Inflation

[grandma]

imported post

http://businessproverbs.com/articles/article.asp?art_id=1203

 

[tsptalk]

Re: imported post

Inflation notches a fresh 30-year high as measured by the Fed’s favorite gauge

KEY POINTS

Headline inflation, including food and energy, rose at a 4.4% annual rate in September, the fastest since 1991.

Core inflation, which is the Fed’s preferred gauge, increased 3.6% for the 12 months, the same as in August but still also the fastest pace in 30 years.

Personal income declined at a faster pace than expected while consumer spending increased and was in line with forecasts.

Employment costs rose more than expected and at the fastest annual pace in 19 years.

https://www.cnbc.com/2021/10/29/inf...h-as-measured-by-the-feds-favorite-gauge.html

 

[Bullitt]

Re: imported post

These year over year comparisons are tough. I think markets are looking past all of it as companies are reporting that the huge blast of demand was a COVID shutdown anomaly.

 

[tsptalk]

Re: imported post

I think markets are looking past all of it

That certainly seems to be the case.

 

[Boghie]

Re: imported post

These year over year comparisons are tough. I think markets are looking past all of it as companies are reporting that the huge blast of demand was a COVID shutdown anomaly.

That certainly seems to be the case.

What does it mean when 'markets are looking past all of it'? (in terms of fundamentals)...

 

[Bullitt]

Re: imported post

What does it mean when 'markets are looking past all of it'? (in terms of fundamentals)...

It's all short term and doesn't matter. Markets believe the supply chain problems will work themselves out after Christmas. See notes from the AAPL and AMZN calls in their threads.

I read that in the past any time since 1985 when we got inflation over +5% YoY, it didn't last. Sure 1973 to 1982 was a problem but markets don't see it as being the same environment. Taking off the gold standard was a big driver of that inflation.

M2 velocity is down to lows never seen before. That means there might be money out there, but it's not being passed around - circulating.

 

[tsptalk]

Re: imported post

Jerome Powell’s Dashboard Casts Doubt on Inflation Easing Quickly

Fed chairman laid out five reasons this summer why higher prices should reverse, but some recent data have gone the wrong way

Federal Reserve Chairman Jerome Powell used the bulk of a widely anticipated speech in late August to explain why he was still confident that this year’s inflation surge would prove temporary. His remarks haven’t aged well.

Economic data released over the past two months have cast doubt on parts of Mr. Powell’s thesis, which helps to explain why he has acknowledged less conviction that inflation will quickly return to the Fed’s 2% goal as supply-chain kinks work themselves out.

https://www.wsj.com/articles/jerome...x6haabo784w&reflink=desktopwebshare_permalink

 

[tsptalk]

Re: imported post

Top Fed Official Says Continued High Inflation Would Be Problematic for Central Bank

Vice Chairman Richard Clarida expects price pressures to dissipate, but a ‘repeat performance’ in 2022 of recent inflation ‘would not be a policy success’

A top Federal Reserve official said he expects this year’s surge in inflation to ease as supply and demand imbalances fade over time and that an extended run of higher prices through next year would be a problem for the central bank.

https://www.wsj.com/articles/top-fe...etyvo7nniwb&reflink=desktopwebshare_permalink

 

[Bullitt]

Re: imported post

Evans. I'm with him on this call but deflation is inevitable.

To Evans, though, it will likely take another two years before inflation is strong enough to merit a rate hike.

The supply side issues that have caused a spike in inflation will dissipate over the next year, and even unemployment falling to 3.5% will likely not be enough to keep inflation much higher than the Fed's 2% goal.

Evans urged fellow policymakers to be more aggressive on its inflation target.

https://www.reuters.com/business/fi...lose-meeting-bond-taper-threshold-2021-09-27/

 

[Boghie]

Re: imported post

Kinda a neat website. It charts the price of gas by city (and nation wide) over a timeframe...

https://inflationdata.com/articles/historical-gas-price-comparison-chart/

Rings true to my memory and my Googlin'

Regular Gas on 2019/11/09 in Raleigh, NC: ~$2.40
Regular Gas on 2021/11/09 in Raleigh, NC: ~$3.25

Hmm, just hmm.

 

[tsptalk]

Re: imported post

Big business bosses are warning that supply chain issues and inflation are here to stay

Companies around the world are battling supply chain bottlenecks as a post-pandemic spike in demand converges with industrial production struggling to catch up after lengthy Covid-induced shutdowns.

Policymakers across major central banks have largely held the line that the period of high inflation in their respective economies, and the global supply problems feeding into it, are “transitory.”

https://www.cnbc.com/2021/11/10/big...in-issues-and-inflation-are-here-to-stay.html

 

[Bullitt]

Re: imported post

It's simple - adapt and provide a resolution or go the way of GE.

 

[tsptalk]

Re: imported post

Only A Banking Crisis Or Higher Rates Can Stop Inflation Now: Trader

If you study the history of inflation in the U.S., whenever CPI surpasses 5.0% outside of wartime, the only thing that prevents inflation from marching higher is a banking crisis (’92, ’08) or significantly higher interest rates, which occur with a considerable lag. Capital market participants today are of the consensual view that the Fed is hamstrung from raising their Target Rate significantly higher due to Treasury’s debt service and interest burden. We don’t buy that premise; if CPI inflation trends 10% or higher they will have to act with Volckerian resolution.

https://www.zerohedge.com/news/2021...or-higher-rates-can-stop-inflation-now-trader

 

[tsptalk]

Re: imported post

This Inflation Defies the Old Models
Neither supply or demand by itself is increasing prices; it’s an unusual combination of both

Last April, economists thought inflation would be around 2.5% right now. Instead, it’s over 6%. Even by the forgiving standards of economic forecasting, that’s a miss of epic proportions.

Explanations come in two schools. The demand school blames President Biden and the Federal Reserve for administering too much stimulus.

The supply school blames pandemic-related bottlenecks and supply chains.

https://www.wsj.com/articles/this-i...6x3e8twlnl2&reflink=desktopwebshare_permalink

 

[tsptalk]

Re: imported post

Inflation Surge Pushes U.S. Real Interest Rates Into More Deeply Negative Territory

By standing still, the Fed’s policy has provided more stimulus to the economy this year

With inflation running at 5% in October from a year earlier, according to the Fed’s preferred gauge, real short-term rates are at their lowest levels in four decades and deeply negative.

https://www.wsj.com/articles/inflat...8cmnxxox482&reflink=desktopwebshare_permalink

 

[tsptalk]

Re: imported post

Key Fed inflation gauge rises 4.9% from a year ago, fastest gain since 1983

The core personal consumption expenditures price index, a closely watched inflation gauge at the Federal Reserve, rose 4.9% from a year ago in December.

That was the fastest gain since September 1983 and a touch above the Wall Street estimate.

Employment costs increased 4% from a year ago, the fastest in the 20-year data history, though the quarterly rise of 1% was less than expected.

https://www.cnbc.com/2022/01/28/key...-from-a-year-ago-fastest-gain-since-1983.html

 

[Bullitt]

Re: imported post

The pros all said throughout 2021 that they wouldn't worry about inflation until they saw wage inflation. That time is now here.

Employers spent 4% more on wages and benefits last year as workers received larger pay raises in a tight labor market, rebounding economy and period of accelerating inflation, marking an increase not seen since 2001.

https://www.wsj.com/articles/us-employers-labor-costs-inflation-11643331612?

 

[bmneveu]

Re: imported post

What are some good inflation hedges? Gold I'm pretty sure, but what else? Are international stocks or bonds any good in a high-inflation environment?

 

[Bullitt]

Re: imported post

What are some good inflation hedges?

Stocks are probably the best. Overweight C. S fund should fare okay, but many of those smaller companies still rely on debt to keep the lights on. I fund probably okay to some extent but there's other factors including currency risk there.

Any companies that have pricing power will be okay. Not advocating these individual stocks, but think NFLX, AMZN and how they've already raised prices. People won't be leaving either company because of the price hikes. Companies with high levels of debt will not be so good, but they've mostly been hammered in advance.

REIT is a good option and may be available once TSP finally starts their modernization track.

 

[Bullitt]

Re: imported post

I'm not crazy about the inflation numbers but perspective is needed. Everyone has forgotten that gasoline prices hovered below $3 a gallon in most of the US in all of 2020 and part of 2021. YoY comparisons are going to be drastic and headlines like to be drastic. It's kind of like when CNBC says, "DOW DROPS 150 POINTS!!!", when the reality is 150 points sounds a lot worse than .2%.

Once we get to June, those YoY comparisons won't sound so wild. In fact, there's a very good chance they will be lower with stimulus finally gone.

The average U.S. household is spending an additional $276 a month because of inflation that is rising at its fastest rate in 40 years, a new economic analysis showed.

The squeeze stems from higher prices across a range of products and services, including cars, gasoline, furniture and groceries.

Mr. Sweet came up with the figure by comparing what the average household spent under 7.5% inflation versus the amount it would have spent when inflation was 2.1%, the average in 2018 and 2019.

https://www.wsj.com/articles/higher-inflation-is-probably-costing-you-250-a-month-11644489000?