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Inflation

"The narrow issue of whether this inflation is in any meaningful sense 'transitory' has now been settled.
It isn’t. Now for the much tougher questions of how long it will last, how bad it will be, and what to do about it."


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  • edited November 11
    Not directly related ... But the “talking heads” this morning (Bloomberg) appear to be on steroids. Or maybe caffeine overdose? “Primal screaming” cited by one re yesterday’s trading. LOL

    What happened yesterday?

    - 30 year treasury bond came to life and bounced significantly higher. But is still under 2%. Interest sensitive intermediate-term (and longer) bond funds took a small hit. Mine were off between .33 & .50%. Looks like the less creditworthy issues held up somewhat better.

    - “Dots” not yet connected by the pundits ... with the U.S. bond market closed today, some of the interest rate momentum upward yesterday was in anticipation of not being able to trade today - and with equity markets open.

    - The more aggressive equity growth funds seemed to get hit hardest - although TSLA gained 4% following a recent 10% down day. TRBCX dropped 1.4% as one example. Precious metals and miners spiked.

    - For once, movement across asset / fund classes in my portfolio was similar - with the moderate growth portion losing .40%, The investment grade paper was off .20%. The 3 alternatives combined fell about .30% in combination.

    - HSGFX gained .49% putting it about break-even for the year.(I don’t own it.).

    - To the crux of the OP, it’s probably a combination of baked-in inflation and transitory coming from temporary supply / labor shortages. I’m not expecting 6+ % annual “official” inflation over the next few years (using CPI figures). Admittedly, a fool’s errand to try and predict what inflation will be in the next 1-3 years.

    - TAIL, which I’ve owned only a few weeks, has around 90% in LT treasuries and most of the remainder in “puts” on selected components of the S&P - if I understand correctly. That’s why it struggled yesterday, losing about a half percent. Time will tell how much of a drag that bond exposure is during major downturns. I view it as a short - intermediate term hedge. Could “screw the pooch” with this one.:)

    - TMSRX held its own. Lost a penny or two.

    - PRWCX held up remarkably well (-.42%). Giroux’s high cash level and avoidance of long term bonds paid off.

    - Miners look hot again today. Up around 2% in pre-markets. Can flip on a dime. The more broadly based miners (like NGLOY) are screaming hot this morning.

    - DKNG? / NY State granted it permission to operate in the state along with 5-6 competing outfits. But revenue will be taxed at 51%. I guess the news broke Friday, the same day I unloaded my small spec position. Looks like it’s off between 5-8% since than.
  • Nice morning update @hank. I think the only significant green I saw yesterday was my gold and silver ETFs. Inflation hedges.

    As far as bonds go, I know there are many here that don't feel any change is needed in their portfolio, but I've worked to eliminate most of my categorized bond funds through 2021. I'm holding short and ultra short funds in my safe (withdrawal) bucket but no bond mutual funds of any kind in my main self managed portfolio. I guess after a couple years of the boy calling wolf many think bonds will continue to do just fine. I'm not one of those people.

    Good luck. I think 2022 may be a very interesting year.
  • Chris Hayes's take:

    The entire economy feels a bit like the moment a big concert or playoff game ends and everyone's trying to get out of the parking lot. "Transitory" can last a maddeningly long time, but the conditions that produce it are, indeed, temporary not structural.

    A significant percentage (2 points maybe) is gasoline, some argue.

    Interesting thread on other variables:

    https://twitter.com/jasonfurman/status/1458568877479055366
  • Howdy all,

    @hank is spot on. Most of the world is skewering the Fed. However, they are one of the principal culprits. Inflation will be with us for a longer period than transitory. Shadow stats has it using the pre-1980 methodology around 14%.

    Some of the issues will go away with more vaccinations around the world. Decriminalizing pot at the Federal level would take care of the truck driver situation. The CDL (Commerical Drivers License) is zero tolerance and drivers are subject to random testing. Pot has a half life of around 30 days. Removing it from the Schedule 1 drug list would probably change it on the CDL and ease that problem until the robots take over.

    The wage push aspect of inflation is real and getting worse. This is what is going to prolong the high inflation environment. You all see the Hiring signs and have seen some of the offers being made to get staff. Many businesses and institutions are reducing their hours due to staff, Covid, etc. The General Employment strike is real and having a major impact. The suggestion had been to raise the minimum wage to $15 and index it to inflation. As I type, this is almost a fait accompli. I've seen and heard of some fairly obscene raises . . . and that's good. I worry most about the restaurants. I have no idea how they're going to cope with wages, cost of goods, energy costs vis-a-vis menu prices. This idiocy of paying tipped staff a sub minimum wage is stale and only exists to keep menu prices low as you pay extra to the waiter/waitress. Rubbish. I tip a lot of people that I do business with - barber, mail lady, etc. And this is in huge reason why they can't get staff. Not enough pay for what can be a fairly miserable job. We'll see various attempts at new business models, but it looks to me like it's double the menu prices if you want traditional sit-down restaurant.

    As for the market, gee, the miners and pm's are showing some life, but who knows if it will last. Perhaps while there is a significant sense of inflation. It's a fairly easy sector to run a momentum play. Here's the sand box if you want to get crazy.

    http://www.kitcosilver.com/equities.html

    and so it goes,

    peace and wear the damn mask,

    rono
  • edited November 11
    OP linked thread is a Bloomberg pay article (for me at least) and my investment site subscriptions are currently at max capacity. So unfortunately did not read it.

    That said...

    Great new thread started today on the Fido Community Forum by Dick, aka dickoncapecod, titled Inflation Outlook. That's an invitation only board so hoping anyone interested has been invited. Post starts with...

    Hi. Anyone interested in a SERIOUS discussion of the inflation outlook --- not the usual complaints and moaning and not political BS........?

    He then offers up a six bullet point analysis of the issue citing technical data and offering analysis/commentary befitting someone with his professional experience and insights.

    Here's hoping all/many can check it out, then get on with worrying about things we can actually control.
  • +1 mikem I've cut back on PTIAX and added assets to TRBUX RPHYX PEGAX and SQIFX These 4 are better than earning 1 basis point in my Fido money market account.
  • edited November 12
    "Decriminalizing pot at the Federal level would take care of the truck driver situation."
    Little Feat: Willin'.
  • I would say bullet 4 is in process, perhaps

    https://www.bis.org/publ/bisbull48.htm
  • I wonder...as we onshore manufacturing do we also we onshore inflation as a result of wage inflation for higher paying US manufacturing jobs.
  • edited November 15
    Gouging of customers by shippers maybe causing a bit of inflation ! If you didn't get a chance to watch 60 minutes last night, see if you can find it somewhere.
    Have a sunny week, Derf
    A link to 60 minute
    https://armchairinvesting.freeforums.net/thread/900/inflation?page=19&scrollTo=22817
  • Here's an interesting and perhaps unprecedented factor that's helping to drive inflation- huge increases in warehousing costs.

    "In a matter of a year, warehousing rents in some markets have doubled. Brand-new buildings that would normally sit vacant for months are selling space before they're finished."

    ➤ Link to PBS article


  • edited November 15
    bee said:

    I wonder...as we onshore manufacturing do we also we onshore inflation as a result of wage inflation for higher paying US manufacturing jobs.

    While some "experts" claim inflation is transitory (whatever that means), I'm not so sure.
    If U.S. companies implement large-scale onshore manufacturing to remediate supply chain issues,
    the result will be higher consumer costs.
    Many lower-paid workers have already received relatively large wage increases (good for them).
    Can this all lead to a wage-price spiral?

  • Is the pope Catholic?
  • John Authers looks at inflation through the lens of the labor market.

    "We can put the question of whether the latest dose of inflation is transitory to sleep; it isn’t, and many find it offensive to say so. But the question of how serious elevated price inflation will be and how long it will last is much more interesting, and much harder to answer."

    Link
  • "But the Journal also noted a less publicized element of this story: Many companies, it turns out, are taking advantage of the situation to push through price increases that are over and above what would be warranted by their own higher costs. The result: Two-thirds of big companies are now enjoying higher profit margins than before the pandemic."

    "Stocks have also delivered demonstrably better returns than gold, which has a reputation—undeserved, in my opinion—of providing inflation protection. That’s why, even if you think inflation will keep going, I still wouldn’t recommend any drastic change to your portfolio. The stocks you already own may do the job quite well."


    Link
  • Jack Hough writing in this week’s Barron’s (November 22 issue):

    “Gold is an inflation hedge, but only reputationally, not statistically. It lost money during bouts of elevated inflation from 1980 to 1984, and again from 1988 to 1991.”

    (Above does not necessarily reflect my opinion and is not intended as investment advice.)

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