Will Inflation Pressure Ease in the 3rd Q & 4th Q of 2022?

[Ulti]

https://www.frbsf.org/economic-research/publications/economic-letter/2022/june/policy-nimbleness-through-forward-guidance-speech/

[Gregmal]

3 hours ago, changegonnacome said:

Burry today tweeting about 'bullwhip' effect of bloated inventories that is akin to the disinflation head fake I expect in the next couple of quarters driven by two elements (1) this bullwhip effect but then (2) genuine easing around supply chains in China etc. etc......the supply side inflation will indeed turn out to be transitory just glacially slower than that word suggests........what wont pass so easily, IMO, is the monetary inflation unleashed in 2020/21 and still circulating in the system (deficit spending/cash out refis/QE in 2020/21) which will remain stubbornly higher inlfation than the Fed's target & will require further rate hikes after a brief head fake pause later this year.

He s on point. I am still amazed at how folks are reacting to all this. Writing is on the wall and it’s literally just a matter of time. Probably a month(August or so) til you get the last few rate hikes and numbers to start comping lower. Fed says we did our job. Numbers support it. Administration says yay victory in November.
 

Yet that doesn’t stop folks from panicking. Massive overreaction emotionally. Calling for solutions that provide zero rational end result. Early stages of COVID everyone said supply chain would be a casualty. Folks then started seeing it as some of the US got back to normal but missed the whole part where certain shit states weren’t. So they made the right call, “transitory”; just were off by a year. And now everyone is under the assumption and hypnosis that toilet paper, cars, home building related stuff, commodities, etc isn’t supply chain related or fixable. LOL some crazy shit. 

Edited June 28, 2022 by Gregmal

[Gregmal]

I mean you think Powell or Biden want “recession causer” tattooed to their legacy? Especially if they don’t need to. Or because some folks are trying to convince them that lumber pricing isn’t supply chain related and cars will never depreciate again? Weren’t folks just running their mouths about wheat? Whoops. Burry nails it with Target. Great example there. Folks are saying this is proof of inflation, the inventory issue? No. It’s proof that supply chain gets clogged and folks buy the bullshit and then order WAYY too much easy to produce shit and then get it…whoops again.

 

For all the whining about the Fed, to be honest, if you look at what they’ve done, the tightrope they’ve walked since GFC, to get things back to a decent place, I think it’s actually pretty remarkable. And there’s a better chance than I think folks expect that they bide enough time for the non Fed supply chain issues to work out so they can claim another victory and avoid a real recession.

Edited June 28, 2022 by Gregmal

[crs223]

15 minutes ago, Gregmal said:

the tightrope they’ve walked since GFC

They bought $8T of financial assets with printed money in a deflationary environment.

 

Some would say they did a poor job with the tightrope part - which only started last fall.

[Gregmal]

Probably bitter savers or short sellers. But those were the losers so who cares? They got it wrong. 
 

Banks got recapitalized. Unemployment low single digits. Household wealth back up. But folks are bitter because the Fed largely did what it told them it was going to do. Dunno why but ok.

[Gregmal]

Like so much of this is stuff that’s overblown and deliberately spun into some negative for reasons beyond me. For instance, the claims that inflation is “stealing peoples paychecks”…..Um, where were all these folks offering to hand back their 3-5% annual raises the past decade when inflation was nil? Oh, we only complain because for a year or two it went up and even though we can easily take other jobs but chose not to? 

[Dinar]

5 hours ago, Gregmal said:

Like so much of this is stuff that’s overblown and deliberately spun into some negative for reasons beyond me. For instance, the claims that inflation is “stealing peoples paychecks”…..Um, where were all these folks offering to hand back their 3-5% annual raises the past decade when inflation was nil? Oh, we only complain because for a year or two it went up and even though we can easily take other jobs but chose not to? 

Greg, with all due respect, inflation was not nil over the past decade, even if we measure it from 2010-2019.   May be CPI reported 2% per annum, but that is not a reflection of reality.  Housing, healthcare, education, food, and the list goes on compounded closer to 3-6% per annum.  

[Gregmal]

26 minutes ago, Dinar said:

Greg, with all due respect, inflation was not nil over the past decade, even if we measure it from 2010-2019.   May be CPI reported 2% per annum, but that is not a reflection of reality.  Housing, healthcare, education, food, and the list goes on compounded closer to 3-6% per annum.  

The average between 2011-2020 was like 1.3%

[Parsad]

27 minutes ago, Gregmal said:

The average between 2011-2020 was like 1.3%

 

Yeah, I partly agree with Dinar.  The CPI calculation may not have shown inflation, but I've been noticing shrinkage of product volume sizes for a few years.  Lower energy, commodity, and labor costs may have offset higher food and manufacturing costs pre-pandemic.  Cheers!  

[Gregmal]

1 minute ago, Parsad said:

 

Yeah, I partly agree with Dinar.  The CPI calculation may not have shown inflation, but I've been noticing shrinkage of product volume sizes for a few years.  Lower energy, commodity, and labor costs may have offset higher food and manufacturing costs pre-pandemic.  Cheers!  

I agree CPI is a joke. So why are 90% of market participants hanging on every monthly report like it’s life or death? Classic herd behavior. Remember when every uptick in COVID cases meant 1,000 points off the Dow? 

[Sweet]

CPI numbers are a joke, everyone with eyes can see massive shrinkage in products over time.  Not only have products increased in price, they are about 2 times smaller over the course of 15 years.

 

Regarding the Fed, wasn’t Volcker considered one of the greatest chairman’s of all time?  The priority ought to be currency stability otherwise all your wealth and purchasing power goes down the toilet anyway.  If the central banks have to tighten to preserve the purchasing power of the currency I’m for that even if it causes a recession.  Longer term it is good for everyone.

 

Regarding those ‘bitter losers’ i.e. savers, they have a right to be annoyed, because they’ve been fucked for over a decade.  Fed policy has been too loose and interest rates too low for too long.  The economy has been on welfare and it’s time to get off, and if it causes havoc in the stock market for a period of time it’s something I accept.

Edited June 29, 2022 by Sweet

[crs223]

9 hours ago, Gregmal said:

Probably bitter savers or short sellers. But those were the losers so who cares? They got it wrong. 

I agree savers and renters were destroyed.

 

That is why I disagree that the Fed “walked a tightrope”.

[Sweet]

Yeh it wasn’t a tightrope, it was a wrecking ball.

 

There was no reason for rates to be as low as they were for so long, or for QE to occur for so long.

[Gregmal]

Why would a saver be pissed though? No one is entitled to returns. How is that any different than someone feeling entitled to a return on their stocks? Especially if you were told early on, that there would be no interest?

 

It’s such a weird thing I’ve heard over and over. Savers got screwed. I should have been getting interest. A “tax” on savers. Huh? Ever hear of capital allocation? If you were told rates would be low, who’s fault is it really?

[Xerxes]

12 hours ago, crs223 said:

They bought $8T of financial assets with printed money in a deflationary environment.

 

Some would say they did a poor job with the tightrope part - which only started last fall.

wasn’t that to counter to deflation. 
 

i.e inflationary means to fight the deflationary vortex 

[crs223]

22 minutes ago, Gregmal said:

Why would a saver be pissed though?

 

Savers got screwed.

 

[Gregmal]

6 minutes ago, crs223 said:

 

Yes, why would someone think they got screwed if they were told what they were getting into ahead of time. And then refused to live in the world they were told they were living in? 
 

Seems like they just got it wrong or worse, chose to be wrong, on the allocation front. 

[scorpioncapital]

33 minutes ago, Gregmal said:

Why would a saver be pissed though? No one is entitled to returns. How is that any different than someone feeling entitled to a return on their stocks? Especially if you were told early on, that there would be no interest?

 

It’s such a weird thing I’ve heard over and over. Savers got screwed. I should have been getting interest. A “tax” on savers. Huh? Ever hear of capital allocation? If you were told rates would be low, who’s fault is it really?

 

They should tell everyone when the market goes up - exact date and time, and when it goes down, timestamp too. Rate changes and amount. That way we can all have our guarantees ) But seriously, hyperinflation and inflation only works if covert. It must be definition be deceitful. 

 

[crs223]

6 minutes ago, Gregmal said:

Yes, why would someone think they got screwed if they were told what they were getting into ahead of time. And then refused to live in the world they were told they were living in? 
 

Seems like they just got it wrong or worse, chose to be wrong, on the allocation front. 

 

Savers are not entitled to returns.  Savers are morons.  Renters are morons.  We are all much smarter and more successful than they are.  Savers and renters may cry or complain but none of us nor the Fed cares about them.

 

My point is: the Fed did not expertly navigate a tightrope.  All they did was hand over a bunch of printed money to the balance sheets of non-savers.

[Spekulatius]

4 minutes ago, crs223 said:

 

Savers are not entitled to returns.  Savers are morons.  Renters are morons.  We are all much smarter and more successful than they are.  Savers and renters may cry or complain but none of us nor the Fed cares about them.

 

My point is: the Fed did not expertly navigate a tightrope.  All they did was hand over a bunch of printed money to the balance sheets of non-savers.

No one is "entitled" to returns. That includes Savers, bond investors, Stock investors, private equity investors, crypto/collectible investors, venture capital, real estate investors and entrepreneurs . At times, every one of these asset classes has performed horribly.

Edited June 29, 2022 by Spekulatius

[Spooky]

I find it hard to buy the savers got screwed narrative - they are generally older and have assets which were all significantly inflated due to the fed action (including bonds). Boomers made out like bandits. It's really the young people / poor people with no financial assets that got screwed.

 

Also, we need to look at the alternative - if the Fed had let the financial system collapse and didn't recapitalize the banks we would probably have been looking at a second depression.

 

Was just watching this interview with Munger and he talks about the Fed's actions since the GFC and he thinks the Fed's actions worked and they didn't have much else that would work:

 

[Guest]

2 hours ago, Sweet said:

Yeh it wasn’t a tightrope, it was a wrecking ball.

 

There was no reason for rates to be as low as they were for so long, or for QE to occur for so long.

 

Yes there was. It helped the stock market. 

[n.r98]

In light of the headfake narrative as postulated by Burry and a few other members of the board, would it then be an apt strategy to take on a basket of high risk assets to play the Fed going dovish somewhere later this year?

[Sweet]

2 hours ago, Gregmal said:

Why would a saver be pissed though? No one is entitled to returns. How is that any different than someone feeling entitled to a return on their stocks? Especially if you were told early on, that there would be no interest?

 

It’s such a weird thing I’ve heard over and over. Savers got screwed. I should have been getting interest. A “tax” on savers. Huh? Ever hear of capital allocation? If you were told rates would be low, who’s fault is it really?

 

 

Greg, what is it you don't understand?

 

If the Fed raised the interest rates massively because inflation couldn't stay under control, I guarantee that all of us investors would be pissed.  Can you try a bit of empathy please? 

 

Heck you don't even need empathy, just invert.

 

Nobody is saying that savers are entitled a return, likewise Gregmal and Sweet the stock market investors are not entitled a return in the market either.  This cuts both ways.

 

It's not just savers, it's pension funds in bonds, its old people who coming to the end of their life who would prefer the stability of a bond than the volatility of stocks.

 

They are perfectly entitled to complain, and when the shoe is on the other foot, and the Fed has to step on the economy for one reason or another, I've no doubt you would be pissy as well (as would I).

 

 

 

Edited June 29, 2022 by Sweet

[Guest]

I'd say the issue on savers earning a return is about fairness.

 

The Fed altered the natural course of things in order to "save the economy". It hurt savers and helped investors. I mean, it helped me a ton personally but I can't say it was the fair or right thing to do.