details yet to be grasped, but they understood the essence.  To hammer the point home though, I told them that if they each took $220 (the retail price for a pair of the most coveted Air Jordan basketball shoes - which you can rarely get at that price) and bought Nike stock with it today and held on to it for 34 years and we assumed the same CAGR, their $220 would be worth somewhere around $74,000 (thanks to the magical rule of 72). They both laughed in amazement.

Then my daughter said, "But I don't want to spend all my money on stock."  To which I replied, "you wouldn't be spending it, you'd be investing it and it would always be there, available to you and growing, unless Nike went out of business”.  To which she flatly replied, "Nike is not going out of business."  I smiled and said, "now you're getting it."

I wish I’d had my revelation in 1988.  If I had, I wouldn’t have bought my Revolutions.  But I didn't know what investing was, and I didn't know what compound interest was, and I didn't know what a retirement account was and, sadly, I didn't know anybody who did.  You all do though.  So be sure to pass the knowledge on or, at the very least, tell them about us so we can do it.