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"Stillers, if I interpret him correctly, seems to have understood it as WABAC having sold, or tried to sell, short term CDs before maturity."I'm uncertain as to how to read WABAC's post. Stillers, if I interpret him correctly, seems to have understood it as WABAC having sold, or tried to sell, short term CDs before maturity.
I read WABAC as saying that he has tried holding short-term CDs, but didn't like that. No indication that he tried to sell them prior to maturity.
Left undefined in all of this is what exactly is the definition of "short term CD" as being used here.
While I agree with Stillers regarding the correct way to use CDs, I really don't appreciate his condescending style- apparently he's attempting to emulate a certain FD person.
He's also thinking about the redemption fee question, and might yet share thoughts there.The GoodHaven Fund disclosed in its annual and semi-annual reports insider ownership as follows - and please note the vast majority of these shares are related to Mr. Pitkowsky and entities connected to his immediate family - "As of November 30, 2022, the members, officers, and employees of GoodHaven Capital Management, LLC, the investment advisor to the GoodHaven Fund, owned approximately 124,075 shares of the Fund. It is management’s intention to disclose such holdings (in the aggregate) in this section of the Fund’s Annual and Semi-Annual reports on an ongoing basis."
Profit-price spiral
There has also been increased discussion about how those corporate profits are contributing to inflation.
In a recent note, economists at ING looked at Germany, where inflation is increasingly a demand-side issue. While cautioning that so-called “greedflation” cannot be proven and there are variations by sector, they wrote that there are signs companies have been hiking prices ahead of the rise in their input costs, and that “from the second half of 2021 onward, a significant share of the increase in prices can be explained by higher corporate profits.” They call this a profit-price spiral.....
Not the 1970s
....Richard Portes, professor of economics at London Business School, told CNBC there is “no serious risk” of a wage-price spiral in the U.K., U.S., or major European countries, however. He also cited reduced union power in the private sector as a notable change from the 1970s.
“If you look at core inflation in the U.S., rentals, housing, have been driving that. That’s got nothing to do with wages — with rentals, it’s more sensitive to interest rate rises,” he added.
There is evidence — including from the IMF — that wage-price spirals aren’t common. The IMF research found very few examples in advanced economies since the 1960s of “sustained acceleration” in wages and prices, with both instead stabilizing, keeping real wage growth “broadly unchanged.” As with so much in economics, the idea that wage-price spirals even exist has also been challenged.
For Kamil Kovar, an economist at Moody’s Analytics, the scenario was always seen as a risk, not necessarily likely. But he, too, said that as time progresses it has become clear that it is not happening.
Wages are likely to increase fairly rapidly for Europe, but there’s “so much scope for wages to catch up with prices, to get to a spiral situation we would need something totally different to happen,” he said. The ECB expects nominal wage growth, not adjusted for inflation, of around 5% this year.
Real wages in Europe are so much lower than before the pandemic they could increase another 10% without going into a “danger zone,” Kovar said; while in the U.S. they are roughly equal but exiting the risky zone.
When comparing the current situation to the 1970s, Kovar said there were some similarities such as an energy shock; back then it was in oil, whereas this time it is bigger and broader, impacting electricity and gas too. There has also been a more rapid drop in energy prices as this shock has subsided.
And again, he noted the ongoing growth in corporate profits and the absence of powerful unions as yet more factors for why this time it’s different.
“It’s an example of how we are slaves to our historical parallels,” he said. “We potentially overreact even if the underlying situation is different.”
Just curious: How has someone who has invested (pretty much exclusively, it appears) in ~5% ST CDs all year (therefore mid-year, UP about 2.5% on an annual basis) done "likely a little better than SPY" when SPY is UP ~15% YTD?
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You've done well the past year without the ups/downs that the folks in the market have, likely a little better than SPY without the drawdown, not too shabby.
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