Is The Bottom Almost Here?

[Luke]

2 hours ago, changegonnacome said:

 

Dude that just not the way it is..........4.5% inflation is not a nothing burger.........the difference is huge, cause of the magic of compounding......think of it this way......with 2% inflation the value of a dollar roughly halfs in 36 years......nobody notices, nobody cares inflation is not a 'thing' being routinely built into life.......... 'inflation phycology' is under control..........4.5% inflation however and the value of a $ drops in half in 16 yrs.......it becomes a thing, its noticeable at the grocery store......and expectations around it start to get imbedded......when inflation becomes a 'thing' in a economy.....inflation expectations can become unanchored & start getting built into unit prices in a way that feeds on itself.......wage-price spiral (which I know you think doesnt exist!) does indeed exist it doesnt have to spriral you can have what we have now which is wage-price trapped at a place that ensures 4.5% inflation persists.......but the problem is a 4.5% inflation economy is one that ends up an 8% one too easily.......its the way it works.....and why 2-ish is important.....its the level at which inflation becomes imperceptible to participants in the economy because its moving so slowly nobody year to year notices it.

 

On the same point....and maybe backing up your Joe thesis - a colleague today framed something in a new way I implicitly know.....but in a more clear way than I'd be thinking......he mentioned how property is such a great bet most of the time as long as you don't pay bubble prices.............as its way by which people, unknowingly and with 10 or even 20 times leverage, get to short a depreciating asset that by dictate will fall at least 2% a year, guaranteed almost....cause what your shorting is the US dollar.....& going long politicians printing money...all collateralized by an asset that you get to live in to make that bet............and seen as you need to live somewhere anyway and the alternative is paying rent....you might as well live in asset that allows you to make that levered trade above..............interesting way to frame the act of buying a home......and perhaps buying JOE too........guaranteed currency devaluation against a hard asset (Florida Panhandle land) with extra demand/price push coming from migration trends + smart investment in the area that increases its desirability & price.

5% growing wages are a real nothing burger, we dont see any productivity gains because when wages stagnate and human labor is too affordable, why innovate? Pressuring wages are an innovation driving factor. You also have to consider by how much wages did not grow over the last 40 years. Arguing for a wage price spiral here is just trying to keep people poor and maintaining or increasing corporate margins...imagine what would happen if the average american could afford some more toys, may it be a newer TV or another iPad for little Johnny. Growing wages would lead to higher demand, investments for Jobs and growing Sales. Its business that decides to increase prices more and more so we dont have any real rising standard of living while gushing out the dividends to people who are mostly well off and dont increase consumption in sectors that would really grow GDP...at some point the macro economy is important even for the micro shareholder investing perspective mindset.

Edited April 28, 2023 by Luca

[Luke]

There is also a profit price spiral which is a reinforcing driver here...the american worker had to live with bad wages for a long time and is not the one to be blamed. 

[changegonnacome]

16 minutes ago, Luca said:

5% growing wages are a real nothing burger

 

Yes they sure are - 2022-23 period saw inflation exceeding pay rises.......such that they weren't actually pay rises at all.....they are actually pay cuts in real terms when inflation adjust........right now based on current figures pay rises are barely covering inflation.....and so wages are STILL pretty much stagnant in real terms......the numbers on your payslip dont matter........its the basket of goods and service it can command.....and on that front (2020-23) this has not been a good period or some golden age for workers.....far from it......you can argue that for the marginal, unproductive, barely show up on time, barely do any work worker...who in a normal economy would spend more time unemployed than employed.........it's been unbelievable boom for them......let's call them the workers enticed off the couch as unemployment dipped below 4%.....the dregs of the labor market and the first to get sacked if you run a business and things start to slow down........this overheated economy has been a boom for those folks.... the basket of goods and services they can command while in W2 over welfare cheques is hugely increased. The median 'normal' worker can't say the same thing unfortunately. 

[Gregmal]

18 minutes ago, Luca said:

There is also a profit price spiral which is a reinforcing driver here...the american worker had to live with bad wages for a long time and is not the one to be blamed. 

Exactly. This whole thing has been a disgusting exercise of the haves trying to screw the people who for the first time in decades finally had momentum as far as jobs and wages went. Clear as day the inflation that came from covid shutdowns and stimulus was transitory. Dont listen to the people who want to tell us $75 oil is evidence of an inflation driven energy crisis lol. Now we are seeing people who have been shorting the market, hoarding cash, or selling doomsday subscription services screaming bloody murder cuz the average annual raise is 5% instead of 3% and because its not cheap to go to restaurants anymore. Corporations and elitists are pissed they have to pay for labor and especially pee on blue collar labor that they feel entitled to. Waiters and bartenders shouldn't make shit. Landscapers should be $15 an hour. Electricians and plumbers shouldn't be charging $150 to show up. Thats largely what this is about. Theres no crisis here and never was. It was largely an illusion because guess what? When you give the average person $1000 a month for a few years, of course prices are gonna go up. Especially when half the country is refusing to function normally.  

[Luke]

37 minutes ago, changegonnacome said:

 

Yes they sure are - 2022-23 period saw inflation exceeding pay rises.......such that they weren't actually pay rises at all.....they are actually pay cuts in real terms when inflation adjust........right now based on current figures pay rises are barely covering inflation.....and so wages are STILL pretty much stagnant in real terms......the numbers on your payslip dont matter........its the basket of goods and service it can command.....and on that front (2020-23) this has not been a good period or some golden age for workers.....far from it......you can argue that for the marginal, unproductive, barely show up on time, barely do any work worker...who in a normal economy would spend more time unemployed than employed.........it's been unbelievable boom for them......let's call them the workers enticed off the couch as unemployment dipped below 4%.....the dregs of the labor market and the first to get sacked if you run a business and things start to slow down........this overheated economy has been a boom for those folks.... the basket of goods and services they can command while in W2 over welfare cheques is hugely increased. The median 'normal' worker can't say the same thing unfortunately. 

The US economy and more than half the population there runs on austerity and deficits, barely money left, 60% paycheck to paycheck, lots of things financed on credit card debt, huge loans etc. The problem is not that they arent saving enough, they dont earn enough. The capital flows go to little into the hands of these people and too much goes into financial engineering. Indices had a huge run since 2008 but the real economy looks different. Varoufakis put it nicely: 

 

"a majority of people in the majority of advanced countries are struggling to make ends meet,they work soul destroying jobs. They work plenty of hours and there is absolutely no connection anymore,the end of the American dream if you want to put it that way, there's no connection anymore between how hard you work and the probability that you will manage to rise up in their social mobility, however hard you work, you will never make it these days, at least for the median brit and median german. Huge inequality is the other side of the coin of high asset prices"

 

We discussed this in another thread i think, about keynes theory of 15 hour work week by the end of the 20th century. Didnt happen, instead we have an overblown financial sector with more funds than stocks in the US...

 

What needs to happen are real investments into the real economy by international capital, growing wages so that these investments can be absorbed, business has to offer good well paying jobs--> less debt for the average american, more political stability in the US, better quality of life, higher productivity etc reinforcing the cycle. Unfortunately, the capital currently is still too concentrated and then inactive/not increasing growth/multiplying. 

Edited April 28, 2023 by Luca

[Luke]

When in 2020/2021 the economy was shut down, a lot of money that was not spend went into the stock market combined with a bubble/euphoria because too many sat at home and saw crypto and tech stocks multiply. Supply chain issues and the ukraine war/energy prices pushed prices high, we see a profit price spiral now and the fed raising to slow the system down. For now i think this thing will slow down and as @gregmal said, the inflation will calm. What has to be done about the huge financial disadvantages is another story.

Edited April 28, 2023 by Luca

[changegonnacome]

50 minutes ago, Gregmal said:

This whole thing has been a disgusting exercise of the haves trying to screw the people who for the first time in decades finally had momentum as far as jobs and wages went.

 

Your just fundamentally ignoring the maths here..............if inflation is 9% and you get an 8% pay rise......you got a pay cut..put simply you can buy less stuff......the average workers pay has been going down not up over this golden period you seem to have in your head.....

 

Wage growth accompanied by low inflation is a 'win' for workers....that is not what has happened over the last 3yrs.

 

 

https://www.wsj.com/articles/workers-lose-ground-to-inflation-despite-big-wage-gains-11673649460

 

This has been a terrible period for average workers wages....they've been robbed by inflation.

Edited April 28, 2023 by changegonnacome

[Dinar]

9 minutes ago, Luca said:

The US economy and more than half the population there runs on austerity and deficits, barely money left, 60% paycheck to paycheck, lots of things financed on credit card debt, huge loans etc. The problem is not that they arent saving enough, they dont earn enough. The capital flows go to little into the hands of these people and too much goes into financial engineering. Indices had a huge run since 2008 but the real economy looks different. Varoufakis put it nicely: 

 

"a majority of people in the majority of advanced countries are struggling to make ends meet,they work soul destroying jobs. They work plenty of hours and there is absolutely no connection anymore,the end of the American dream if you want to put it that way, there's no connection anymore between how hard you work and the probability that you will manage to rise up in their social mobility, however hard you work, you will never make it these days, at least for the median brit and median german. Huge inequality is the other side of the coin of high asset prices"

 

We discussed this in another thread i think, about keynes theory of 15 hour work week by the end of the 20th century. Didnt happen, instead we have an overblown financial sector with more funds than stocks in the US...

 

What needs to happen are real investments into the real economy by international capital, growing wages so that these investments can be absorbed, business has to offer good well paying jobs--> less debt for the average american, more political stability in the US, better quality of life, higher productivity etc reinforcing the cycle. Unfortunately, the capital currently is still too concentrated and then inactive/not increasing growth/multiplying. 

What are you basing your argument on that these people who live paycheck to paycheck do not earn enough?  I know plenty of people with USD 500K in annual income who live paycheck to paycheck, and people with USD 100K in annual income who save plenty.  Don't buy $300 sneakers and $1000 apple phones and $1000 apple watch.  

Most of the people I grew up with were very poor, yet all became very successful through hard work.  Hard work pays very well in the US, even if you are not skilled, you can easily make $20 per hour in NYC.  

[Gregmal]

8 minutes ago, changegonnacome said:

 

Your just fundamentally ignoring the maths here..............if inflation is 9% and you get an 8% pay rise......you got a pay cut..put simply you can buy less stuff......the average workers pay has been going down not up over this golden period you seem to have in your head.....

Uhm what does $600-$2000 per month on a percentage basis for those eligible equate to? So much more goes into this that is completely

ignored. A married couple with three kids making $60k a year is still probably wayyy ahead of inflation based on what kind of breaks they got during COVID. Regardless of weather inflation hammered them hard with the $6 Heinz ketchup since now they have enough money to not buy the store brand which is like 10% more expensive today than it was in 2019. 
 

Sitting here talking about this years inflation and this years pay raise completely ignores the totality of the situation and all that has caused it. And it is wholly silly because I guarantee you 95% of the population is incapable of noticing 1-2% variances in anything so acting like folks are going broke because of 5% yearly wage gain against 7% inflation is absurd.

Edited April 28, 2023 by Gregmal

[changegonnacome]

2 minutes ago, Gregmal said:

is still probably wayyy ahead of inflation based on what kind of breaks they got during COVID

 

Temporary Gov breaks vs salaries...........is mixing apple and oranges......your talking one time COVID assistance programs .......which as you know have gone away.....I didnt see any cheques come in recently for breathing.........however.....the price increase that XYZ company put on XYZ product in 2020/2021....and they ain't going down.....its a permanent impairment of purchasing power..

 

 

[changegonnacome]

 

Your telling me the above is a great environment for workers.....some kind of golden age for the little guy......they are getting their pocket picked. They are worse off, not better. Fact. End of story.

 

You can overlay COVID stimmy's but they are gone now....and workers above....can buy less than they could before COVID. Less, not more......and stimmys are gone.

 

You must be confusing the diversity, availability and opportunity to CHANGE jobs......which was indeed AMAZING during 2021/22 period.......with what happened to the purchasing power i.e. REAL wages of workers.....which was just horrible......as bad as it is during a recessionary period.

Edited April 28, 2023 by changegonnacome

[Gregmal]

If someone gives me money today and then I get subsequently taxed for several years after, in a roundabout way that sounds like an interest rate like cost. If I get an advance on my future earnings today, I have no business complaining about the hit to cash flow because I’m paying it back later. It’s a very similar phenomenon. It’s hardly the end of the world. The inflation story is done and been done for a while now and that’s why most of this stuff is just being shrugged off by the market and now people are moving into the recession fixation. 3-5% inflation for a little while isn’t going to be some gargantuan gotcha like catalyst that takes 50% of the markets and causes blue chips to trade to 12x. It was a cute story while it ran with the bogus cpi prints from early 2022 into September or so, but that’s it. 
 

Saying stimulus doesn’t count because it got spent is also silly. Of course if people spend their money it’s not there anymore. People got big one or two off pay raises in many cases probably equivalent to 40%. $2000 a month was pretty common for some folks. Others got free rent. Pauses on their mortgages. You know how many years of 5 or even 10% inflation is needed to square that into a net negative? Not to mention, as I’ve pointed out so many damn times now, some things went up in prices. Others are choices. Complaining about McDonald’s is bullshit when you can get 18 burgers for $25 at Costco and yea, that’s still a nothing burger even if those $25 burgers go up 5-10% for a few years. 

[Gregmal]

Like shit the amount of times I’ve been at Shop rite and heard stay at home moms using “prices are crazy” as something to block the isles chatting about except I see their carts and it’s like you definitely don’t need 80% of the junk in that cart and if you got store brand you’d save 40% but hey, inflation is a bitch right? Or the folks who whine about car prices and it’s like wait, am I seeing something or did you just dump your 3 year old car for a new one?

[Gregmal]

11 minutes ago, dealraker said:

That first sentence had Angela and I 'bout hittin' tha damn floor belly-laughing Greg...but it is completely accurate in so many instances.  People have savings because of thinking, not efforts or amount of earnings in most but of course not all cases.  

 

Hope you have a good weekend.  We are dieseling out and about in the Marshall Catboat to eat dinner with friends about 7 miles away tomorrow.

 

https://www.marshallcat.com/marshall-22

Haha enjoy your weekend. But be forewarned, you are walking into the lions den tomorrow. Be prepared to get hammered by the inflation entrenched menu, which will almost certainly be ground zero for evidence of the wage price spirals crushing the economy. You will probably see hand written price increases on said menu as costs to get stickers or publish new ones have become too prohibitive for such establishments. And hold you hats when the bill comes and your tipping options begin at 18%. Tough times for those daring enough to go out and enjoy the luxury of pay 5-10x the cost of the food you could make yourself at home.

[TwoCitiesCapital]

9 hours ago, Gregmal said:

Stable Inflation under 5% is a nothing burger.

 

 Frankly, there is more deflation occurring right now than inflation. 

 

These two sentences seem to conflict with one another. Because, if anything, what we're seeing is NOT stable. 

 

We went from a decade of inflation averaging sub-2% (the environment you describe) to one where it accelerated to 9+% and is coming back down to 5% all in 24-36 months. 

 

And as you pointed out, it's unlikely to stay at 5% given the falling housing and etc. So what part of 2 --> 9 --> <5 sounds stable to you? 

 

If anything, this is the environment I've described in prior posts. Inflation WILL be volatile. It'll average higher the last decade through various booms/bust cycles. And that has NEVER been good for equities historically. Especially in periods where it's accelerating above 4% or below 1%. 

 

Pick your spots. I own a ton of Fairfax, and EM, and commodity producers. I'm not saying sell every stock you own. But I AM saying that it seems to be reckless to be 100% in stocks in an environment that has not favored them historically just knowing they often sell off in sympathy with one another. 

 

If you really believe you're seeing deflation, it's long duration bonds you want to own. 

Edited April 29, 2023 by TwoCitiesCapital

[Gregmal]

22 minutes ago, TwoCitiesCapital said:

These two sentences seem to conflict with one another. Because, if anything, what we're seeing is NOT stable. 

 

We went from a decade of inflation averaging sub-2% (the environment you describe) to one where it accelerated to 9+% and is coming back down to 5% all in 24-36 months. 

 

And as you pointed out, it's unlikely to stay at 5% given the falling housing and etc. So what part of 2 --> 9 --> <5 sounds stable to you? 

The 2-9 was caused by COVID lockdowns and monthly checks. Once those stopped, it allowed things to begin normalizing. COVID was obviously not a stable period, but that is over unless we expect either of those two things to begin again. 5% wage increase absolutely won’t move the needle. There’s virtually nothing that is remotely in the cards at this point that will create any sort of major reaccelerating inflation surge. So if we aren’t headed back up in any meaningful way, it’s either stable or declining. Personally I don’t see how it doesn’t keep declining bigly at least into Q4. 

[TwoCitiesCapital]

9 minutes ago, Gregmal said:

The 2-9 was caused by COVID lockdowns and monthly checks. Once those stopped, it allowed things to begin normalizing. COVID was obviously not a stable period, but that is over unless we expect either of those two things to begin again. 5% wage increase absolutely won’t move the needle. There’s virtually nothing that is remotely in the cards at this point that will create any sort of major reaccelerating inflation surge. So if we aren’t headed back up in any meaningful way, it’s either stable or declining. Personally I don’t see how it doesn’t keep declining bigly at least into Q4. 

 

I don't necessarily expect them to happen again, but what we can say is inflation has never been "stable" once crossing the 5% threshold. 

 

Whether that's the result of knock on effects from wage/price spirals, or supply chain disruptions, or energy shocks, or war? I dunno. I'm sure there's always an excuse. It's just never been stable and I don't expect it to be different this time. Especially considering ALL of those are factors at this time. 

 

We're likely going to see these violent ups and downs. 

Edited April 29, 2023 by TwoCitiesCapital

[Luke]

11 hours ago, Dinar said:

What are you basing your argument on that these people who live paycheck to paycheck do not earn enough?  I know plenty of people with USD 500K in annual income who live paycheck to paycheck, and people with USD 100K in annual income who save plenty.  Don't buy $300 sneakers and $1000 apple phones and $1000 apple watch.  

Most of the people I grew up with were very poor, yet all became very successful through hard work.  Hard work pays very well in the US, even if you are not skilled, you can easily make $20 per hour in NYC.  

I should have specified, of course we have millionaires that live paycheck to paycheck. What i am talking about is that 

1. 15% of the US population lives in poverty, this number didnt change since 1960 (bottom should see rising of living standards in a working capitalistic system)

2. Capital flows have been hugely distributed upwards since 1975 (https://www.rand.org/pubs/working_papers/WRA516-1.html)

Same counts for my homecountry germany btw, end of the 1980s the average DAX-30 Manager made 14x of the average worker, today it is 50x. 

 

These people are not as poor as someone in a Kenia Kibera Slum but the numbers do show that the average workers has been hugely disadvantaged compared to the capital the US generated over the last 50 years. 

 

[Luke]

"“The average income growth for the top one percent was substantially higher,” write Price and Edwards, “at more than 300 percent of the real per capita GDP rate.” The higher your income, the larger your percentage gains. As a result, the top 1 percent’s share of total taxable income has more than doubled, from 9 percent in 1975, to 22 percent in 2018, while the bottom 90 percent have seen their income share fall, from 67 percent to 50 percent. This represents a direct transfer of income—and over time, wealth—from the vast majority of working Americans to a handful at the very top"

[Luke]

My point why this is bad for our economy is described in this study: 

https://www.oecd.org/newsroom/inequality-hurts-economic-growth.htm

 

As the Time put it: "The iron rule of market economies is that we all do better when we all do better: when workers have more money, businesses have more customers, and hire more workers. Seventy percent of our economy is dependent on consumer spending; the faster and broader real incomes grow, the stronger the demand for the products and services American businesses produce. This is the virtuous cycle through which workers and businesses prospered together in the decades immediately following World War II. But as wages stagnated after 1975, so too did consumer demand; and as demand slowed, so did the economy. A 2014 report from the OECD estimated that rising income inequality knocked as much 9 points off U.S. GDP growth over the previous two decades—a deficit that has surely grown over the past six years as inequality continued to climb. That’s about $2 trillion worth of GDP that’s being frittered away, year after year, through policy choices that intentionally constrain the earning power of American workers"

[Luke]

So if wages rise for a few precent for the american working class, this wont lead to a horrible wage-price spiral that will destroy the economy and blow us all up. It would actually be beneficial for the system. 

 

The inflation came from the disruption in the supply chain and then partly from the ukraine war, these supply chains are reorganizing themselves right now, as does the EU sort out their energy problem (i hope). 

Edited April 29, 2023 by Luca

[Luke]

7 hours ago, Gregmal said:

The 2-9 was caused by COVID lockdowns and monthly checks. Once those stopped, it allowed things to begin normalizing. COVID was obviously not a stable period, but that is over unless we expect either of those two things to begin again. 5% wage increase absolutely won’t move the needle. There’s virtually nothing that is remotely in the cards at this point that will create any sort of major reaccelerating inflation surge. So if we aren’t headed back up in any meaningful way, it’s either stable or declining. Personally I don’t see how it doesn’t keep declining bigly at least into Q4. 

I agree mostly, i doubt though the stimulus played a bigger role here but could have strenghtened the covid supply chain issue effect, imagine also how many people pushed that money into the stock market and how much of the stimulus money was lost to the funds that sold the tech stocks at all these high valuations to the massive bag holders everywhere now. The crypto market alone lost a trillion in value, lots of money redistributed. 

 

7 hours ago, TwoCitiesCapital said:

 

I don't necessarily expect them to happen again, but what we can say is inflation has never been "stable" once crossing the 5% threshold. 

 

Whether that's the result of knock on effects from wage/price spirals, or supply chain disruptions, or energy shocks, or war? I dunno. I'm sure there's always an excuse. It's just never been stable and I don't expect it to be different this time. Especially considering ALL of those are factors at this time. 

 

We're likely going to see these violent ups and downs. 

 

With all these geopolitical tension, capex boom to diversify the supply chain, i think the easy stability and relative peace we had the last 20 years are not for granted anymore. So yeah, ups and downs makes sense to me too

 

[SharperDingaan]

22 hours ago, changegonnacome said:

- a colleague today framed something in a new way I implicitly know.....but in a more clear way than I'd be thinking......he mentioned how property is such a great bet most of the time as long as you don't pay bubble prices.............as its way by which people, unknowingly and with 10 or even 20 times leverage, get to short a depreciating asset that by dictate will fall at least 2% a year, guaranteed almost....cause what your shorting is the US dollar.....

 

Property has been framed this way for a very long time; the knowledge was just kept within the moneyed sections of the community. 

 

Example: 2% 'average' inflation, $1 M mortgage (interest only, for simplification), $250K (20%) DP, $1.25M house, 25 year amortization.

In year 25 the purchasing power (relative to today) of the house is 2.05M  [1.25*(1.02)^25]. In year 25 the purchasing power (relative to today) of the mortgage is .61M [1/1.02^25]. Buy vs rent the house, and relative to today, your purchasing power increases by 1.44M [2.05-.61]; a 250K DP worth 1.44M in year 25, is 5.75x your day 1 purchasing power, a CAGR of 7.25%; and the higher the actual inflation ..... the greater your year 25 purchasing power. 

 

The cost is 25 years of monthly interest payments, property taxes, and upkeep versus 25 years of rent. Of course there is uncertainty in both alternatives, but in most cases the buy approach will be the cheaper option.  

 

The 7.25% CAGR is not far off the often quoted historic US stock market return, involves significantly less risk, and enables materially more control over the investment. There is a reason why new immigrants invest in property vs the stock market ... it is not just for a place to live in.

 

SD

 

 

 

Edited April 29, 2023 by SharperDingaan

[SharperDingaan]

Inflation thing:

 

Every grocer will tell you that prices are coming down as supply chains untwist; but they will not go down to what they were. Most would also tell you that absent an industry change, go-forward inflation increases will be around 3.0-3.5%/yr. In CPI terms; the price declines reflect the monthly calculation roll off/on, and the go-forward rate reflects the trend of month over month increases. Whether CB's can successfully bring that trend down to 2%, is opinion.

 

A grocers net income before taxes is maybe 4% of revenue; from both selling the goods themselves to shoppers, and selling the display space to suppliers. All else equal as inflation hikes selling prices, it hikes the grocers net income; against which the more that people substitute lower priced goods, the worse it is for the grocer. However, given the uncertainty around future net income, as an investor - I'm only willing to pay a lower multiple for the grocers stock. Bias towards lower share prices.

 

As Gregmal points out - people bitch about the prices, but the shopping cart still contains a lot of unneeded stuff. It's really denial that inflation has worsened their standard of living, and it will continue until ability to continue financing it runs out (Credit Card, LOC, etc.). The more consumer orientated the culture (US, China, etc.), and the more of a status symbol that 'brand' is, the worse it is; the forecast 2H 2023 economic softness that many are speaking of. 2H 2023 'softness' or a recession; depends upon local CB action. 

 

Inflation is hurting a lot of people, and it is getting a lot worse; foodbanks/shelters are seeing record volumes, addiction/domestic abuse is rising rapidly, and the infirm/mentally ill are being progressively pushed out of their supports. The mentally ill used to be locked up in institutions, now they are being left on their own to manage as best they can, wander the streets, and are failing; there is a reason why mass shootings and mass transit attacks have been spiking across the land.  

 

SD

Edited April 29, 2023 by SharperDingaan

[changegonnacome]

Thanks @SharperDingaan yep the 'math' is irrefutable........and why the answer to the question when is the right time to buy a house? The answer usually is always (1) when you need one & (2) right now......you really want that leveraged compounding short against the US dollar to start to play out ASAP.

 

It's also math that shows why an inflationary & this emerging stagflationary version of the US economy is not a good one for 'the little guy' albeit with a headline 3.4% unemployment rate while positive tells a tiny part of the real underlying story.........real wages are falling....which is not a good outcome.....while the little guy is way more likely to be a renter, than an owner of hard assets....he/she therefore hasn't got an implicit short against the value of USD (a mortgage) benefiting from higher inflation...... and by extension doesn't own a hard asset appreciating against the devaluing currency....while providing fixed accommodation costs.

 

Now who does have an explicit leveraged short against the US dollar?......the holder of lots of mortgages and the owners of lots of hard assets.....this aint Joe sixpack.......it's Joe Blackstone & friends......cheering on the debate out there that says "hey 4% inflation is nothing burger, lets shift up the 2% inflation target up to 4-ish".....of course it isn't, for them it's a boomtime if that happened.......their short against the US dollar had an expected 2% return unlevered....inflation running at 4% just doubled their unlevered expected CAGR by 100%.......which is amplified by how much they've levered it via a mortgage....something levered 10 times...where the underlying return just doubled is a beautiful outcome for the holder. 

 

However It's a lose-lose for poorest quartile of the population......and an inflationary period has always been a pretty good strategy if one were looking to introduce instability in your society.......& for obvious reasons.......that quartile might not know the math exactly....but they sure as hell sense when the 'system' is screwing them. Some here seem to think the 'war' on inflation is some elite conspiracy to screw the poor again & line the pockets of the rich.....it's quite the opposite....inflation if one wanted to 'go there'....could be more evidentially construed as a conspiracy by Blackstone/Brookfield investors, the landed class and the holders of multiple 3% mortgages + the government......to screw over the poor....given the beneficiaries of a persistent 4-5% inflationary period, as we've demonstrated above with math, are so clearly the top quartile.....that to think the bottom quartile is 'winning' right now ignores the reality, the facts and the math.

Edited April 29, 2023 by changegonnacome