Humming All the Way to Reno

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The investors in the Smead International Value Fund have asked our team at Smead Capital Management what looks attractive today. To help explain this conversation, we’d like to teach you about a personal story of mine that is a good allegory to explain this.

My direct family (wife, kids and myself) often get away on vacation to the Lake Tahoe/Reno area. Due to the rental car situation that followed the pandemic, we were paying an obscene price to rent cars. We did some math and figured out that we would be better off just purchasing a car for our trips there. We landed on a 2019 F-150 with double bench seats (which fits all six of us). Autos haven’t often rewarded you to be an owner, but the truck wasn’t the best part looking back. When we looked into the financing, a major bank was willing to provide us with a 72-month loan at 2.19%. We bought the truck with the financing, roughly one year ago now. Today, inflation continues to run across the economy causing rates to rise. This has me “humming all the way to Reno.”

Humming all the way to Reno

You've dusted the non believers

And challenged the laws of chance

Now, sweet You were so sugar sweet

You may as well have had 'kick me'

Fastened on your sleeve

The Federal Reserve was providing money far too cheaply at that time. The inflation that is proving to be sticky has “dusted the non-believers and challenged the laws of chance.” The fact that a person of creditworthiness could borrow money at a rate that one year later would make central bankers get jealous, exposes how peculiar today’s markets have been. We need to be thoughtful as investors about how we can profit from these oddities.

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