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  • Inflation Expectations Are Up. Should Investors Worry?

    From schwab.com

    Economic growth is picking up as the vaccine rollout gains speed, commodity prices are heading higher, the government is proposing another large fiscal aid package, and the Federal Reserve is pledging to keep its very easy monetary policy intact for the foreseeable future. Not surprisingly, inflation expectations are rising, as illustrated in the chart below. Given these factors, how concerned should bond investors be about inflation? Here’s our take on the current situation, and what investors can consider doing now. There are many ways to measure inflation. The most widely used measure is the Consumer Price Index ... (full story)

Complete bullshit.
No sign of inflation whatsoever at this stage.
Disinflation followed by deflation is more likely.
Let's see. Inflation of the money supply by $5 trillion in one year. Restriction of the supply chain by the Government reaction to an unexpected flu virus. FED actual goal IS 2.0% inflation YoY. Inflation increasing from .3% to 2.2% in the last 3 months. All the Blue States coming online economically all at once now that they don't have to deal with Trump. Dollar Velocity increasing. FED saying they won't react to a sudden jump in inflation if it doesn't stay over 4%. Commodity prices already leading the way and minimum wage doubling. Yeah, nothing to see here. Pass the popcorn. I'm trading the trend of the USDX to... Ummm, 80? EURUSD to 160? That's my play. Probably wrong. I'll be broke by the end of the month. Maybe. I don't know.
Was just at a big Box store a piece of Lumber a year ago was in 27-28 USD range, now 42.and small change.
Is consumer going to chase price increases just cause interest rates are low a question worth asking?
What they are more likely going to do is keep nominal spending in check and reduce scope of purchase.

Fed can control rates they can not control what people do. Sticker shock is real.

Cold winter settling in the USA and Europe getting a dose as well. Energy costs for heating are rising and that is going to take another bite out of disposable income.
For all the Yak about global warming German roadway had a 70 KM bottleneck from Trucks stuck in Snow.
Drivers reported to be stuck for 16 hours unable to move.
Quoting funzodundee
Complete bullshit. No sign of inflation whatsoever at this stage. Disinflation followed by deflation is more likely.
No sign of inflation? Really? Can I move to your corner of the world please?
aneh sekali, setiap usd menguat, selalu ada berita entah berantah muncul (pls translate, my english not good )
Quoting foto
Was just at a big Box store a piece of Lumber a year ago was in 27-28 USD range, now 42.and small change. Is consumer going to chase price increases just cause interest rates are low a question worth asking?.
Amongst other things, I watch lumber futures. In March 20 they touched about $250 or so. Now around the $950 mark (all a bit depending on which expiration month you are looking at).

Not so straightforward, of course, as I don't know of any supply issues should there be any. I'm guessing its on the demand side. Supply flow would be what is known as inelastic - it doesn't change quickly to changes in price.

This, as with any raw commodity, will feed itself into finished products that use lumber and will then have secondary and tertiary effects on prices associated with this as demand for substitutes will increase and perhaps wages.

No need to understand anything about macro economics to understand this intuitively.
Quoting LloydOz
{quote} Amongst other things, I watch lumber futures. In March 20 they touched about $250 or so. Now around the $950 mark (all a bit depending on which expiration month you are looking at). Not so straightforward, of course, as I don't know of any supply issues should there be any. I'm guessing its on the demand side. Supply flow would be what is known as inelastic - it doesn't change quickly to changes in price. This, as with any raw commodity, will feed itself into finished products that use lumber and will then have secondary and tertiary effects...
I spent many years in Construction industry and after having written my fair share of estimates know just how damaging supply price increases can be to putting a job together. People do not have ability to print money like CB's. They have budgets and that is the limiting factor. Interest rates can make a difference but where they are now it is meaningless as to how much impact they can offer.

I survived mortgage rates at 18% under Volcker, they have fallen quite some ways but Fed is basically not effective any longer. Consumers are in no mindset to jump on the wheel of fortune and role dice just because Powell or Yellen say so.

Market ramping up prices just because financial derivatives allow them to, does not mean there will be takers to absorb the increase.
People are paying down consumer debt they are not chasing price.

add: We were told Fed knew what it was doing back then, storyline has never changed no matter how big a F__k up they are.
Nailed it foto .

" Market ramping up prices just because financial derivatives allow them to, does not mean there will be takers to absorb the increase.
People are paying down consumer debt they are not chasing price.

add: We were told Fed knew what it was doing back then, storyline has never changed no matter how big a F__k up they are. "

I'm just surprised the US citizens haven't marched on the Fed as they did the Capitol .

That's the real cess pit !
Quoting foto
{quote} I spent many years in Construction industry and after having written my fair share of estimates know just how damaging supply price increases can be to putting a job together. People do not have ability to print money like CB's. They have budgets and that is the limiting factor. Interest rates can make a difference but where they are now it is meaningless as to how much impact they can offer. I survived mortgage rates at 18% under Volcker, they have fallen quite some ways but Fed is basically not effective any longer. Consumers are in no...
Its all coming to a head just a matter of time I guess. To your point I think now its also in the hands of the rest of the world vying for those commodities and thus maybe there are some legs in this commodity bullishness beyond the cash infused speculation. But everything we see for sure is not sustainable. The CB's averting a proper recession again with printing money. Over 20 years now without a proper business cycle.
  • Post #10
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  • Edited at 2:18am Feb 14, 2021 2:02am | Edited at 2:18am
Quoting foto
{quote} I spent many years in Construction industry and after having written my fair share of estimates know just how damaging supply price increases can be to putting a job together. People do not have ability to print money like CB's. They have budgets and that is the limiting factor. Interest rates can make a difference but where they are now it is meaningless as to how much impact they can offer. I survived mortgage rates at 18% under Volcker, they have fallen quite some ways but Fed is basically not effective any longer. Consumers are in no...
Thankyou for sharing your experience and wisdom.

As I mentioned, I don't really know why lumber prices have rocketed. I doubt, however, that it is due to some derivative pump and dump play, or a deliberate squeeze, but rather what is happening in the real economy.

So, a certain segment of the population must be buying lumber. I would only be guessing who, but from what you suggest, its no longer your average lower of even middle class demographic. Probably a lot of DIY stuff during lockdown. I am lazy - I could find out how construction is going.

Or maybe they aren't chopping down trees anymore. That's possible. I have no idea of the American raw or processing lumber industry. That might be quite useful to know, actually, like are there only a few fairly powerful outfits which are licenced to harvest and process timber?

But anyway, should things like this be some consequence of unlimited liquidity (causing a lot of people to become very wealthy quite quickly on their stock portfolios and so they build a few more mansions and garages for their new fleet of cars and helicopters) which macro economists say will not cause inflation, well they aren't very clever then. Haven't joined the dots.
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  • Posted: Feb 12, 2021 10:40am
  • Submitted by:
     Newsstand
    Category: Fundamental Analysis
    Comments: 10  /  Views: 1,241
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