Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Support MFO
Donate through PayPal
Gundlach: U.S. Rates 'Don't Have Any Legitimate Reason' To Rise
Inflation "largely absent?" He lives in a bubble, insulated from reality. A loaf of bread or a pound of beef costs triple what it did just two or three years ago.
Reply to @MaxBialystock: I agree. I have the unique situation of going stateside once or twice a year. In the past few years my observations are; prices are going up and the economy is not getting any better, at least in the area I visit.
Just like in the 70's, inflation is hitting not only in the prices but in the sizes of packaging. Back then it was known that inflation was real. Today it is disguised since the CPI measures inflation far differently than it did even in the 90's.
The economy is recovering in certain areas. But go out of those areas and things don't look so good. An example is the Puget Sound area in Wash. state. Seattle and King Co. are doing quite well. Go into Pierce Co (Tacoma) or some of the other outlying areas and the change is significant. Jobs being created are part time and many jobs are now having hours reduced. Some full timers are back to part time.
Reply to @MaxBialystock: The low inflation is to a degree a result of computer & electronics prices dropping rapidly. The government years ago began stacking the deck by including a healthy dose of these thingamajigs in inflation calculations. Also, if this year's new computer costs the same, but has 5X the computing power of last year's model, in their calculations that amounts to a price decline.
Remember $100+ for a basic hand-held calculator 40 years ago? $2500 for a budget laptop 20 years ago? $2,000 for a 42" flat screen TV 10 years ago? All these and more can be had more cheaply today. (Admittedly, it's hard to eat these things or make your car run on them:-) In 2013 most Social Security recipients received a "COLA" adjustment of 1.7% to reflect what the government considered increased living costs. Next year it is projected to be 1.5% - really pathetic IMHO
Reply to @MaxBialystock: Max, The bend over index I'll agree with Hank regarding the ability of those in power to adjust the CPI to fit the needs, as they may see things. And yes, food and healthcare costs; among many other items will continue to find price increases. But, in the big plan overall, I won't disagree with Mr. Gundlach that there is pressure at this point for higher interest rates. 'Course, we're still not living in normal business environment times, let alone monetary times and I expect continued pressure still in place for many areas and folks in general to continue to delever. I suspect one of the greatest remaining fears of many at the Fed. is economic deflation in a broad sense. And, Europe; at least to my view, still has many problems that are currently not in the spotlight. Lots of debt baggage there, that has not yet been claimed at the checkout station.
Sidenote: unemployment may be reported to be 5% in 5 years; but it will not be the same aspect of good paying jobs as from the past. Everyone could have work in this country in exchange for a place to live; and the unemployment rate could be .5% by an official measurement, but it wouldn't mean squat to a living standard of the country. Folks had work in the old Soviet Union sweeping the stairwells in the government apartment buildings. They were employed !!! Officially at least......then it was time to move on into line for a loaf of bread....if one was in line soon enough. The numbers, whichever one chooses, are relative to something. It is a matter of whether the something has any true value for the society.
Reply to @JohnChisum: I was wondering how you are. Philippines earthquake. My wife's people are in Cebu. The epicenter was Bohol, so not far away at all. Glass, bricks, concrete in the streets. A few deaths, sad. When you're over there, which city are you in? Are you there in Asia right now?
Reply to @hank: OMG, the imaginative ways that people manufacture lies, and at the same time, come up with a way to rationalize the lie, and not call it such. Except that they are lying to themselves. Cripes. Just another brick in the wall. Apologies to Pink Floyd. In the same way, the gummint gives itself permission simply not to count you as unemployed if you've been that way for over six months. ... Yes, the earth is round. But if you've been here for more than six months, be careful! It turns FLAT, and you will fall of the edge!!! Both of the major parties play these games. They both suck. How can we expect truth in advertising when no one in the Ministry of Truth cares about the truth?
I wish Grundlach had selected a few funds or bonds in which I might invest, if there are 8% yields out there. Guess that's why I invest in his funds - hoping he is correct and can make much more than his ER. The rest of this is so far off topic that you should bail out.
The world has become flat and most simple manufacturing jobs and many white collar jobs (including some accounting, even medical transcription) have moved off-shore. The jobs that move back often have robots doing the repetitive tasks.
Reportedly, the next wave of job creation will be "Health-related" jobs as the boomers age. The majority will be minimum wage, probably with minimum benefits, "caregiver" jobs that are essential, but not remunerated well enough to support a family. There is a possibility that robots will do some of this work. If the taxpayers have to pay for the care, I'm for robots. If my children have to make a living, I suggest health care that requires human skills - robots don't yet manage wounds or fractures.
There was a recent (CNN?) interesting article about Germans utilizing lower-priced Polish nursing facilities for their parents. They were at least close enough for occasional visits. Wonder if I will spend my declining years in Mongolia - once you get past the airfare, it's very reasonable- and "he really doesn't recognize us anymore, plus there is that direct camera feed." (If I were younger, I'd be developing the business plan; fly in the family for a visit twice a year, plus some "cultural opportunities", and every one is a winner.) There's probably already a patent troll sitting under a bridge on this.
The reality is that the assembly line, which provided well-paid, relatively mindless work, has been usurped by mindless, much more precise robots. Even X-rays can be interpreted by computer algorithms more accurately than by human eyes, so maybe we will get a few more primary care physicians (yeah, right).
I'm pessimistic about the prospects of the lower 50% of any future generation. Those with power or money will have to provide enough benefits for survival or a strong enough police force to prevent a revolt, while providing only as much as they must to keep the lower class alive (assuming that they choose to do so - slaughtering half the population would simplify the future for a few generations - maybe I see a novel here).
Guess it's good I don't own firearms. Much more of this and I might shoot the closest target.
All hail Grand Poobah Gundlach! While I tend to agree that rates will probably not rise much in the year ahead, you can bet your sweet bippy that the poobah is betting his life on this. REAL inflation is there, whether or not the government's manipulated numbers show it or not. But the real reason interest rates will not budge much for the foreseeable future is the huge amount of debt on which we must pay interest. And Congress just buckled again, allowing the Treasury to add to the enormous pile of debt. As long as the country continues on the current spending binge and refuses to address entitlement programs, this will only get worse. If we are barely able to finance our debt when rates are at 0%, just think how bad it will be when rates are 2%.
Comments
Just like in the 70's, inflation is hitting not only in the prices but in the sizes of packaging. Back then it was known that inflation was real. Today it is disguised since the CPI measures inflation far differently than it did even in the 90's.
The economy is recovering in certain areas. But go out of those areas and things don't look so good. An example is the Puget Sound area in Wash. state. Seattle and King Co. are doing quite well. Go into Pierce Co (Tacoma) or some of the other outlying areas and the change is significant. Jobs being created are part time and many jobs are now having hours reduced. Some full timers are back to part time.
Remember $100+ for a basic hand-held calculator 40 years ago? $2500 for a budget laptop 20 years ago? $2,000 for a 42" flat screen TV 10 years ago? All these and more can be had more cheaply today. (Admittedly, it's hard to eat these things or make your car run on them:-) In 2013 most Social Security recipients received a "COLA" adjustment of 1.7% to reflect what the government considered increased living costs. Next year it is projected to be 1.5% - really pathetic IMHO
Max,
The bend over index
I'll agree with Hank regarding the ability of those in power to adjust the CPI to fit the needs, as they may see things. And yes, food and healthcare costs; among many other items will continue to find price increases.
But, in the big plan overall, I won't disagree with Mr. Gundlach that there is pressure at this point for higher interest rates. 'Course, we're still not living in normal business environment times, let alone monetary times and I expect continued pressure still in place for many areas and folks in general to continue to delever. I suspect one of the greatest remaining fears of many at the Fed. is economic deflation in a broad sense. And, Europe; at least to my view, still has many problems that are currently not in the spotlight. Lots of debt baggage there, that has not yet been claimed at the checkout station.
Sidenote: unemployment may be reported to be 5% in 5 years; but it will not be the same aspect of good paying jobs as from the past. Everyone could have work in this country in exchange for a place to live; and the unemployment rate could be .5% by an official measurement, but it wouldn't mean squat to a living standard of the country. Folks had work in the old Soviet Union sweeping the stairwells in the government apartment buildings. They were employed !!! Officially at least......then it was time to move on into line for a loaf of bread....if one was in line soon enough.
The numbers, whichever one chooses, are relative to something. It is a matter of whether the something has any true value for the society.
My 2 cents.
Take care,
Catch
The world has become flat and most simple manufacturing jobs and many white collar jobs (including some accounting, even medical transcription) have moved off-shore. The jobs that move back often have robots doing the repetitive tasks.
Reportedly, the next wave of job creation will be "Health-related" jobs as the boomers age. The majority will be minimum wage, probably with minimum benefits, "caregiver" jobs that are essential, but not remunerated well enough to support a family. There is a possibility that robots will do some of this work. If the taxpayers have to pay for the care, I'm for robots. If my children have to make a living, I suggest health care that requires human skills - robots don't yet manage wounds or fractures.
There was a recent (CNN?) interesting article about Germans utilizing lower-priced Polish nursing facilities for their parents. They were at least close enough for occasional visits. Wonder if I will spend my declining years in Mongolia - once you get past the airfare, it's very reasonable- and "he really doesn't recognize us anymore, plus there is that direct camera feed." (If I were younger, I'd be developing the business plan; fly in the family for a visit twice a year, plus some "cultural opportunities", and every one is a winner.) There's probably already a patent troll sitting under a bridge on this.
The reality is that the assembly line, which provided well-paid, relatively mindless work, has been usurped by mindless, much more precise robots. Even X-rays can be interpreted by computer algorithms more accurately than by human eyes, so maybe we will get a few more primary care physicians (yeah, right).
I'm pessimistic about the prospects of the lower 50% of any future generation. Those with power or money will have to provide enough benefits for survival or a strong enough police force to prevent a revolt, while providing only as much as they must to keep the lower class alive (assuming that they choose to do so - slaughtering half the population would simplify the future for a few generations - maybe I see a novel here).
Guess it's good I don't own firearms. Much more of this and I might shoot the closest target.