Inflation

[over9k]

Just saw a headline that swaps have now priced in a 5% peak funds rate from the fed. Ouch.

 

[frugal.rock]

"Bring back boris" is now trending as a hashtag.

I might have started that in the UK thread this morning... ?

What a stand up guy, cutting his Carribbean holiday short to come back to take the PM role on. ?
Surely Bollywood won't get it and not sure if a Penny could Pound it out.
Better the devil you know?

 

[divs4ever]

I might have started that in the UK thread this morning... ?

What a stand up guy, cutting his Carribbean holiday short to come back to take the PM role on. ?
Surely Bollywood won't get it and not sure if a Penny could Pound it out.
Better the devil you know?

would rather they resurrected Margaret Thatcher , at least she stood for something

 

[over9k]

First friday gain in 6 weeks. Just sold a little bit of NRGU at 570. Would like to make some small degen growth plays with TNA & TQQQ on monday. Maybe some SOXL too. We'll see.

 

[waterbottle]

First friday gain in 6 weeks. Just sold a little bit of NRGU at 570. Would like to make some small degen growth plays with TNA & TQQQ on monday. Maybe some SOXL too. We'll see.

I'll board the degen train too.
Seems that the US Treasury is considering buying back bonds + Fed officials now changing language and hinting at slowing down the pace of hikes.

Treasury bond buyback programme gathers pace

NEW YORK: The long-simmering idea that the United States government should stand ready to buy back treasury securities from investors to improve market functioning is moving closer to reality.

www.thestar.com.my

Fed Set to Raise Rates by 0.75 Point and Debate Size of Future Hikes

Some officials have begun signaling their desire to slow down the pace of increases soon and to stop raising rates early next year to see how their moves this year are slowing the economy.

www.wsj.com

Phil Low may have been right

 

[over9k]

Yeah, we'll see. There's a whole weekend to go yet.

 

[divs4ever]

I'll board the degen train too.
Seems that the US Treasury is considering buying back bonds + Fed officials now changing language and hinting at slowing down the pace of hikes.

Treasury bond buyback programme gathers pace

NEW YORK: The long-simmering idea that the United States government should stand ready to buy back treasury securities from investors to improve market functioning is moving closer to reality.

www.thestar.com.my

Fed Set to Raise Rates by 0.75 Point and Debate Size of Future Hikes

Some officials have begun signaling their desire to slow down the pace of increases soon and to stop raising rates early next year to see how their moves this year are slowing the economy.

www.wsj.com

Phil Low may have been right

just coincidental there are some pivotal elections happening in the next 4 weeks ( NOT just the US ) ( let's see if the Fed Chair stays loyal to the Populists and Patriots )

regarding bond-buying .. Japan needs to prop up their Currency , the UK needs to prop up their liquidity , and somebody is ratcheting up the sanctions on China , so who else has DEEP pockets to fund a side-show conflict during an economic collapse ( that has been building momentum since September 2019 )

 

[frugal.rock]

In my little world, I am seeing the economy reducing, prices stabilising.
Housing, mortgages, new house/loan applications, refinance etc all on the reduction phase.
Supermarkets doing there bit to help. Locking in prices for months ahead etc

That's not to say excessive inflation is over, but we have definitely hit near a top. It remains to be seen if it is the top or just a plateau before travelling on. I seem to think the world is just getting on with it after the plandemic and the results are slowly flowing in albeit hindered in some areas of the world.

Phil Low may have been right

Phil has to go by the data which was/is laggy.
Perhaps they now understand the volatile nature and are using less granular data or, have employed a few more statistician's/Actuary types to source and scrutise wider data sets.
??

 

[frugal.rock]

so who else has DEEP pockets to fund a side-show conflict during an economic collapse ( that has been building momentum since September 2019 )

The suspense is killing me. Please elaborate.

 

[divs4ever]

In my little world, I am seeing the economy reducing, prices stabilising.
Housing, mortgages, new house/loan applications, refinance etc all on the reduction phase.
Supermarkets doing there bit to help. Locking in prices for months ahead etc

That's not to say excessive inflation is over, but we have definitely hit near a top. It remains to be seen if it is the top or just a plateau before travelling on. I seem to think the world is just getting on with it after the plandemic and the results are slowly flowing in albeit hindered in some areas of the world.


Phil has to go by the data which was/is laggy.
Perhaps they now understand the volatile nature and are using less granular data or, have employed a few more statistician's/Actuary types to source and scrutise wider data sets.
??

LA LA LA ... Phil don't want to hear no bad news , that is why the RBA doesn't work on producer prices and housing starts ( or approvals )

that data is still laggy , but not ridiculously so ,

top ? you ain't seen nothing , yet , you have the compounding effect of the recent rate rises ( across the globe ) which have NEVER been in front of the price increases

and the retailers can only do so much ( until they eat through their credit lines )

 

[divs4ever]

The suspense is killing me. Please elaborate.

the money printer gang ( just like in the UK , after the last bout of forced selling , by the instos offset by empty wallets in the retail ) ( they were already the buyer of last resort , promoted to top buyer )

those various ETFs chock full of leveraged bonds must be starting to look educational as well .. is it only the UK with pension fund trouble , i wonder ??

( silly me i avoided those ' sausage bond ' products at first glance .. think of the lessons i could have been learning )

i blame The Big Short for that aversion

 

[frugal.rock]

top ? you ain't seen nothing , yet , you have the compounding effect of the recent rate rises ( across the globe ) which have NEVER been in front of the price increases

If you are saying the compound effect of interest rate rises will push global inflation up further, then I don't understand.
I had thought inflation is more a localised thing, which explains the different inflation rates around the world, and interest rate rises slow inflation due to less money to spend, thus reducing demand, etc

I'm trying to get a proper handle on where Aus is at.

I had also thought with overall general supply normalising again post covid, that would help settle inflation.

I understand the effect of energy costs also affecting inflation, but even that seems to be priced in by the markets, but that's a very laggy indicator on domestic retail. @over9k you seem to explain stuff the way I can understand.
What am I missing?

 

[over9k]

@frugal.rock What are you missing about what? What divs is trying to say?

I think he's referring to supply side problems caused by rate rises, hence the comment about retailers using all their lines of credit.

Higher rates reduce demand yes but they also make supply expansion harder to finance. They're not an entirely one-way instrument. People often forget this.

 

[frugal.rock]

What are you missing about what? What divs is trying to say?

Thanks for clearing up the finance bit.

So, if I'm reading this right, the economy at the street level, which is what I'm seeing and referring to, seems to me to be indicating a slow down, retraction , etc.

However, are you pundits saying what I am seeing is expected to be just a minor blip or plateau, before inflation continues on & up?

Apart from finance and energy, what other factors should I consider moving forward.

I'm constantly in a state of "the more I learn, the less I know" ?

 

[over9k]

what other factors should I consider moving forward

Labour supply and national debt(s) for starters and then geopolitics after that. Take a look at australia's immigration levels over the last few months - from zero up to the 6 figures per annum point right as inflation really starts to bite and unemployment starts to increase (and job ads decrease).

Plenty of countries can plug their baby-bust problem with immigration, particularly english speaking ones. Others like germany, korea, japan etc have much more of a problem.

Next is national debt burden(s) as interest rates (borrowing costs) increase.

Then there is the massive curveball of china's covid lockdowns cutting the supply of stuff everywhere but also the demand for energy. Should said lockdowns lift, everything will absolutely scream, both energy demand and supply of whatever china's exporting to whoever's buying it, which will improve the "stuff bought from china" inflation problem but only exacerbate the energy one. They will obviously want a lot more of AU's rocks etc once they get their mills running properly again. This is probably the single biggest uncertainty/headache for australia going forward as if they keep pummeling their economy then they keep pummeling this one.

Finally, there's the economic sanctions on china and/or russia. Some simple googling will tell you what they are and you can extrapolate from there. There appears to be absolutely zero probability of these lifting and a high probability of them getting worse. As to whether this does things like, say, force xi jinping's hand into lifting their covid lockdowns for example is anyone's guess.

 

[over9k]

So yeah, I can't tell you what *will* happen next but I can tell you what will determine what happens next. Hope that helps.

 

[over9k]

My own opinion re: inflation is that the U.S strategic oil reserves are finite and already about 50% drained, china's economy is all but breaking under the strain of their lockdowns, even when opec had the taps running almost flat out we still had massive oil price problems and they've just cut 2 million barrels/day, venezuela's collapsed, libya was destroyed, there's no gas pipelines into europe from the usa or saudi arabia (and almost no delivery facilities by sea), and their storage tanks aren't nearly big enough to last the next 4-5 months. The only saving grace is that it looks like it's going to be a relatively mild winter by northern hemisphere standards.

There is an oil pipeline from the middle-east but they've just deliberately cut the supply off in an effort to bolster prices and there's basically nothing anyone can do to change it so that K.O's the oil supply too.

The EU's already committed hundreds of billions in support in the same way they did for covid but this time it's to enable things like factories (which people work at and which use a lot of energy) to get mothballed for a few months so there's enough oil and/or gas left over for heating through their winter. This, too, cannot go on forever.

So yeah, it's kind of going to be like the covid lockdowns for them all over again but this time it will be TO save energy rather than energy demand collapsing as a side-effect. Their ONLY other supply option is USA and the political pressure there re: oil prices is rising precipitously.

History doesn't repeat but it often rhymes hey?

 

[divs4ever]

If you are saying the compound effect of interest rate rises will push global inflation up further, then I don't understand.
I had thought inflation is more a localised thing, which explains the different inflation rates around the world, and interest rate rises slow inflation due to less money to spend, thus reducing demand, etc

I'm trying to get a proper handle on where Aus is at.

I had also thought with overall general supply normalising again post covid, that would help settle inflation.

I understand the effect of energy costs also affecting inflation, but even that seems to be priced in by the markets, but that's a very laggy indicator on domestic retail. @over9k you seem to explain stuff the way I can understand.
What am I missing?

due to the widespread excessive printing AND supply side issues , and glitches in globalization ( particularly the smooth flow of liquidity )

i am suspecting something unpleasant and MAYBE unprecedented ( or at least very difficult to find in recorded history )

we also have an astounding amount of debt liabilities and a situation where the ORIGINAL lender is often at the bottom of the priority list

Aus is most likely a hapless leaf floating in a stormy ocean , especially now we have distanced ourselves from China ( MAYBE India would throw a lifeline , but we aren't that integral to their manufacturing base , like we were to China in 2008 )

look at our 'five eyes partners ' and none can boast a robust economy ( truthfully )

 

[Value Collector]

we also have an astounding amount of debt liabilities and a situation where the ORIGINAL lender is often at the bottom of the priority list

Globally though Net debt is $0.

 

[divs4ever]

not if they have to pay out CDS swaps ( and other derivatives ) that might be incalculable

several pension funds have massive unfunded liabilities ( and that seems to be just the US )

but of course they could always print more US dollars