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U.S. Inflation Accelerates to 40-Year High

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Re: U.S. Inflation Accelerates to 40-Year High

#151

Post by recursivedoubts »

RC_ITR wrote: post #106
dcolkitt wrote: post #63

Earlier quoted context omitted.

> The Fed has held interest rates at 0 (negative, real terms) which makes all cash flows effectively infinite net present value. This is only true for cash flows discounted by the risk-free rate. The discount rate of risk assets comes from the risk-free rate with a risk premium added on top (probably 6% or so today for the average blue chip equity).

Yeah, I mean, talk to any stock-picking hedge fund and ask them how much the 10Y treasury yield factors into their discount rate (I'd say not a single one would say it does at all). Classic HN 'Confidence = knowledge' comment.

i know my gp comment reads w/ a lot of confidence, but I really have no idea what's going to happen

I do believe that even stocks, in the long run, will be discounted against a general opportunity cost and that really low interest rates make small movements really significant in that regard

we'll see

Re: U.S. Inflation Accelerates to 40-Year High

#152

Post by redtriumph »

eldavido wrote: post #81
logicalmonster wrote: post #19

Does anybody believe that the 7.5% figure is completely accurate and not fudged and massaged to give an answer that won't entirely spook the market? It feels like their strategy is to avoid making a choice and letting the bubble unwind as slowly as possible to avoid political fallout. Unfortunately, we learned as kids that ripping off a bandaid faster is usually best, so this might prolong pain for a while.

Keep in mind "7.5%" is the aggregate across the entire basket. This isn't how individual people perceive inflation. What actually happens is that a few things make big jumps (10-15%) and the prices of other things don't increase as quickly. Maybe not the nicest thing to say, but I'm hardly affected by inflation at all. The four biggest categories to experience inflation recently have been used cars, petroleum, rents,…

IMO, increasing gas prices indirectly affect food prices too... since the cost of transportation is linked to fuel prices.

Re: U.S. Inflation Accelerates to 40-Year High

#153

Post by arcticbull »

bko wrote: post #16

This is clearly a result of the monetary base expanding at unprecedented levels due to covid (~40% in 2 years). Around $12 trillion was allocated for covid measures and around $10 trillion disbursed. About half was legislative (income support, state local funding, loans) and another half was Fed mostly benefiting banks (asset purchases and liquidity measures). So far we've seen crazy asset inflation (weird the market…

> This is clearly a result of the monetary base expanding at unprecedented levels due to covid (~40% in 2 years).

Or, it's because supply chain disruptions have caused shortages, and there's more demand post-reopening chasing a smaller base of supply.

Japan more than tripled its money supply since 1990 and CPI remained dead-ass flat for thirty years. It's not sufficient to say that an increase in the money supply necessarily leads to an increase in prices. [1, 2]

> So far we've seen crazy asset inflation (weird the market is up 30% from pre-covid levels).

Repeat after me: an increase in the price of assets is not necessarily asset inflation. If each quantity of asset buys you more CPI basket (i.e. returns outpace inflation) then it's an ROI. A real dollar return.

The NASDAQ [5] and S&P 500 [6] P/E ratios are actually roughly in line with historical averages, give or take. Check again. There was a correction recently.

Take Google, for instance. Going into end of 2019, it was trading at $1500/share. Today, $2780. That's 1.85X higher! Crazy right? Well, check their revenues. [3] Just over 1.6X higher (and that's an annual histogram). Google has been trading at the same P/S ratio since 2010, give or take. [4]

Big Tech is reporting some of the best quarterly performance in the history of the world - certainly since the Dutch East India Company, anyways.

Thanks to the COVID response, we very narrowly escaped another lost decade. [7] A few months of inflation means nothing in the long run.

[1] https://fred.stlouisfed.org/series/JPNCPIALLMINMEI

[2] https://tradingeconomics.com/japan/money-supply-m2

[3] https://www.statista.com/statistics/266206/googles-annual-gl...

[4] https://ycharts.com/companies/GOOG/ps_ratio

[5] https://www.macrotrends.net/stocks/charts/NDAQ/nasdaq/pe-rat...

[6] https://www.multpl.com/s-p-500-pe-ratio/table/by-year

[7] https://voxeu.org/article/tale-three-depressions

Re: U.S. Inflation Accelerates to 40-Year High

#154

Post by ldiracdelta »

JaimeThompson wrote: post #114
dcolkitt wrote: post #69

Earlier quoted context omitted.

I'm sorry, but "corporate greed" doesn't make sense. Were corporations not greedy in 2017?

https://www.nytimes.com/2021/12/27/business/beef-prices-catt... "Since the 1980s, the four largest meatpackers have used a wave of mergers to increase their share of the market from 36 percent to 85 percent...Their dominance has allowed them to extinguish competition and dictate prices." https://twitter.com/AlecMacGillis/status/1476219789899096064

In food supply, I think the issue is regulatory capture. If you make food in the USA you almost have to have a lawyer on staff to navigate all the regulation. Compliance team sizes are growing in ag. The difficulty of starting up a competing meatpacker plant is getting harder every year. When the ability of entry into food production is harder every year, you don't have to compete on efficiency and it trends toward monopoly.

Re: U.S. Inflation Accelerates to 40-Year High

#155

Post by commandlinefan »

marricks wrote: post #65
commandlinefan wrote: post #38

Earlier quoted context omitted.

It also works out _sort of_ well for homeowners - at this rate, my house payment is going to end up being a minor inconvenience instead of my largest fixed payment. Of course, I'll still have to pay property taxes and insurance on the newly inflated value of the house.

> Of course, I'll still have to pay property taxes and insurance on the newly inflated value of the house Luckily mortgage payments are the larger than that chunk :D

For now, anyway. My property taxes are currently just over 50% of my mortgage payment, and I expect them to go up 10% (maximum allowed by law) again next year.

Re: U.S. Inflation Accelerates to 40-Year High

#156

Post by fuckcensorship »

amanaplanacanal wrote: post #145
fuckcensorship wrote: post #67

Earlier quoted context omitted.

Inflation statistics have been rigged for decades [1]. [1]: http://www.shadowstats.com/alternate_data/inflation-charts

I bought into the shadowstats guy for a long time, until he admitted he makes up his numbers. It's all bogus.

I wasn’t aware of this. Thank you for letting me know!

Does anyone have a source which is not bogus? Or is the “inflation numbers are rigged” premise just bogus?

Re: U.S. Inflation Accelerates to 40-Year High

#157

Post by jcadam »

Rebelgecko wrote: post #111
tagoregrtst wrote: post #100

Earlier quoted context omitted.

My math might be wrong, but according your source isn't the annualized month-to-month inflation 7.5%? (1+0.6/100)^12 = 1.0744. The year-to-year (multiply all seven rates and then power to 12/7) is 7.1% which is pretty close to 7.5% anyway. (Also, note that the decrease over the last two months is probably due to the Christmas peak ending. Best case scenario, pie in the sky, for inflation is 3.6% which is higher than…

If you still have a lot of time left on your mortgage it may be beneficial to refi

I got 2.75 on mine, which is ridiculously low. My parents paid something like 11-12% on their first house.

Re: U.S. Inflation Accelerates to 40-Year High

#158

Post by pessimizer »

legitster wrote: post #32
marricks wrote: post #14

Inflation is a good thing for people with a lot of debt but not a lot of money. Think of the millions of student debt borrowers. Even if student debt isn't cancelled, it may get effectively cancelled one way or another. Which just goes to show, if WSJ or Bloomberg say something is bad, it may not actually be bad for you. Let's just hope the pressure stays up so wages keep on increasing. EDIT: I'd like to add, wage gr…

> Inflation is a good thing for people with a lot of debt but not a lot of money. The counter to this is inflation is painful to people living on savings or fixed incomes. And the politics here are brutal - young people whom this benefits don't vote, older people whom this hurts do.

> The counter to this is inflation is painful to people living on savings or fixed incomes.

The last generation that generally saw the ability to do any of this are the Baby Boomers, and they're a generation that is half-dying and half-broke. Once the Xers with no savings and no pensions start losing the ability to work, the calculus changes. They're 45-60 years old now.

The material view of people who are living on savings and fixed incomes is the people who are wealthy enough not to have to work. That category will soon be dwarfed by the people who need universal health care to stay alive and the people who depend on inadequate social security payments.

Re: U.S. Inflation Accelerates to 40-Year High

#159

Post by short_sells_poo »

bko wrote: post #30
marricks wrote: post #14

Inflation is a good thing for people with a lot of debt but not a lot of money. Think of the millions of student debt borrowers. Even if student debt isn't cancelled, it may get effectively cancelled one way or another. Which just goes to show, if WSJ or Bloomberg say something is bad, it may not actually be bad for you. Let's just hope the pressure stays up so wages keep on increasing. EDIT: I'd like to add, wage gr…

Believe it or not, but wealthy people have more debt relative to income than the poor. For instance, I have a mortgage that is several multiples above my annual income. Most other wealthy people also have debt because it makes sense due to low rates and good credit. The poor often have a tough time getting credit. If you're not making a lot of money it's tough to get debt at multiples of your annual income. That's wh…

It's important to make a distinction here between someone who is wealthy and someone who has high income. I think the people who this applies to are more in the bucket of high earner. E.g. take a typical "high earner" tech worker who brings in $500k p.a. total, but lives in an expensive Californian town. They may have a $2mln mortgage to service and high living expenses. Their debt to income ratio is high, but they can afford it (for a time). At the same time, this person is not wealthy. They need the high cash flow to service their debt load and their net worth may even close to zero (taking the debt into account).

There are many definitions of what is a wealthy person, but in my book it is someone with a net worth >$10mln and a low debt loading. Assuming their holdings are in a well diversified portfolio generating 5% net of inflation, they can likely maintain their lifestyle while their wealth will still continue to grow and they are not at risk of being wiped out by income loss or small drawdowns. E.g. someone who has assets worth $100mln but $90mln debt is very highly leveraged and could quickly find themselves being forced to liquidate assets in case they experience just a 10% drawdown.

A wealthy person will indeed often use debt as a leverage vehicle or simply to make a purchase without having to liquidate their holdings, but the debt will still mostly be a small portion of their assets and often also a relatively small portion of the appreciation of their wealth.

Re: U.S. Inflation Accelerates to 40-Year High

#160

Post by [deleted] »

bko wrote: post #45
rwj wrote: post #25

Earlier quoted context omitted.

Yes, clearly, because Covid hasn't disrupted anything else. /s I suspect that the causes are more complicated.

My belief is that printing trillions of dollars and growing the money supply by 40% in a short period of time has impacted asset prices, and now consumer prices. If covid impacted other things (i.e. business), why are all asset prices up well above pre-covid levels. The impact of the money printing outweighs any other covid impacts. Nothing covid related should tell us that Manhattan real estate should be above pre-c…

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