Inflation

[Gunnerguy]

Great chart from @LizAnnSonders (Chief Investment Strategist for Schwab) on Twitter

US inflation YoY comparisons are now crazy hard. Even +0.2% MoM every month is going to have CPI at 2% by mid '23. Anything less than that could be staring down a deflationary barrel.

View attachment 147675

Inflation swaps etc are pricing this in already.

Fed needs to back way off right now.

This is absolute bs. Astonished that Schwab do not understand basic maths. Or are they just lying to get IR’s down.
Basically .....
1. Inflation is based on the last 12 months prints.
2 In May 2023, if we have had 6 monthly prints of zero then .....
3. Dec 2022 to May 2023 would be zero.
4. The remaining 6 months would be Dec 2022 back to July 2022.
5. Jul 2022, August 2022, and Sept 2022 inflation were all above zero.
6. So mathematically May 2023 inflation at zero is IMPOSSIBLE unless we have actual printed DEFLATION of about 3%-4%. That is consistently -0.5% per month from now fir 6 months.

(Almost) Mathematically impossible inflation to be 0% in May 2023.

2% inflation by May 2023 only possible if we have 200 bps IR minimum ..... NOW.

Gunnerguy

 

[Smurf1976]

we still have the pivot of european energy demand over to U.S suppliers yet to occur (facilities not finished)

We have the US LNG export facilities to be built and then, once that's done, the immediate next problem is obtaining sufficient gas to feed them with.

The gas situation won't be resolved quickly.

 

[over9k]

We have the US LNG export facilities to be built and then, once that's done, the immediate next problem is obtaining sufficient gas to feed them with.

The gas situation won't be resolved quickly.

The yanks can get the gas out of the ground no problem, they're getting so much of it that they're having to flare it to get rid of it at the moment.

As you said, it's moving it that's the tricky part. Even if they get the import facilities sorted, as waterbottle showed before, there's just not enough tankers in the world to actually move enough of it.

This leaves just two options: Build and man more tankers (at enormous expense on top of the already huge expense of building more import facilities), or find a substitute.

The thing to note is that either way, the demand transfers from russia to everywhere else, and at a long term/strategic level, the U.S is the most secure/reliable supplier of everyone else.

Considering just how expensive/difficult it would actually be to create what is essentially a 24/7 running flotilla of LNG ships crossing the atlantic, unless we see a nordstream type LNG pipeline built either off the continental shelf and across the entire atlantic seabed or under the arctic (yeah right), simple economics is going to see them pivot to substitutes. They'll use gas for all the things they have no other choice with and everything else will move to some kind of alternative.

And if that alternative is american, then U.S inflation will surge.

 

[divs4ever]

the leaks have not stopped, the gas is not escaping anymore,
a bit like saying your tire is not pierced anymore since it is now flat and has no air escaping anymore
->because there is no gas anymore;
there has been no gas pushed in these for weeks, i was just the leftover in the pipes which bubbled out..now over..the pipes remain cracked open and destroyed

the pipes would have been pressurized to keep out condensation ( and encroaching seawater ) and also to reduce the chance of the pipelines collapsing/crushing .. now the pipe in exposed ( internally ) to seawater which is corrosive and other unwanted debris ( sand , concrete , seaweed , and whatever )

but the question still is .. since the EU has now proven itself as an ( deliberately ) unreliable customer , will Russia rush to repair , and supply ( if it was me i would be firing in a claim to my insurer calling it a complete write-off 50% cash-back would have to better than maybe they will pay for the gas this time )

AND since there are turbine delays , even when the pipeline repairs are complete how many turbines will be ready to assist gas-flow

i would be ringing Modi and Xi and sussing out joint venture possibilities ( making sure Siemens doesn't supply a single part no matter how trivial )

 

[divs4ever]

The yanks can get the gas out of the ground no problem, they're getting so much of it that they're having to flare it to get rid of it at the moment.

As you said, it's moving it that's the tricky part. Even if they get the import facilities sorted, as waterbottle showed before, there's just not enough tankers in the world to actually move enough of it.

This leaves just two options: Build and man more tankers (at enormous expense on top of the already huge expense of building more import facilities), or find a substitute.

The thing to note is that either way, the demand transfers from russia to everywhere else, and at a long term/strategic level, the U.S is the most secure/reliable supplier of everyone else.

Considering just how expensive/difficult it would actually be to create what is essentially a 24/7 running flotilla of LNG ships crossing the atlantic, unless we see a nordstream type LNG pipeline built either off the continental shelf and across the entire atlantic seabed or under the arctic (yeah right), simple economics is going to see them pivot to substitutes. They'll use gas for all the things they have no other choice with and everything else will move to some kind of alternative.

And if that alternative is american, then U.S inflation will surge.

getting that to gas to Europe will be a BIG problem ( both US logistics and EU logistics issues ) did anyone notice how many boat ( trips ) it would take to replace that Russian gas .. but on the upside both the US and EU are used to dealing with debt-pigs

 

[divs4ever]

2% inflation by May 2023 only possible if we have 200 bps IR minimum ..... NOW.

of course it is possible , all you do is change the definition of 'inflation' ( just like they did with 'recession' and they will do with 'depression' when needed )

mathematics is irrelevant in clown-world

 

[Smurf1976]

The yanks can get the gas out of the ground no problem, they're getting so much of it that they're having to flare it to get rid of it at the moment.

They can get gas out of the ground and are doing so but the whole logistical chain to:

Increase gas production

Increase pipeline capacity within the US to move that gas to LNG facilities

Build and operate the LNG facilities

Build and operate enough LNG ships

Build and operate the import terminals in Europe

On a scale sufficient to replace Russian gas imports by pipeline is truly massive. It's going to be bottleneck after bottleneck there is my expectation. Fix one problem then it's oh yeah, there's another issue. Someday yes but it'll be a while is my expectation.

 

[moXJO]

Dow has been on fire. Wish I went all in the other week.

Surely this isn't the end of inflation. People are still too ready to throw cash in at any given moment. Need to see a behavioural change before fed will stop.

 

[waterbottle]

Dow has been on fire. Wish I went all in the other week.

Surely this isn't the end of inflation. People are still too ready to throw cash in at any given moment. Need to see a behavioural change before fed will stop.

It's fed pivot bet

Fed’s Williams sees steep decline in inflation ahead

Cooling global demand and steady improvements in supply should result in falling rates of inflation for goods over the next year, New York Fed President John Williams said Monday. “These factors should contribute to inflation declining to about 3% next year,” Williams said in a speech to the...

finance.yahoo.com

 

[qldfrog]

Dow has been on fire. Wish I went all in the other week.

Surely this isn't the end of inflation. People are still too ready to throw cash in at any given moment. Need to see a behavioural change before fed will stop.

My view is the pivot bet is justified as this pivot is not realistically based on inflation being over or as you stated behaviour change, but on the risk of total collapse of financial giants aka CS..but not only...
Economic collapse takes time,werks ,months, financial collapse is done and dusted in a couple of hours.

 

[InsvestoBoy]

This is absolute bs. Astonished that Schwab do not understand basic maths. Or are they just lying to get IR’s down.
Basically .....
1. Inflation is based on the last 12 months prints.
2 In May 2023, if we have had 6 monthly prints of zero then .....
3. Dec 2022 to May 2023 would be zero.
4. The remaining 6 months would be Dec 2022 back to July 2022.
5. Jul 2022, August 2022, and Sept 2022 inflation were all above zero.
6. So mathematically May 2023 inflation at zero is IMPOSSIBLE unless we have actual printed DEFLATION of about 3%-4%. That is consistently -0.5% per month from now fir 6 months.

(Almost) Mathematically impossible inflation to be 0% in May 2023.

2% inflation by May 2023 only possible if we have 200 bps IR minimum ..... NOW.

Gunnerguy

Sir, you are the astonishing one.

To make so brazenly incorrect a statement without even bothering to understand the mechanics of either inflation or mathematics.

The 6 steps you have listed are nonsense and honestly make me feel sad for the world.

I have worked it out in a spreadsheet this morning for your benefit and the benefit of the other turnips who liked your post.

May 22 - Aug 22 data is from https://fred.stlouisfed.org/series/CPIAUCSL

Since this seems difficult for your astonishing brain to understand, let's take the easiest one where you can just use the same number:

If the Aug 22 CPI value is 295.62 and the constant MoM print for the next 12 months is 0% each month, what is the YoY value of CPI in Aug 23? It's 0%. The current CPI YoY would mechanically decline from 8% to 0% without a single deflationary MoM print.

YoY you can see we would approach very close to 0% by June 22 at 0% MoM prints, don't even have to wait until August.

So, no, you do not need anything resembling what you said to reach deflation.



How depressing this is.

 

[InsvestoBoy]

Or are they just lying to get IR’s down.

Just shaking my head at the kind of reality someone must live in to believe this is even a possibility.

 

[Gunnerguy]

Just shaking my head at the kind of reality someone must live in to believe this is even a possibility.

InvestoBoy,
Lets agree to disagree. Attack the opinion not the indevidual.
I stand by my post. IR needs to be higher to get Inflation down. Shops are still busy, unemployment is low, Christmas spending I believe will not be a 'horrifically bad retail results', maybe 'soft'. AUD is sinking, Aussies will likely travel less (abroad), and thus 'stay at home and spend'. Yes savings rates are down, I think 12% down to about 5%. Many still on fixed rates and IR's not affecting them.
Recession may be coming, but currently I don't really think thehigher IR's are going to have very much impact on holding back inflation.

Your May to August numbers suggest in 4 months inflation has increased by about 1.4%, which YOY would be 4.2%.
I don't believe the CPI figures in your spreadsheet are representative.

TLDR: Inflation at 0% by August 2023 will only happen if there is a catastrophic decline in the Australian/Global economy, evan Global War/Pandemic, or IR at 7% and mortgages at 10%.

Please disagree politely. It's disappointing that so very many discussions on ASF just end up arguments and slagging.
In my many years on ASF I have never 'Ignore'd' anyone.

Gunnerguy

 

[againsthegrain]

InvestoBoy,
Lets agree to disagree. Attack the opinion not the indevidual.
I stand by my post. IR needs to be higher to get Inflation down. Shops are still busy, unemployment is low, Christmas spending I believe will not be a 'horrifically bad retail results', maybe 'soft'. AUD is sinking, Aussies will likely travel less (abroad), and thus 'stay at home and spend'. Yes savings rates are down, I think 12% down to about 5%. Many still on fixed rates and IR's not affecting them.
Recession may be coming, but currently I don't really think thehigher IR's are going to have very much impact on holding back inflation.

Your May to August numbers suggest in 4 months inflation has increased by about 1.4%, which YOY would be 4.2%.
I don't believe the CPI figures in your spreadsheet are representative.

TLDR: Inflation at 0% by August 2023 will only happen if there is a catastrophic decline in the Australian/Global economy, evan Global War/Pandemic, or IR at 7% and mortgages at 10%.

Please disagree politely. It's disappointing that so very many discussions on ASF just end up arguments and slagging.
In my many years on ASF I have never 'Ignore'd' anyone.

Gunnerguy

Job figures are looking good by the way, and Aussies don't give up easy. Australia as a overall country and society has not seen any major social upheavals. Down under when the going gets tough we get proactive about it and find a second job or pick up more hours.
Look at France as a example, their standard of living is high and compare to any east euro country they are gods, yet quick to riot burn and loot when they hit a bump on the road.

I think we will be fine, there will be no mass defaults no blood in the street, just some hard yakka all around and plenty room to move rates higher. Somebody think about the pensioners and savers!

 

[waterbottle]

Job openings were down in the US, probably contributed to the bump overnight....





Meanwhile NZ central bank hikes by 50bps for a fifth time.... Phil Lowe please explain?

 

[mullokintyre]

Meanwhile in Sydney...

Would not fancy towing my van through Sydney in the future.
Will these rates have an effect on inflatoon?
Would be classed as a heavy vehicle.
Pretty soon there will be significant numbers of vehicles rat running thru side streets and feeder roads to avoid tolls.
Mick

 

[divs4ever]

Dow has been on fire. Wish I went all in the other week.

Surely this isn't the end of inflation. People are still too ready to throw cash in at any given moment. Need to see a behavioural change before fed will stop.

i suspect this ISN'T the top of inflation as the public feels it , but i see definitions changing , measuring tools being re-calibrated ( to deceive )

maybe they aren't throwing ' but using it quickly while it still has some purchasing power ( and the banks will let you withdraw it )

other CBs are already intervening ( some think the Fed is a heartbeat away from a pivot )

 

[moXJO]

i suspect this ISN'T the top of inflation as the public feels it , but i see definitions changing , measuring tools being re-calibrated ( to deceive )

maybe they aren't throwing ' but using it quickly while it still has some purchasing power ( and the banks will let you withdraw it )

other CBs are already intervening ( some think the Fed is a heartbeat away from a pivot )

I feel it's just a "pause and assess" before another round of jacking rates.

Rba seems gun shy when it comes to pulling the trigger.

Imo there's still to much gouging of prices when it comes to goods and services. I don't think the psyche of the consumer has been shaken enough not to see inflation rapidly rise again.

Goods and services are already topped out in this country. I'm not sure exactly how that's going to be addressed without a deflationary period.

 

[sptrawler]

I feel it's just a "pause and assess" before another round of jacking rates.

Rba seems gun shy when it comes to pulling the trigger.

Imo there's still to much gouging of prices when it comes to goods and services. I don't think the psyche of the consumer has been shaken enough not to see inflation rapidly rise again.

Goods and services are already topped out in this country. I'm not sure exactly how that's going to be addressed without a deflationary period.

Agree 100%, without deflating prices across the board, those at the bottom will cost the Govt heaps and that will further feed the inflation.

 

[divs4ever]

I feel it's just a "pause and assess" before another round of jacking rates.

Rba seems gun shy when it comes to pulling the trigger.

Imo there's still to much gouging of prices when it comes to goods and services. I don't think the psyche of the consumer has been shaken enough not to see inflation rapidly rise again.

Goods and services are already topped out in this country. I'm not sure exactly how that's going to be addressed without a deflationary period.

the problem seems to be nobody is buying government debt , at least in the UK and Japan ( maybe other places as well ) now Japan also likes buying US debt , normally

we still have some supply disruptions to bite ( like tissue paper in Germany and England , food in lots of areas )

will all this be forgotten leading up to the US mid-terms or will Trump endorsed candidates grab control of the Senate and Congress