‘Raise Inflation Hedges Big Time’: Is The Genie Already Out Of The Bottle?
Who's concerned about inflation on the heels of the biggest global demand shock in at least a century?
Quite a few market participants, actually. I often speak of the pandemic’s "Harvey Dent character" — the biggest demand shock since the Great Depression is a deflationary supernova by definition, but the virus was also a supply shock in many respects. The risks associated with far-flung supply chains were suddenly laid bare, and with populism/nationalism still ascendant, you can expect mor
I see little reference to the difference policies make for the Federal government as an income taxing authority. If you give a poor person money they spend it quickly and it gets spent by others quickly to replenish stock. However give a tax cut then it sits in someones bank for generations. In the first case the federal government gets most (how much?) of the money back in taxation in the latter the treasury is starved. I would like to see more public acceptance of this basic principle.
Thank you for the daily education. I read all the articles. Some more than once.
Interesting point…………. also Ditto on the input (adding relevance) that this site makes to the every day events…
Kevin Muir has started his sequence of articles on inflation; what causes it and what assets do well in a high(er) inflation environment. I do not know if we will have inflation or deflation in the future but Muir offers an interesting point of view; personally I think the probability of higher inflation is somewhat high (0.5? 0.6?). Of course, we have had asset inflation for ten years.
Before Keven goes too far down the rabbit hole, what do you, Professor Heisenberg, think are assets that will do well in a high inflation environment under the current conditions (e.g. QE, low bond yields, large federal deficits, political chaos, King Trump?, etc)?
Some things come to mind.
Utilities? State regulators will keep utility rates in step with inflation and utilities are not optional.
Large Cap Tech? The answer to every equity question?
Commodities? We could have inflation and a recession; my guess is commodities are not the answer.
ETC.
Interesting call on the low in yields. Let’s see the range when the fed makes an effort.
A curve steepener is an indicator the market thinks growth will pick up. Things are going to be dicey for awhile. Wait until the end of August and see how the consumer is reacting when the spigot gets shut off – even if it is for a couple of weeks. While I am cautious for the next 3-4 quarters we will come out of this and get some growth back eventually- the world will not end. After a borrowing binge there is usually a hangover, and this will lower long run growth. Not saying it is not worth the trade off- better that than homelessness and even more breadlines, but there will be a price to be paid later. Lower long run nominal growth, lower population growth and aging demographics usually do not lead to longer term higher interest rates.