Inflation

[JohnDe]

Here's one from genius inflation predictor Hanke in 2009 telling investors "inflation will roar back with a vengeance" if the Fed doesn't stop QE and that they should "avoid being suckered into any stock market rallies" and instead "Stick with the Treasury Inflation-Protected Securities (TIPS) that I have been recommending for some time. You should also own some gold, via commodity futures or an exchangetraded fund."

Fed Up

Investors watching the recent rally may think that the Fed has saved the day, but its approach is fraught with danger.

www.forbes.com

LOL

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2009? That is ancient in the trading market. though, as Nostradamus followers have done, those that predict don't care about timelines.

 

[InsvestoBoy]

2009? That is ancient in the trading market. though, as Nostradamus followers have done, those that predict don't care about timelines.

Mate I am just responding to someone who said I should listen to genius inflation predictor Hanke with a bit of context since I have been following the market for more than 10 minutes, once you have been around for a while you know who is serious and who is a complete joke.

Anyone listening to an Austrian in 2022 because "they got it right" is ignoring their complete and obvious wrong calls about the fundamental nature of money and markets for the last decade+.

 

[moXJO]

For you to believe that inflation is not transitory, you must believe that everything, everything, is going to keep going up in price at the same pace it has been for the last 1.5 years.

If prices settle at the current high level for the next year, inflation will be 0%. Hopefully that is obvious.

So do you believe that or not?

Adding "transitory" is a waste of time, it's just "inflation". It's like me saying I need to take a "transitory $hit".

 

[InsvestoBoy]

Adding "transitory" is a waste of time, it's just "inflation". It's like me saying I need to take a "transitory $hit".

I really view it in the exact opposite way.

Inflation is not transitory, it's a sustained and pervasive increase in the price level, always driven by "too much money chasing too few goods".

Anything else is transitory.

Maybe to add to your analogy, to me inflation is diarrhoea, anything else is just ****.

 

[Smurf1976]

If prices settle at the current high level for the next year, inflation will be 0%. Hopefully that is obvious.

So do you believe that or not?

There’s already considerable further inflation baked in the cake.

Lots of workplaces where pay negotiation is done for the entire workforce on a fixed timeframe. So they haven’t seen a labour cost increase yet but it’ll be a big, sudden jump when it comes.

Same with lots of contracts. Suppliers haven’t been able to pass on cost increases at all thus far but it’ll be a big jump when the present contract expires.

Also industries that have absorbed cost increases so as to keep prices below psychologically key price points but when they finally break through it’s 25 - 50% increases in one hit to the next key price point.

Then there’s the ~24 cents per litre fuel price rise in a fortnight here in Australia.

So we’d need to see significantly negative underlying inflation to avoid further rises at the pointy end.

 

[JohnDe]

There’s already considerable further inflation baked in the cake.

Lots of workplaces where pay negotiation is done for the entire workforce on a fixed timeframe. So they haven’t seen a labour cost increase yet but it’ll be a big, sudden jump when it comes.

Same with lots of contracts. Suppliers haven’t

Which workplaces, industry, contracts & suppliers?

 

[waterbottle]

The fact that the headline CPI rose, despite POO returning to pre-Ukraine war levels, is cause for concern. What happens when POO starts climbing back up when China is out of lockdown and the Euro winter starts?

 

[over9k]

Which workplaces, industry, contracts & suppliers?

Basically everything. Inverted population pyramid = good for workers.

Only problem is that we're going to have to be taxed into oblivion to pay the national debt + cost of boomers retiring.

And the more rates spike, the more burdensome the debt gets.

 

[bluekelah]

lol Hanke.

Just another Austrian who has been wrong forever on inflation and everything else.

I remember this joker in May 2008 saying the Fed was flooding the system with liquidity, the dollar would be crushed, inflation would remain high, into the face of the worst liquidity crisis in decades and the start of a massive bond bull market.

Perhaps the interviewer should have asked "sir, considering you have been predicting inflation forever and been consistently wrong, why would any sane person listen to a word you have to say now that it appears your broken clock was right for once?" but I doubt the Prof would dare to appear on such a show.

So where did henke say FED was flooding the system in 2008, etc. do you have a link I can read up on?

IIRC the housing bubble started bursting in 2007 after a series of rate hikes by FED to 5.25%, causing Greenspan then started dropping rates in 1H 2008 in the face of rising unemployment and negative GDP growth, i think they only dropped a few % points to 2% and stocks were down like 20% even before Oct 2008 when the GFC hit. then rates all the way to zero at the end of 2008. how is that flooding the system with liquidity when everything is correcting, especially in May 2008 rates only dropped a couple % points?

And has Snider which you have been showing as an example been right all the time? what does Snider recommend for retail investors to be buying? What are his current views on high inflation etc..? has he been making any predicitons? How accurate have they been?

 

[waterbottle]

PPI rose 0.2% MoM when energy & food excluded....

 

[Smurf1976]

Which workplaces, industry, contracts & suppliers?

Lots of large employers with generic positions, or positions that can be grouped at the same rate for payment purposes, have fixed wage structures.

The public service is one example. As an employee you're at Band x Level y and that has a precise pay rate attached to it with little or no room to negotiate. Same in private enterprise where that system is used, it's absolutely rigid. The structure doesn't nominate your actual pay, it just nominates what level you're paid at. Any negotiation on your part as an employee will be about what level you're at, and you can certainly negotiate that both in the PS and private with that system, but the $ attached to any given level are fixed.

Sitting behind that is the actual negotiation process which puts $ amounts against those bands and levels and usually they're set for very specific periods, that is the end date is specified right from the start. 3 years is not uncommon from what I've seen personally but it will vary. I do recall working under a 5 year agreement in the past.

So for an employer with a previous agreement from 2019 that needs to renew that later this year, they'll face a significant hike in one hit. Bearing in mind that CPI generally forms the base minimum for such negotiations.

As for contracts, that could be anything but I mean things where someone (a business or government) negotiated a (say) 4 year contract with whatever supplier (another business) to provide their requirements of x.

When that comes up for tender to get a new contract, well it's a different world now. Nobody in 2022 is going to be offering prices the same as they agreed to in 2018 for example. They'll not only be passing through inflation thus far, they'll be factoring in their own expectations of inflation through to 2026. They might've been burned recently with cost increases and will be keen to make sure it doesn't happen again.

In the energy industry tenders are failing outright. That is, a large user goes to open tender for their requirements with the result that not a single supplier actually submits a complying tender. The suppliers simply aren't willing to lock themselves into pricing for x years ahead and will instead just offer short term contracts at a fixed price or, alternatively, they'll agree to the 5 year term the customer wants but it'll be based on the spot price + x, it won't be a fixed price as such just a fixed margin on the spot or some other variable reference price.

All that's really the same thing. Situations where pricing is locked in for several years at a time. Last time that was locked in for many, nobody would've understood what you were on about if you'd said "Covid", Ukraine was just another country of no particular significance and CPI was running at ~2%. Once it's time to renew the contracts or agreements, prices will be higher and that remains so even if CPI goes to zero right now, there's still the recent rises to be passed through.

Another example I'm aware of, due to having a contact within the industry, is live entertainment. It's not unusual for a band to be booked 12 months before the show date and at 2% inflation that's not a big deal. However when your costs include both international and domestic air travel, they include hotels, venue hire and all the rest there's some very real exposure there as well as the ticket sales volume risk (which is exposed to the broader economy and consumer spending). The overall situation is starting to raise some serious concerns about how robust the financials are to external stresses I'm told.

 

[noirua]

UK inflation falls for first time in nearly a year

British consumer price inflation fell for the first time in almost a year in August as a drop in fuel prices offered some unexpected – and probably brief – respite to households and the Bank of England. Annual consumer price growth slowed to 9.9 per cent from July’s 40-year high…

cyprus-mail.com

 

[over9k]

So while you all bicker like children, I'll ask, did anyone have the stones to buy yesterday?

 

[Telamelo]

So while you all bicker like children, I'll ask, did anyone have the stones to buy yesterday?

Nup as believe more downside to come imo so rather wait for capitulation/end of the world doomsday type scenario to play out - no certainties it will though but have my watchlist ready nevertheless

 

[qldfrog]

Nup as believe more downside to come imo so rather wait for capitulation/end of the world doomsday type scenario to play out - no certainties it will though but have my watchlist ready nevertheless

My buys were in a months ago and price wont change for the next 12 months...have to with inflation...
do not chase a SP, let in come to you in a bear market?

 

[JohnDe]

So while you all bicker like children, I'll ask, did anyone have the stones to buy yesterday?

Yes. Also sold the day before, using those funds for new investments.

 

[mullokintyre]

So while you all bicker like children, I'll ask, did anyone have the stones to buy yesterday?

Nah, its only a flesh wound.
I will be buying when the streets flow with blood.
Far too many overated wannabees in the index.
Mick

 

[JohnDe]

So while you all bicker like children, I'll ask, did anyone have the stones to buy yesterday?

My purchase was from the Nasdaq at its low, looking good now

 

[over9k]

30% off the low of the 7th, was about +1% two nights ago where the nasdaq dropped 5%, and then ran 15% last night alone.

Energy IS the play lads

 

[waterbottle]

When

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30% off the low of the 7th, was about +1% two nights ago where the nasdaq dropped 5%, and then ran 15% last night alone.

Energy IS the play lads

When does the US shut off SPR releases?