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

[Spekulatius]

33 minutes ago, stahleyp said:

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. 

It's not just fairness, over the longer run, ZIRP or worse negative interest rates are like cancer to the financial system. They cause all sorts of problems - we can see this playing out in Japan and Europe. Whole Ponzi scheme like "asset classes" like crypto are booming because of ZIRPR and are melting like snow in the sun when central banks are tightening.

[Gregmal]

Coming out of something like GFC, you wanted to encourage investment. It’s necessary to revitalize everything. I have trouble feeling sorry for folks who had a decade to see this, and instead insisted on getting something for nothing. 
 

I mean even now it’s spoken of as a given, and it’s oh so obvious, but….show of hands? Who bought tech, ponzi, crypto, biotech, etc and capitalized on the last decade? Lotta folks missed it.

[Sweet]

Investors got something for nothing.

 

The whole financial system was bailed out, interest rates were set at zero, and we had huge amounts of QE.

 

Remember the taper trantrum?  Fed tried to wind down purchases, the market get wobbly and suddenly its called off.

 

The Fed should not have been so willing to intervene just because stocks were falling.

[Gregmal]

5 minutes ago, Sweet said:

Investors got something for nothing.

Idk man but actually living and working through the last ten years, there were an awful lot of people poo pooing everything, whining about the Fed, touting cash and gold, and sitting on the sidelines. Some even spent a lot of time shorting. You got rewarded for taking risk, that is hardly something for nothing. Big difference vs hoarding in a savings account saying “pay me”. This is a classic case of how everything is obvious in hindsite. 

[Guest]

31 minutes ago, Spekulatius said:

It's not just fairness, over the longer run, ZIRP or worse negative interest rates are like cancer to the financial system. They cause all sorts of problems - we can see this playing out in Japan and Europe. Whole Ponzi scheme like "asset classes" like crypto are booming because of ZIRPR and are melting like snow in the sun when central banks are tightening.

 

All good points.

[Ulti]

https://ritholtz.com/2022/06/revisiting-peak-inflation/

[Sweet]

1 hour ago, Gregmal said:

Idk man but actually living and working through the last ten years, there were an awful lot of people poo pooing everything, whining about the Fed, touting cash and gold, and sitting on the sidelines. Some even spent a lot of time shorting. You got rewarded for taking risk, that is hardly something for nothing. Big difference vs hoarding in a savings account saying “pay me”. This is a classic case of how everything is obvious in hindsite. 

 

Many of those criticisms were justified then and are still justified.  However in the US stock market optimism has been handsomely rewarded in the long run, and its a lesson some people will never get.  Even now I people predicting on Twitter a recession incoming WORSE (kid you not) than covid and 08 combined.

 

It's important to separate out who is complaining and for what reason.

 

The perma-pessimists, the likes of zerohedge, Hussman, Schiff crowd are making their money from sounding the alarm... nearly... all... the... dam... time.  Others just have it in their DNA.

 

On the other hand there are just mom and pop savers, uneducated in stocks, and only know interest from bank accounts.  And I gotta say, they have been screwed whilst we investors got our ass saved and generous multiple expansion.

 

I am worried that the historic low rates the past 15 years, and the massive printing money, will lead to underperformance in the next decade, but where else would you be if not stocks?   

 

NFTs, a shitcoins? 

Edited June 29, 2022 by Sweet

[Gregmal]

21 minutes ago, Sweet said:

 

Many of those criticisms were justified then and are still justified.  However in the US stock market optimism has been handsomely rewarded in the long run, and its a lesson some people will never get.  Even now I people predicting on Twitter a recession incoming WORSE (kid you not) than covid and 08 combined.

 

It's important to separate out who is complaining and for what reason.

 

The perma-pessimists, the likes of zerohedge, Hussman, Schiff crowd are making their money from sounding the alarm... nearly... all... the... dam... time.  Others just have it in their DNA.

 

On the other hand there are just mom and pop savers, uneducated in stocks, and only know interest from bank accounts.  And I gotta say, they have been screwed whilst we investors got our ass saved and generous multiple expansion.

 

I am worried that the historic low rates the past 15 years, and the massive printing money, will lead to underperformance in the next decade, but where else would you be if not stocks?   

 

NFTs, a shitcoins? 

I think the biggest takeaway is to just be mindful of the bigger picture and where all the incentives are. Then find a place you are comfortable investing your “excess” in. Everyone is consumed with the noise and the story of the week/month/year….every year it’s something. The folks who were obsessed with COVID are now doing the same with inflation. Got a 3-5 year horizon? You’re ahead of the game and shooting fish in a barrel. 

[EBITDAg]

1 hour ago, Ulti said:

https://ritholtz.com/2022/06/revisiting-peak-inflation/

As a counterpoint, http://bonddad.blogspot.com/2022/06/a-comment-on-housing-inflation-and-fed.html 

 

"...1/3rd of the entire CPI reading is housing, and housing prices have been on a tear. That gets reflected, with a 12 to 18 month lag, in “owner’s equivalent rent” (OER), which is currently at a 30 year high...Well, house prices are still up (awaiting tomorrow’s updates) about 16% YoY. That is going to continue to feed into OER for the next 12 months at least.

In other words, the only reason inflation declines in the next 12 months is if the non-housing 2/3’s of the number slows down drastically."

[changegonnacome]

20 hours ago, Gregmal said:

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.

 

Yep - but to be clear I’m saying this will be a head fake…..supply chain inflation will peel off, Fed will pause, but what will be revealed is stubborn underlying monetary inflation that is Fed/Treasury made and will require a second rate hike cycle that will put the US into recession (if that doesn’t happen this hike cycle).

 

I hate macro and have no faith in my macro predictions…..but this is what my spidey senses tell me.

 

Real story is, cause the problem is so hard as pertains to the US economy/inflation/markets, is that I’ve pivoted a lot of energy to international stocks. Where IMO the inflation there is more supply chain/Ukraine related & my strong $ is going a lot further.

 

 

Edited June 29, 2022 by changegonnacome

[Parsad]

9 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?

 

Agree!  Savers made it up, or should have made it up, on the bond and equity side.  If they stayed in GIC's then that's their fault.  Cheers!

[Parsad]

8 hours 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.

 

Hmmm...savers outside of GIC's did pretty well.  So it wasn't just non-savers.  Cheers!

[Parsad]

8 hours ago, Spooky said:

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:

 

 

I don't think anyone disagrees with what the Fed did, just how long they did it.  And then again with the pandemic.  They have to step in, there was no one else of size that could inject liquidity during the GFC or support businesses during the pandemic.  Just the size and duration of the support is at question...because it kind of effed things up in other ways.  Cheers!

[Ulti]

https://www.calculatedriskblog.com/2022/06/predicting-next-recession.html

[Parsad]

Went to the mall and while there saw a Rocky Mountain Chocolate location.  Bought 6 pieces that I planned to devour over the next 24-48 hours. 

 

The lady working the counter put them in the bag and rang them up.  I figured maybe $15-18 plus tax...which is what it would have been over the last 5 years.

 

$31!!!!  6 small pieces...$31!!  If it was Teuscher Chocolate or some place in Zurich, yeah sure.  I know the price of Callebaut chocolate prices are up, as is sugar and other commodities, but really?  $31...roughly 50% price hike from the last 5 years?

 

They were already in the bag, so I paid for them and begrudgingly ate a couple!  They weren't even that good! 

 

Cheers! 

[Ulti]

https://www.atlantafed.org/cqer/research/gdpnow

[Gregmal]

Is there any inflation input not coming down? Oh yea, housing....everything else? right on cue. Amazing how that works. 

[fareastwarriors]

16 hours ago, Parsad said:

 

 

The lady working the counter put them in the bag and rang them up.  I figured maybe $15-18 plus tax...which is what it would have been over the last 5 years.

 

$31!!!!  6 small pieces...$31!!  ?

 

 

 

Buying something without looking at prices? Doesn't sound like value investor move.

[Parsad]

22 minutes ago, fareastwarriors said:

 

Buying something without looking at prices? Doesn't sound like value investor move.

 

The price was $X.XX/100g, so I had no idea how much the chocolates weighed, as she was holding them and putting them in the bag as I selected.  Cheers!

[Gregmal]

Is it weird when you see media publications saying inflation remains stubbornly high when literally every input minus housing has been plummeting? Even energy now? And I mean housing, the fintwit hacks all seem to be predicting GFC 2.0…. Seems like everything is pointing towards an August/September pat on the back and “we re done here” from team Biden and the Fed. Perfect timing for elections.