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The Inflation thread, Discussion
early birds
post Posted: Today, 09:46 AM
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The first hint of a jump in US inflation and what did all those brave souls among the bond bunnies do? Why they jumped sideways and sent US bond yields lower!

So much for the bond market being the all-powerful monster that would tame central banks post-Covid, as some alarmist writers of economic nonsense had been insisting as they fretted over quantitative easing, higher inflation and anything else they could lay their hands on.

The US Consumer Price Index jumped 0.6% in March, the largest gain since August 2012, after rising 0.4% in February. A 9.1% surge in fuel prices accounted for nearly half of the increase in the CPI. Petrol prices rose 6.4% in February. Food prices rose 0.1% as the price of potatoes unexpectedly rose and food consumed outside the home also rose 0.1%.

For the year March, the CPI surged 2.6%. That was the largest gain since August 2018 and followed a 1.7% increase in February.

And theres the outbreak of inflation shock horror, just as the talking heads had warned but it passed without too much pain and bond yields eased afterwards.

Core inflation (excluding food and energy), rose 0.3% after up from 0.1% in February. That was the largest gain in seven months in the core CPI as the annual rate rose 1.6% after the 1.3% rise in February.

The Fed tracks the core personal consumption expenditures (PCE) price index for its 2% inflation target, (now a flexible average rather than hard target, a little like the flexible 2% to 3% over time target for the Reserve Bank.

The core PCE price index rose an annual 1.5% in February and judging by the core CPI, probably nudged a bit higher in March (we will find out in a fortnight).

The yield on the key 10-year Treasury bond ended down 5.6 basis points to yield 1.6198%, well below a 14-month high of 1.776% hit on March 30.

The Fed especially chair Jay Powell, have been warning for a while that inflation will make a transitory jump mid year as the comparative base rolls over and the big falls a year ago drop out of calculations. The same is going to happen here as well, according to RBA governor, Phil Lowe.

Central banks want to see inflation rising because it shows the rebound from the Covid lockdowns is actually strengthening and the higher demand is increasing prices for goods and services.

Deflation or disinflation means weak demand, a lot of spare capacity in the economy and problems ahead for economies showing them.

The US isnt one and nor is Australia or New Zealand (which left monetary policy on hold yesterday

https://www.sharecafe.com.au/2021/04/14/bon...n-edges-higher/

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from our own sharecafe



 
nipper
post Posted: Apr 9 2021, 04:47 PM
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every Friday, I get an email from Naos
QUOTE
As part of the NAOS investment process, we pay particular attention to the comments made by company CEOs and business leaders in order to gain a greater understanding of the current investment environment and key trends that may be emerging. Below are quotes from the week which in our view detail some of the most important and prominent industry trends and economic factors impacting their businesses.
(to subscribe ... https://www.naos.com.au/subscribe )



There seems to be a persistent theme this week:
CEO Insights - Week Ending 9 April 2021 By NAOS Asset Management[/size]

Automotive

"This is the strongest March result in two years with private buyers representing the largest proportion of new vehicle purchasers" Tony Weber, CEO, Federal Chamber of Automotive Industries

"It's hard to know when the new car supply is going to continue to ramp up. I mean, they're obviously facing some major chip shortages. I think the supply, the tightening of the supply is going to be around here for a while" William Nash, CEO, CarMax Inc [USA's largest used car retailer]


Transport & Logistics

"Reforms to address climate change are ushering in an era of modal shift for freight, from polluting and congested road travel to efficient higher speed rail service. This will drive significant growth in railcar demand in the years to come above and beyond replacement demand growth" Bill Furman, CEO, The Greenbrier Companies Inc [global manufacturer/repairer of railcars]

"Rail freight traffic has actually grown over pre-crisis levels in some countries" Bill Furman, CEO, The Greenbrier Companies Inc [global manufacturer/repairer of railcars]

"The spot rate on containers has gone up massively there are less containers and less ships so there's more demand than supply" Andre Reich, CEO, The Reject Shop Ltd


Inflation

"No matter what commodity you look at, whether its poly[ethylene], resin, oil or gas, commodity prices are up and a lot of them impact raw material costs" Bernie Brookes, Exec Chairman, Colette [handbag & jewellery retailer]

"As we navigate the current environment, we are seeing input cost inflation accelerate in many of our categories and across the industry" Sean Connolly, CEO, Conagra Brands Inc [multinational packaged foods brands conglomerate including brands Birds Eye & Healthy Choice]


Tourism, Travel & Leisure

"Around 38 per cent of Australian tourism businesses have told us they're cutting jobs and reducing workforce hours to stay viable with the ending of JobKeeper, Sixty per cent of tourism enterprises are in a weaker position since COVID-19, 47 per cent remain open but have fewer staff, and the end of JobKeeper is having a major impact on exposed sectors" Simon Westaway, Executive Director, Australian Tourism Industry Council

"We've experienced significant latent demand upon opening new sailings this summer. In fact P&O [Cruises] opened to a single biggest booking day in seven years on the announcement of coastal sailings for its two ships this summer" Arnold Donald, CEO, Carnival Corporation [world's largest cruise ship company]


US Economy

"I have little doubt that with excess savings, new stimulus savings, huge deficit spending, more QE [quantitative easing], a new potential infrastructure bill, a successful vaccine and euphoria around the end of the pandemic, the US economy will likely boom" Jamie Dimon, CEO, JPMorgan Chase & Co.


Technology

"As the market is showing optimism with regards to a potential COVID recovery, we are seeing demand returning from industrial customers" Mark Adams, CEO, SMART Global Holdings Inc [global computer memory & storage provider]


Insurance

"The global P&C [property & casualty insurance] industry is one of the most complex and highly regulated markets in the worldIt's also an industry that is undergoing significant change with the entry of new competitors and increasingly sophisticated customers who now expect a simplified digital experience" Mike Jackowski, CEO, Duck Creek Technologies Inc [multinational insurance software provider]


Retail

"I think if you ask anybody that's providing a product these days, we've seen a seismic shift [to online] over the last 12 months" Gary Medved, CEO, Mace Security International inc [global manufacturer of personal safety & security products]


Commercial Property

"The golden days of landlords milking retailers is gone. This [post COVID] is a complete reset" Paul Zahra, CEO, Australian Retailers Association

"If customers are choosing to shop a brand in store in a shopping centre then, yes, that's a relationship with the landlord. If customers are choosing to shop online because we've invested tens of millions of dollars in infrastructure then landlords have nothing do with that" Mark McInnes, CEO, Premier Investments Ltd


Residential Property

"Given the environment of rising housing prices and low interest rates, the bank will be monitoring trends in housing borrowing carefully and it is important that lending standards are maintained" Dr Philip Lowe, Governor, Reserve Bank of Australia


Food & Beverage

"Psychology experts assert that it takes on average, 66 days for a new behaviour to become habitualwe are nearly 400 days into the COVID-19 pandemic. Consumers have adapted to at-home eating and formed new habits that we expect to sustain well beyond the current conditions and early data supports our hypothesis" Sean Connolly, CEO, Conagra Brands Inc [multinational packaged foods brands conglomerate including brands Birds Eye & Healthy Choice]




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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne

Said 'Thanks' for this post: early birds  
 
nipper
post Posted: Jan 28 2021, 08:37 PM
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OK OK it is Buffett, but I like it
QUOTE
Inflation is a far more devastating tax than anything that has been enacted by our legislatures. If you feel you can dance in and out of securities in a way that defeats the inflation tax, I would like to be your broker .... but not your partner.



https://www.sharecafe.com.au/2021/01/19/ina...tion-inflation/




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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
nipper
post Posted: Jan 26 2021, 08:58 PM
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And while we are at it...
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Just getting a few things straight ..
.. the Libs dropped University fees, not the ALP.

(they also persisted with National Service for 4 years after engagement effectively ended in Vietnam. And other silly policies)



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
mullokintyre
post Posted: Jan 26 2021, 02:58 PM
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In Reply To: nipper's post @ Oct 31 2020, 04:16 PM

QUOTE
Just getting a few things straight .... and former RBA governor Ian Macfarlane should hold the institutional memory .... Whitlam and Co get a lot of stick for the early '70s, but the system was teetering under the previous Liberal coalition

Hindsight is a wonderful thing, but even so Whitlam got what he deserved and so did Macmahon, but not before both of em screwed the economy for the next few years.
Keating did what Macmahon should have done, let the economic levers go where they needed to go, hence the banana republic and "recession we had to have".
Right now, the RBA is doing a Macmahon and keeping interest rates artificially low. Interest rates might be at historical lows, but to get a loan from a bank for anything other than ultra safe housing is like getting blood from a stone.
They refuse to take any risk whatsoever, but demand a risk free premium as their profit.
I am struggling with the next phase of the economy - just how high will inflation get to, how high will interest rates get to, and which industries will survive and proper.
Mick



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sent from my Olivetti Typewriter.
 
nipper
post Posted: Oct 31 2020, 04:16 PM
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Just getting a few things straight .... and former RBA governor Ian Macfarlane should hold the institutional memory .... Whitlam and Co get a lot of stick for the early '70s, but the system was teetering under the previous Liberal coalition
QUOTE
For a start, the growth of production and employment during the 30 year post war Golden Age was stronger than any period before or since. We had high levels of protection against imports, with little or no competition from developing countries.

We had a strong union movement, confident that in pushing for higher wages it was not jeopardising workers job prospects. We had a centralised system for setting wages, with widespread indexation of wages to the consumer price index.

Our businesses took a cost plus approach to their prices. If wages or the cost of imported components rose, this could be passed on to customers, confident your competitors would be doing the same. That is, firms had pricing power.

Finally, business, union and consumer expectations about how fast prices would rise in future were quite low at the start of the period, but they picked up and, by the end, had become entrenched at a high rate.

This macroeconomic environment was clearly conducive to rising inflation, and it took one policy error to push it over the limit, Macfarlane says.

Under the McMahon government, the predecessor of the Whitlam government, fiscal policy was made expansionary even though the inflation rate was already 7 per cent. Monetary policy was eased, with interest rates remaining below the inflation rate. And the centralised wage fixing system awarded 6 or 9 per cent pay rises.

So, that is how we acquired an inflation problem. What changed in the second 30 year period of declining inflation? Macfarlane thinks the defining feature of the later period was that, in the long struggle between capital and labour, the interests of capital took precedence over those of labour. That is, the bargaining power of labour collapsed.


https://www.smh.com.au/business/the-economy...569up.html?btis



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 


nipper
post Posted: Jul 10 2020, 12:00 PM
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Interesting times:
QUOTE
Prime Minister Scott Morrison announced earlier this week that the Government intended to introduce some support after much of the current stimulus package ends in September.

At the moment, stimulus also means adding eye watering levels of government debt to the balance sheet ..... perhaps a trillion dollars of it.

That's not a problem according to some economists such as Bill Mitchell, emeritus professor of economics at Newcastle University and one of the early founders of Modern Monetary Theory (MMT). There is no question that the Government can meet all of its liabilities he said. A government like Australia, which issues its own currency, can always pay it out. He said the Government could simply get the Reserve Bank to create the currency that is needed.

Modern Monetary Theory has long been ridiculed by most economists as Modern Magical Thinking because simply typing money into existence risks inflation. MMT supporters say inflation is the last of our worries right now.

But even if you accept that the Reserve Bank can magically type money into existence, that is a luxury households do not have. Household debt relies on income from jobs.

Professor Mitchell believes the way out of our coronavirus recession is for the Government to fund unconditional jobs for anybody who wants them. That income support then provides a sort of buffer for the economy, he said.

The Reserve Bank deputy governor is not entirely dismissive of Bill Mitchell's belief that we do not need to worry about government debt. A reasonable amount of what they are saying is not different from the way I would think about it, and the way a lot of other people think about it, it is a matter of degree, Mr Debelle said. If you borrow too much, then that's inflationary or you are Argentina and you default. There are plenty of examples where there are clearly limits, the question is where those limits are.




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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne

Said 'Thanks' for this post: early birds  
 
nipper
post Posted: Jun 18 2018, 09:32 AM
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Beware the long-lost threat of inflation
QUOTE
For nearly a decade, inflation hawks such as yours truly have been the stopped clocks of economic forecasting – except that we're still waiting to be right once, much less twice, a day. As central banks throughout the developed world ran their money-printers furiously in hopes of jolting the economy from its swoon, we fretted at the prospect of overheating. It was as if we were offering lemonade during a blizzard.

My defense when reality-based colleagues called me out was that I'm old enough to have firsthand experience of roaring inflation – back in the 1970s – and it's no picnic. While it is true that inflation is a nifty way to file down the fangs of the national debt while boosting the take-home pay of workers, the lived reality has its darker sides.

For families such as mine back then, living pay cheque to pay cheque, the rising wages never seemed to catch up to the soaring prices. Eventually, rather than let things spiral out of control Venezuela-style, the Federal Reserve slammed on the brakes with double-digit interest rates in the early 1980s that threw the economy into an unpleasant recession.

So at the risk of being wrong again – an occupational hazard for all opinion columnists – allow me to ring a faint alarm on inflation once again. This time, I'm spurred by a recent conversation with a veteran of America's freight-hauling industry, a bellwether sector given the number of lives it directly affects.

For a variety of reasons, trucking prices have gone through the roof over the past year, with no end to the upward trend in sight. The problem starts with a shortage of drivers. Interstate truckers have a long history as the ill-treated workhorses of the US economy – underpaid, disrespected, pressured to put in long hours and battling loneliness far from home. With unemployment down to unusually low levels, blue-collar workers have plenty of alternatives to this life.

According to a report last year for the American Trucking Associations, US freight companies were short by about 50,000 drivers last year. Given that the median age of private-company drivers is 52 and that young Americans are shunning the field, the shortage could more than triple by 2026. Widespread adoption of self-driving trucks is too remote to offset the problem.

This explains the sign-on bonuses that major freight haulers are offering to new drivers. The going rate, according to one industry insider, has climbed tenfold over the past couple of years, from $1,500 to as much as $15,000, collectible after six months on the road. The chance to collect two bonuses per year is fuelling rampant driver turnover: as high as 95 percent annually at major fleets.

Important safety advances are adding to the labor shortage, most notably the new requirement that rigs be equipped with an electronic logging device, or ELD. Designed to tame the problem of overtired drivers skirting federal requirements for adequate rest, the tamper-proof ELDs record precisely the number of hours each driver has been on the road in a given day. My new friend from the freight industry estimates that more than 800,000 non-compliant trucks were pulled from circulation when ELD enforcement began on April 1.

These trends, along with rising fuel costs and strong consumer demand for shipped goods, are driving the price of freight sky high – up from last year by about four times the rate of inflation, and the worst may be yet to come. Demand for truck space is growing while supply is shrinking. Given that 70 percent of America's freight moves by highway, this runaway cost engine is felt in all corners of the economy.

At a time when high stock prices reflect expectations of growing corporate earnings, one manufacturer after another has reported that freight costs are weighing noticeably on profits. The story repeats itself across the iconic brands of America's grocery stores: Coca-Cola, Hershey, General Mills, Tyson, Procter & Gamble. You name it. The heat from this inflationary fire is singeing farmers, food processors, manufacturers, big-box stores, restaurants, and e-commerce giants such as Walmart and Amazon (whose founder and chief executive, Jeffrey P. Bezos, also owns The Post).

I know: Calm down. Labor anomalies in a single industry won't spark runaway inflation by themselves – though consumers are already seeing higher prices because of shipping costs, and they are sure to see more. And Federal Reserve Chairman Jerome H. Powell signalled last week that he's keeping a close eye on core inflation and won't let it spoil what he called a "very strong" economy.

But the search for a "Goldilocks economy" is never-ending. And for the first time in years, there is a place for us hawks at the table. Because too hot is now as threatening as too cold.

by David Von Drehle - The Washington Post



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne

Said 'Thanks' for this post: early birds  
 
nipper
post Posted: Aug 29 2017, 07:48 AM
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these components always seem to be cited - another indicator of low numbers ahead?

QUOTE
...a fruit and vegetable oversupply [is] causing prices to plummet. Crops have been thriving in this year's unseasonably warm Queensland winter, pushing them to mature faster and earlier than usual; a stark contrast to six months ago, when stock was low in the wake of Cyclone Debbie.

Ipswich grocer Tracey Castellana said prices had fallen by more than 50 per cent. "A lot of the vegetables, the prices were through the roof and the customers were very unhappy about it, but now it seems to be a flood in the market," she said....
http://www.abc.net.au/news/2017-08-29/frui...r-crops/8848694



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
marketwinner
post Posted: Apr 8 2017, 07:23 AM
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In Reply To: nipper's post @ Mar 22 2017, 11:04 AM

http://www.nzherald.co.nz/world/news/artic...jectid=11829757

Eurozone inflation falls back below target in March - World - NZ Herald ...

http://www.feedstuffs.com/news/fao-index-s...e-decline-march

FAO index shows global food price decline in March


 
 


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