Kuppy on Inflation

[Gregmal]

Great quick read. As always, Kuppy nails it. It feels like the engine has been revving on the inflation trade all year, and at some point I think it really takes off. 

 

https://adventuresincapitalism.com/2021/09/20/when-the-levee-breaks/

[Spekulatius]

36 minutes ago, Gregmal said:

Great quick read. As always, Kuppy nails it. It feels like the engine has been revving on the inflation trade all year, and at some point I think it really takes off. 

 

https://adventuresincapitalism.com/2021/09/20/when-the-levee-breaks/

Well, Kuppy is always looking for adventures. He moves from one adventure to the next one quickly. Some work out nicely, others not so much.

 

As for the inflation , he could well be right, but I am not convinced that this is a given outcome. What we are seeing in my opinion is that the COVID demand and ruhen supply shock is causing  crazy ripple effects through supply and manufacturing chains that travel at different speed and hit at different times.

We have seen toilet paper, disinfectants, lumber, iron ore, semiconductors, cars, housing. In each of those, we have seen a demand collapse followed by resulting demand and prices spikes. Some of those have quickly reversed already and I expect most of those that are still surging will do the same.

I think we will see another one most likely with natural gas this winter, bit it will also be short lived.

 

We may end up on a permanently higher price level, but I could also see a deflationary case where absence of stimulus causes a surplus and falling prices. I think it is very hard to predict a definite outcome here, there are just too many factors at play here to come to a deterministic outcome.

[Viking]

I have two conflicting models. Looking out 2 years or so (i.e. once the economy normalizes) my guess is we get more deflation. This is driven by too much debt, rapid deployment of new technology etc.

 

Covid has been hugely disruptive to supply chains and the labour market creating supply/demand imbalances everywhere. And this is creating inflation (right now). My guess is inflation will moderate as the economy learns to live with covid.

 

What happens in China over the next 6-12 months is the wild card. The move left by Zhi (in terms of their economy) has the potential to be a game changer. (The reverse of the Berlin Wall coming down). I just have no idea how it will play out over the next year. Is there a policy mistake by Zhi (China growth slows more than expected)? Do relations with US deteriorate to the point US companies decide to pull out of China? Not likely but it looks likely to me companies like Apple are shitting their pants right now given their massive exposure to China today (with apparently no back up plan). The problem with bringing production back to the US is… (start reading from the beginning again  - right now there is not enough raw materials or labour to onshore production and this situation is likely to persist for a while…

Edited September 21, 2021 by Viking

[Spekulatius]

Well, if Xi goes full Mao tse-Tung, we can not just say our Chinese stocks bye bye, but Apple and other stocks supplying into China will see a 50%+ drawdowns and the resource sector will be a black hole much bigger and way longer than for the Great Recession.

 

It will be great for us long term because China will be set back 20 years at least  and nobody can challenge the US for a long time to come. I don’t think it will come to this, but nonsensical things can happen when a dictator tries to secure his position to the detriment of everyone else.

[Gregmal]

Wage inflation is inevitable and ESG is certainly not transitory; its gaining steam. Definitely not welcome news for large scale, low wage labor reliant operations such as the QSR stuff, Walmart, Amazon, etc. Housing as well is the easiest area for the government to goose with regulation/subsidies and what better way to keep on buying votes than pumping affordable housing programs? 

 

So some of it is one off disruptions in certain areas but theres also some very important areas where those things have nothing to do with it. We talked about it in the job market thread...where do these jobs now come from?

[Gregmal]

I would also add that it seems a lot of people have their eyes in the wrong place with the "covid disruption" thesis. Yes, that occurred, but that merely set the table for a lot of whats to come. Just as significant IMO, if not more so, is the government spending and stated objective now of both parties to effectively pay for votes. We've more or less backdoored our way into a UBI with the Child Tax Credit stuff. Look at all stuff in the 3.4T package....Covid IMO was merely an excuse to get certain programs and ideas into play. A lot of them I think are here to stay. 

[SharperDingaan]

We find it usefull to think in different timeframes - all else equal; 1-2 yrs out as reasonably predictable, 3-5 yrs out ... not so much.

 

It is pretty clear that we will have aggressive wage inflation over the next 1-2 yrs. Health care, education, public service labour contracts etc. are all up for renewal, and a 1-2%/yr increase just isn't going to cut it; there will be lots of drama, but wages are going to go up. To minimize the annual wage inflation impact, most would expect 1% wage increases and an upfront sign-on bonus for the rest - indirectly funded via the central bank.   

 

Supply chains are going to take at least a transitory 1-2 yrs to 'normalise; fading bull whip price spikes partially being offset by re-location. 3-5 yrs out, todays decisions on onshoring new PPE and related labour (EV factories, ESG, drugs/vaccines, robotics, etc) dominating the picture. Successful implementation of CBDC's setting up the displacement of USD as the globes reserve currency. Relative inflation and trade flows materially impacting FX rates.

 

China isn't going away, but most would expect a global de-coupling - our own view is CBDC/Reserve Currency, and a domestic baby boom. There is still demand for commodities, but domestic markets largely remain closed to the international market. Obviously, how/if it plays out, is the wild card.

 

Lots of opportunities, but learn to make disruption your friend.

 

SD      

[muscleman]

16 hours ago, Spekulatius said:

Well, Kuppy is always looking for adventures. He moves from one adventure to the next one quickly. Some work out nicely, others not so much.

 

As for the inflation , he could well be right, but I am not convinced that this is a given outcome. What we are seeing in my opinion is that the COVID demand and ruhen supply shock is causing  crazy ripple effects through supply and manufacturing chains that travel at different speed and hit at different times.

We have seen toilet paper, disinfectants, lumber, iron ore, semiconductors, cars, housing. In each of those, we have seen a demand collapse followed by resulting demand and prices spikes. Some of those have quickly reversed already and I expect most of those that are still surging will do the same.

I think we will see another one most likely with natural gas this winter, bit it will also be short lived.

 

We may end up on a permanently higher price level, but I could also see a deflationary case where absence of stimulus causes a surplus and falling prices. I think it is very hard to predict a definite outcome here, there are just too many factors at play here to come to a deterministic outcome.

 

Yes the supply chain disruption will be fixed soon.

But don't forget Fed's printing 120 bn per month and that's been going on for a long time. The cash is circulating around the economy. Unless they have plans to recycle all that cash back, then inflation is inevitable. I don't see why the fed would recycle the cash.

[wabuffo]

But don't forget Fed's printing 120 bn per month and that's been going on for a long time. The cash is circulating around the economy.

 

Nope.  It is stuck at the Fed.

 

wabuffo

[Spekulatius]

10 minutes ago, wabuffo said:

But don't forget Fed's printing 120 bn per month and that's been going on for a long time. The cash is circulating around the economy.

 

Nope.  It is stuck at the Fed.

 

wabuffo

Instead of looking at the Fed "printing" money, watch the treasury spending money. I learned that from you @wabuffo.

[wabuffo]

Instead of looking at the Fed "printing" money, watch the treasury spending money. I learned that from you @wabuffo.

 

[KJP]

12 minutes ago, wabuffo said:

Instead of looking at the Fed "printing" money, watch the treasury spending money. I learned that from you @wabuffo.

 

 

So banks have all of these excess reserves that are just sitting there.  I assume the corresponding liabilities on their balance sheets are deposits.  [Compare change over time in lines 29 and 34 in table 2 https://www.federalreserve.gov/releases/h8/current/ ; see also https://fred.stlouisfed.org/series/WFRBLT01005 and  https://fred.stlouisfed.org/series/WFRBLB50086 ] Absent taxation or reverse QE (sale of bonds by the Fed) is there any way to actually lower system-wide deposits?  In the first instance, a purchase of a good or service by one depositor winds up as a deposit in the account of the seller (and then deposits in the accounts of the seller's factors of production).  Similarly, a purchase of an asset by a depositor winds up as a deposit in the account of the seller.  So, putting aside foreign (out-of-the-system) leakages, deposits per person are obviously up and (absent taxation or bond selling) it's not clear how to get them down.

 

From the consumer perspective, when would having more money in your account create inflation?  I don't think "when you spend it" is a systemic answer, because then the question becomes does the recipient also spend it?  In other words, even if the initial recipient's MPC is high, if the deposits eventually trickle into the hands of people's whose MPC is low, it doesn't seem like a recipe for sustained inflation (in other words, velocity of M2 stays low or may even get lower: https://fred.stlouisfed.org/series/M2V ).  What would cause everyone's desire to increase their pace of their consumption?  Do we have a better explanation than "expectations," which is my own interpretation of the two distinct trend lines on page 2 here: https://paulromer.net/the-trouble-with-macro/WP-Trouble.pdf ?   Similarly, is the structure of the economy likely to push more of these deposits over time to people who have a high MPC or low MPC?  See, for example, the trend of labor share of output during and after the 1970's:  https://www.bls.gov/opub/mlr/2011/01/art3full.pdf

 

From the investment side, conventional theory suggests that increasing reserves ought to push down rates which ought to spur borrowing to fund investment in capital as more projects become NPV>0 via the lower discount rate.  While the first part appears to have happened, the second part seems lacking -- loans outstanding have not increased.  [See line 9:  https://www.federalreserve.gov/releases/h8/current/ ]  So, what is going to spur large-scale investment in new capital in the US?  I assume this is the reasoning behind a massive deficit financed infrastructure plan now -- if the private sector won't invest, then the government will!

 

Finally, I put aside foreign leakages earlier, but how many of the deposits could over time leak out via net imports and the sellers (or their factors) using the dollars overseas to facilitate trade ex-US trade?  (If there's any merit to this, would the magnitude of the dollar expansion of deposits relative to output have to be looked at relative to broader output base than just US GDP?)  Alternatively, if the increased US deposits increase the demand for imports and foreigners don't actually want those dollars (hard to believe given current Treasury rates), would that depreciate the dollar and cause inflation via higher priced imports?  And even if it did increase the price of imports, can labor bargain for higher wages or start a cycle of inflation that way, or is going to have to accept a lower (or slowing growing) standard of living?  Can any model of the economy actually determine these answers endogenously, or do they turn on structural factors (e.g., union bargaining power) that are exogenous to the models that are generally used?

 

All of this is obviously, arm-chair amateur macroeconomics.  But I'm trying to get at the fundamental causality -- what are the underlying real world mechanisms that are going to cause increased government deficit spending to turn into sustained high (more then 2 or 3%) increases in US price levels?

[KJP]

1 hour ago, wabuffo said:

But don't forget Fed's printing 120 bn per month and that's been going on for a long time. The cash is circulating around the economy.

 

Nope.  It is stuck at the Fed.

 

wabuffo

 

Is it stuck at the Fed as reserves or are people choosing not to spend their deposits rapidly and choosing not to create new deposits via lending?

[wabuffo]

Is it stuck at the Fed as reserves

 

It is stuck at the Fed as reserves (in aggregate for the US commercial banking sector that has access to the Fed payments system).    There are only three ways reserves can be reduced in a permanent way:

 

1) The Fed sells assets (US Treasuries, MBS, etc) or doesn't roll over assets as they mature.

2) The US Treasury taxes more than it spends or issues treasury securities (that aren't purchased by the Fed).   Currently - US Treasury is in the penalty box as far as Treasury security net issuance is concerned.

3) The banks could redeem their reserves for hard currency.  (I'd like to see that armored truck delivery!)

 

Notice that except for no. 3 (which is really a non-factor), the private sector banking system is completely at the mercy of the consolidated US government (Fed + US Tsy) for the size of its reserve asset balance.

 

Basically the Federal govt gives you three choices in terms of how it presents its liabilities to you as a private sector:

1) currency in circulation

2) reserves

3) US Treasury securities.

 

Its no different between your bank and you:

1) currency in circulation = cash/bills at the ATM

2) reserves = demand deposit (ie, checking account.)

3) Treasury securities = time deposits (ie, you get a higher rate but you have to lock up your money 30-days to 30-years). 

 

So what the Fed is doing with QE is going to the private sector and saying "I'll exchange your time deposits for demand deposits." The only nuance is that you and I don't get deposit accounts at the Fed - only banks do.  So reserves are not great for the private sector - illiquid, frozen and stuck with the banks.  We'd rather keep the time deposits (ie., Treasury securities) because if we have to we can pledge them as collateral for loans.

 

You really have to imagine the US Treasury as the world's largest and richest depositor who pays for a lot of stuff (and gets some tax income).  The Fed is the US Treasury's bank.  The US Treasury has a deposit account at the Fed.  So do the commercial banks.  So the US Treasury and the banks are the Fed's depositors/customers.   Just like your bank clears payments between you and the world around you - the Fed is mainly there to clear payments between the US government and the banks through their individual deposit accounts at the Fed. 

 

Its really that simple - but few people understand its innate simplicity.  Instead we get these complex talking heads on CNBC who talk out of their arses.

 

wabuffo

Edited September 22, 2021 by wabuffo

[KJP]

39 minutes ago, wabuffo said:

Is it stuck at the Fed as reserves

 

It is stuck at the Fed as reserves (in aggregate for the US commercial banking sector that has access to the Fed payments system).    There are only three ways reserves can be reduced in a permanent way:

 

 

 

Yes, I understand this point in the aggregate.  But that doesn't get at what's happening on the consumer side within the banking system itself, e.g., how fast are these deposits moving around among depositors, which I believe is the assumed mechanism underlying the belief about inflation.

 

To look at it another way, the reserves are on the asset side of commercial banks' balance sheets, and the increase in that asset has led to a roughly corresponding increase in deposits, which are liabilities on commercial banks' balance sheets.  Those commercial bank liabilities are (a portion of) the private sector's assets, which individual actors of the private sector can spend, if they so choose.  Of course, when one private sector actor spends on a good or service, that spending (assuming we're not talking about a tax payment) becomes the deposit of another private sector actor.  So, to your point, aggregate reserves and deposits don't change.  But my act of spending counts towards the consumption section of GDP.  If the recipient of my spending decides she doesn't want to hold that money and instead spend it very quickly on some other goods and services, that's more GDP.  If we keep going round and round this way and output can't keep up (it's presumably down at the moment as the result of COVID), then the quantity theory of money identity gets you inflation.  In other words, if MV must equal PT because it's an accounting identity. 

 

Although others can speak for themselves, I believe this is the intuition underlying the colloquial expression that prices must go up if there's more money around.  Why is this belief wrong?  Put another way, why hasn't the large increase in private sector deposits and the presumably restricted output led to (or going to lead to) inflation, meaning a general increase in that nominal price level?

Edited September 22, 2021 by KJP

[wabuffo]

If the recipient of my spending decides she doesn't want to hold that money and instead spend it very quickly on some other goods and services, that's more GDP.  If we keep going round and round this way and output can't keep up (it's presumably down at the moment as the result of COVID), then the quantity theory of money identity gets you inflation.  In other words, if MV must equal PT because it's an accounting identity. 

 

KJP - Velocity of money is a bogus concept, IMHO because the concept of monetary-aggregates-growing-rapidly-leads-to-inflation mantra is a bogus concept.

 

Basically the flow in 2020-2021 went like this (i'm way oversimplifying of course - but simple helps illustrate the idea).  

 

1) The US Treasury sends stimmie checks to everyone creating new deposits. 

2) Everyone spends the stimmie checks - thus moving the deposits. 

3) The deposits cluster on the balance sheets of the biggest US corporations because everyone bought a lot of stuff from these corporations. 

4) The US Treasury issues Treasury securities which the biggest corporations buy in exchange for their mountains of deposits (or deposit their cash in Money Market Funds and thus MMFs buy the Treasury securities).

 

See what happened here?  This is what we mean by the US Treasury soaking up reserves/deposits.  It has to - otherwise, if there is no step 4, deposits accumulate on the balance sheets of corporations/MMFs and we go negative on rates - since MMFs can't make money and will start charging/gating to accept more deposits.  

 

That's kind of where we are right now.  The US Treasury can't increase its debt net issuance because of the debt ceiling.  (as I look at today's US Treasury daily statement, net US Treasury debt o/s (net of Fed holdings) = $16.854t.   That number is marginally lower than where it was on Jan. 1st, 2021 at $16.940t.  But meanwhile, the US Treasury has added to deposits (via its net spending) a total = $2t.  (equals $2t in new deposits).  That's why bank reserves are up - and more importantly why the Fed is doing over $1t of reverse repo + bank reserves are up almost $1t since the start of year.  Its all to keep the system in balance and rates from collapsing.

 

I think inflation is usually caused by real economic dislocation - ie, a debt default and devaluation (and I'm putting the US going off the gold standard in 1971 as a de-facto devaluation) or because productive private assets get destroyed due to war, etc. )  I also think excessively high tax rates can also lead to inflation mainly because they cause demand for the government's money to fall dramatically - thus weakening the currency severely.

 

I don't think we had any of those things in 2020-2021 - but what do I know.  I'm not a CNBC talking head.

 

wabuffo

Edited September 22, 2021 by wabuffo

[KJP]

25 minutes ago, wabuffo said:

If the recipient of my spending decides she doesn't want to hold that money and instead spend it very quickly on some other goods and services, that's more GDP.  If we keep going round and round this way and output can't keep up (it's presumably down at the moment as the result of COVID), then the quantity theory of money identity gets you inflation.  In other words, if MV must equal PT because it's an accounting identity. 

 

KJP - Velocity of money is a bogus concept, IMHO because the concept of monetary-aggregates-growing-rapidly-leads-to-inflation mantra is a bogus concept.

 

Basically the flow in 2020-2021 went like this (i'm way oversimplifying of course).  

 

The US Treasury sends stimmie checks to everyone creating new deposits.  Everyone spends the stimmie checks - thus moving the deposits.  The deposits cluster on the balance sheets of the biggest US corporations because everyone bought a lot of stuff from these corporations.  The US Treasury issues Treasury securities which the biggest corporations buy in exchange for their mountains of deposits (or deposit their cash in Money Market Funds and thus MMFs buy the Treasury securities).

 

I think using monetary aggregates/velocity of money to predict inflation has been a dead-end from day 1 when Friedman proposed it (and Volcker tried to implement it to fight inflation - he was wrong!  But hey - he did something panicky and drastic like raising rates to the teens so he's a Fed Chair badass!  ).

 

I think inflation is usually caused by a debt default and devaluation (and I'm putting the US going off the gold standard in 1971 as a de-facto devaluation) or because productive private assets get destroyed due to war, etc. )  I also think excessively high tax rates can also lead to inflation mainly because they cause demand for the government's money to fall dramatically - thus weakening the currency severely.

 

I don't think we had any of those things in 2020-2021 - but what do I know.  I'm not a CNBC talking head.

 

wabuffo

 

I think this is a perfectly reasonable hypothesis, and I think it's consistent with what I said earlier about a one-time increase in deposits not necessarily leading to inflation if they ultimately migrate to low propensity to consume holders, such as the corporations you refer to.  I'm also skeptical of any analysis based on velocity -- it seems to me to be  just a plug variable for an accounting identity.  Without some underlying theory, I don't see how that identity can tell us much of anything.   

 

Your high tax theory is interesting.  It seems to be the opposite of what MMTers would say because you need government money to pay taxes, so higher taxes ought to increase demand for government money and thereby drive down inflation.  Are you saying high taxes would ultimately result in less work and less output, thereby driving down demand for money?  (I assume you also think this effect is non-linear and really kicks in at very high rates, not moving a marginal rate from 35% to 37%.)  Or are you suggesting very high taxes would push people to black markets in which they use alternatives currencies and pay no taxes, and thus have no need for government money?

 

Also, to expand on your 2020-21 funds flow hypothesis, one of the other ways corporates get deposits off their balance sheets is still below 2019 levels:  https://www.yardeni.com/pub/buybackdiv.pdf  But even if they had disbursed, that would just convert corporate deposits into the deposits of existing equity owners, who I suspect also have a low propensity to consume good and services (though a high propensity to acquire financial assets).

 

 

Edited September 22, 2021 by KJP

[wabuffo]

Are you saying high taxes would ultimately result in less work and less output, thereby driving down demand for money?  (I assume you also think this effect in non-linear and really kicks in at very high rates, not moving a marginal rate from 35% to 37%.)  Or are you suggesting very high taxes would push people to black markets in which they use alternatives currencies and pay no taxes, and thus have no need for government money?

 

Yes to all of the above.   I think MMTers have this blindspot to the effect that the private sector are just sheep to be herded or sheared by government spending or taxing.

 

This is the part where I marry MMT with Laffer Curve theory.  I know the Laffer Curve gets ridiculed - but I do think it has some high level applicability (ie - you get zero tax revenue with either a 0% or 100% tax rate - so all we are arguing about is the shape of the curve between those two points - probably different curve shapes depending on the type of income).

 

I think both the Laffer Curve and MMT were revolutionary economic concepts when they were first introduced (Laffer 1978?) and MMT (early 2000s).   I think even today we are struggling to comprehend just how big the fiscal capacity of the world's largest and most productive economy truly is.

 

wabuffo

Edited September 22, 2021 by wabuffo

[KJP]

1 hour ago, wabuffo said:

I think both the Laffer Curve and MMT were revolutionary economic concepts when they were first introduced (Laffer 1978?) and MMT (early 2000s) - but they are/were revolutionary.   I think even today we are struggling to comprehend just how big the fiscal capacity of the world's largest and most productive economy truly is.

 

wabuffo

 

At the risk of drifting dangerously off-topic, I think MMTers agree with you on inflation.  I read Prof. Kelton's book and a collection of essays published in book form as Modern Monetary Theory and its Critics (https://www.amazon.com/Modern-Monetary-Theory-its-Critics-ebook/dp/B085632KFL )  But I found more useful an exchange between Tom Palley on the one hand and Randy Wray and Eric Tymoigne on the other that was published in the Review of Political Economy in 2015. 

 

In his initial article, Palley uses the simplified construct of a no-growth economy (in the long-run aggregate supply sense, not in the short-run cyclical sense) that is not at full employment.  MMTers would advocate using deficit spending to get to full employment.  Using Keynesian multiplier analysis, Palley argues that the deficit spending would not pay for itself in increased tax revenue (if it did there would be no multiplier to get the economy back to full employment in first place).  So, in this world the government would have to continue running a deficit to maintain full employment, and since by hypotheses it's a no-growth economy, output is stable.  In this world, "the money supply would keep growing relative to output, causing inflation that would tend to undermine the value of money."  [In a growing economy, I assume he would permit money supply to grow with GDP.] 

 

In their response, Wray and Tymoigne say Palley is wrong because "[t]he fiscal balance at full employment depends on the desired net saving of non-government sectors at full employment.  If the desired net saving of the domestic private sector is positive at full employment, no inflationary pressures need arise from a fiscal deficit."  When I first read this I did not understand what they were saying.  But in light of our funds flow discussion here, I believe they are saying that if the deficit spending just piles up in the accounts of people who are content to save it, there will be no inflation, just like cash piling up on your corporate balance sheets wouldn't cause inflation.  (I assume that money isn't likely to sit as bank deposits or low yield Treasuries -- instead, it seems to me that it would go toward driving up the price of assets and very scarce goods (Picassos, beachfront real estate, Mariners World Series rings, etc.))

 

In his reply, Palley asserts that persistent deficits in a no-growth economy imply either inflation or "very special and implausible conditions about money demand."  Palley doesn't elaborate on what he means here, but I now assume he means people won't accept a reality of continuing to pile up more and more financial assets and will insist on spending them.  But we really don't know how true that is in the sense that wealthy people may well be content to continue (at least for quite awhile) piling up financial assets and occasionally trading them (at progressively higher prices) for scarce assets, particularly if the existing level of output supplies everyone's need for food, clothing, shelter, etc.

 

 

Edited September 22, 2021 by KJP

[scorpioncapital]

canada has a 52% marginal tax rate, currency is relatively strong for now. Of course most are too poor to be in that bracket, even though its much lower than in USA. So maybe the effects of high tax is a poorer society.

 

I also don't know about others but i find it kinda sickening that covid is being used to generate inflation. how do you know the politicians aren't going too far than is scientifically necessary?

 

as for the article regarding energy lookout, things are changing. so maybe look at alternative energy too because it is possible oil is gonna be suppressed relative to what it would normally do in high inflation.

[wabuffo]

But in light of our funds flow discussion here, I believe they are saying that if the deficit spending just piles up in the accounts of people who are content to save it, there will be no inflation, just like cash piling up on your corporate balance sheets wouldn't cause inflation. 

 

KJP - I've heard Wray make this very argument in his book "Understanding Modern Money" but I'm not sure I totally understand it either.

 

On the lighter side - it's funny to watch the macro commentators heads explode trying to square this circle:
1) inflation is running high AND

2) the Fed seems like they are throat-clearing for tapering and rate hikes -- BUT

 

3) Long-term yields are heading lower tonight.

 

Huh?  That's not supposed to happen?  

 

wabuffo

Edited September 22, 2021 by wabuffo

[COBFInfinity]

On 9/21/2021 at 5:49 PM, Gregmal said:

Great quick read. As always, Kuppy nails it. It feels like the engine has been revving on the inflation trade all year, and at some point I think it really takes off. 

 

https://adventuresincapitalism.com/2021/09/20/when-the-levee-breaks/

Hmmm...I know him most for his obsession with shipping stocks that have performed quite poorly. He was also still saying just a few months ago that COVID is just like a typical cold. He has also shared some political views that are completely out of touch with reality (but we won't get into that here.) So I find it hard to accept the "always nails it" narrative.

[Gregmal]

2 hours ago, COBFInfinity said:

Hmmm...I know him most for his obsession with shipping stocks that have performed quite poorly. He was also still saying just a few months ago that COVID is just like a typical cold. He has also shared some political views that are completely out of touch with reality (but we won't get into that here.) So I find it hard to accept the "always nails it" narrative.

Yea IDK because I'm not a big fan of following individual people and terrible and tracking the Twitterers. But in the past year of following some of his stiff he has:

-called the BTC rally from 9k to 60k

-then called the exact top

-in between nailed the SPAC bubble top intraday

 

His fund performance is pretty solid. Additionally he's accomplished quite a bit for a guy his age and on top of it is very down to earth and willing to engage with pretty much anyone. Overall I'd say, and please recommend others if you know of them, the single best person I know who can quickly size up a developing situation and spit out how you can make money from it....a far cry from most who just look at shit, slow as molasses, and then want to do fundamental analysis. So I dont know ones politics but I'd say its pretty irrelevant here. Personally, I have never had a problem generating actionable ideas, but if I did, his weekly idea generator newsletter is totally worth $3k annually. I dont subscribe because if it did I'd probably be like 6:1 levered which is just asking for trouble. 

 

I'd also add that anyone who bought the COVID hysteria got their shit pushed in and likely missed what may indeed have been the single greatest quick money opportunity they'll see in their lifetimes. Like you could have made 50-100% on shit like Google and Berkshire inside of a year if you weren't wrapped up in all the media nonsense. 

[COBFInfinity]

1 hour ago, Gregmal said:

Yea IDK because I'm not a big fan of following individual people and terrible and tracking the Twitterers. But in the past year of following some of his stiff he has:

-called the BTC rally from 9k to 60k

-then called the exact top

-in between nailed the SPAC bubble top intraday

 

His fund performance is pretty solid. Additionally he's accomplished quite a bit for a guy his age and on top of it is very down to earth and willing to engage with pretty much anyone. Overall I'd say, and please recommend others if you know of them, the single best person I know who can quickly size up a developing situation and spit out how you can make money from it....a far cry from most who just look at shit, slow as molasses, and then want to do fundamental analysis. So I dont know ones politics but I'd say its pretty irrelevant here. Personally, I have never had a problem generating actionable ideas, but if I did, his weekly idea generator newsletter is totally worth $3k annually. I dont subscribe because if it did I'd probably be like 6:1 levered which is just asking for trouble. 

 

I'd also add that anyone who bought the COVID hysteria got their shit pushed in and likely missed what may indeed have been the single greatest quick money opportunity they'll see in their lifetimes. Like you could have made 50-100% on shit like Google and Berkshire inside of a year if you weren't wrapped up in all the media nonsense. 

I have no doubt he has better returns than me lately. I don't do his style of swing trading anyway, so I am not following any of his trades closely and I used to follow his blog but not anymore. But set aside investments for a moment. The point about COVID is that he is still, to this day, on the side of the lunatic fringe saying that it is completely nothing AS A MEDICAL ISSUE. If he is so utterly wrong about something so basic, I find it hard to have much confidence in his judgement on anything else.

 

It seems like he could be a parallel to Larry Jeddeloh, who was the Director of Equity Research at Leuthold for quite a few years. Now, I haven't seen any of his work in the past decade, but he has run TIS Group for many years and it turns out he is a batshit crazy conspiracy theorist and in the years that I saw performance on his separate accounts, they were quite poor. I have to believe that Jeddeloh had some talent to have been a partner at Leuthold, but it seems the craziness overruled any genius he might have had. So Kuppy may well have a very good knack for some things, but at the same time he is inexplicably divorced from reality on some things. Could be a recipe for crash and burn.

[Gregmal]

13 minutes ago, COBFInfinity said:

I have no doubt he has better returns than me lately. I don't do his style of swing trading anyway, so I am not following any of his trades closely and I used to follow his blog but not anymore. But set aside investments for a moment. The point about COVID is that he is still, to this day, on the side of the lunatic fringe saying that it is completely nothing AS A MEDICAL ISSUE. If he is so utterly wrong about something so basic, I find it hard to have much confidence in his judgement on anything else.

 

It seems like he could be a parallel to Larry Jeddeloh, who was the Director of Equity Research at Leuthold for quite a few years. Now, I haven't seen any of his work in the past decade, but he has run TIS Group for many years and it turns out he is a batshit crazy conspiracy theorist and in the years that I saw performance on his separate accounts, they were quite poor. I have to believe that Jeddeloh had some talent to have been a partner at Leuthold, but it seems the craziness overruled any genius he might have had. So Kuppy may well have a very good knack for some things, but at the same time he is inexplicably divorced from reality on some things. Could be a recipe for crash and burn.

 

Anythings possible and I have no dog in the fight other than Ive found his instinct to be on the elite end. From a trading sense maybe on par with @SharperDingaan or @ERICOPOLY here, to at least give folks a measuring stick. Something happens, a catalyst, and inflection, boom, he's on it. As someone who trades a good bit, you want to pay attention to these things because the current market dynamic(really the dynamic present for the past decade) is that a good trend or spurt of momentum will last for a good while and give you lots of opportunities to profit from it.

 

Largely speaking, society has gotten way too quick to write people off because "they said/think this or that". If I'm looking to make money I want to read and hear and see absolutely everything I can, take in all the different vantage points, and then process it and hope theres an actionable conclusion. Guy on the street could tell me "Hey Mr., Can I have $5 for a ride because my Uber called and said they had to go pick up someone from Hershey at the airport)...and if we're in Ohama, maybe Ive got a good lead. Maybe its bullshit. Stupid example of course but my point is that all it costs is a minute or two of my attention. In regards to what he's(Kuppy) wrote on inflation, everything IMO is spot on. There seems to be a proud public investment many folks have in the "transitory inflation" storyline....and the common theme of support for that narrative is to point out how commodity product ABC which was at X pre covid, and then went to 3 or 4 times X, has now fallen back to 2X....which is kinda bullshit but then you read another story slip out about how this sort of increase is here to stay. Or that one. Or how Costco expects freight prices to stay high...

https://www.cnbc.com/2021/09/24/costco-nike-and-fedex-are-warning-theres-more-inflation-set-to-hit-consumers-as-holidays-approach.html

 

In a conference call Thursday with analysts, Costco Chief Financial Officer Richard Galanti called freight costs “permanent inflationary items” and said those increases are combining with things that are “somewhat permanent” to drive up pressure. 

 

So at the end of the day why not listen? Who cares about the messenger although if the messenger is currently hot, take that for what its worth. But if you're trying to make money or catch a wave, you've gotten be open to everything in order to assess what makes the most sense.