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2021 - Is inflation finally back in the conversation?


Reagan1k

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I think it's pretty simple (which probably means I don't understand it).  But the May report will tell us where we are, more towards an accurate triangulation of degree and possible length of inflation.

I expect May's report to be more like March's, a stabby increase in the YOY and trend.  I think this mostly because energy and food prices clearly shot up from April's reprieve (esp. gas/diesel).  Plus the Europe natural gas situation with Russia made it go way up, which of course will reflect down the line in global markets. 

If May's report is markedly worse, I think we're Stagflated and in deep, sticky shit for 4-5 more months.  If it withstood the battering it seems to have gotten, then I think a strong case could be made that barring some unforeseen force acting upon the economy in the summer, we might be heading down towards 5 or even 4 percent, which to me would begin to show up in prices by mid-summer.

That May crop report is a biggie/extra-influential for the rest of '22:

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20 minutes ago, Johnny Chimpo said:

Just to be clear what I wrote was definitely with this sort of thing in mind 😂

 

I think what some posters here love to say when similar situations come up is fuck around and find out. 
 

On the plus side I’m guessing this contributed to the California budget surplus, which is then being used to offset inflation. 

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Here's a bit of good news:  Retail spending continued to increase in April.  My guess is that people saved $$$ from the pandemic and now have opportunities to spend on stuff that they couldn't when padlocked into their homes.  But I dunno.  

This is a tricky number, as the prices weren't adjusted for inflation, so reflect increased prices.  But it's still stubbornly hanging on.

One possible bad sign is that gas spending decreased 3% from March.  Energy, especially gas, is often the first sign of a spending slowdown.  But again, it's kind of a mixed bag.

Anyway that's the one stat that's a little not to be expected - at some point high prices will drive spending down - but not yet:

https://www.cnbc.com/2022/05/17/retail-sales-april-2022-up-0point9percent-vs-1point0percent-estimate.html

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3 minutes ago, phdhorn said:

Here's a bit of good news:  Retail spending continued to increase in April.  My guess is that people saved $$$ from the pandemic and now have opportunities to spend on stuff that they couldn't when padlocked into their homes.  But I dunno.  

This is a tricky number, as the prices weren't adjusted for inflation, so reflect increased prices.  But it's still stubbornly hanging on.

One possible bad sign is that gas spending decreased 3% from March.  Energy, especially gas, is often the first sign of a spending slowdown.  But again, it's kind of a mixed bag.

Anyway that's the one stat that's a little not to be expected - at some point high prices will drive spending down - but not yet:

https://www.cnbc.com/2022/05/17/retail-sales-april-2022-up-0point9percent-vs-1point0percent-estimate.html

I'm gonna go with Wally World on this one.  Their analysis of the market is....disturbing.  

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I am too lazy to research this elsewhere: if inflation is being caused by an oversupply of money, why are stocks falling?  Wouldn’t everyone having too much cash and nowhere to spend it result in people buying more stocks as a store of value, causing the market to rise?  Or is the shift in sentiment forcing people to pull money out of stocks to pay for other things that have gone up in price?

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I am too lazy to research this elsewhere: if inflation is being caused by an oversupply of money, why are stocks falling?  Wouldn’t everyone having too much cash and nowhere to spend it result in people buying more stocks as a store of value, causing the market to rise?  Or is the shift in sentiment forcing people to pull money out of stocks to pay for other things that have gone up in price?

This inflation is a different animal. Structural supply issues around wheat, oil, land labor is driving it along with consumer demand (which is not driven by individual consumer credit usage increases). Meaning raising interest rates might not solve our issues because the US consumer is not running up their helocs and credit cards to buy jet skis
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43 minutes ago, Immaculate Vibes said:

Target did the same as Walmart. Better sales, worse earnings due to decreasing margins. 

I've been saying this for months because I live it every day. Businesses aren't "getting rich" off of this inflation contrary to the narrative being pushed. Maybe O&G did better given the massive spike, but we knew this would be temporary. But everyone else is getting squeezed. 

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1 hour ago, TwiceHorn said:

Seeing price reductions in the Dallas market, which is nice.  A month ago, you had to offer 10%++ over to get almost anything.

WoW mortgage apps fell 12%.  

Edited by Trey3216
Immaculate Vibes beat me to it.
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23 hours ago, Snake Diggity said:

I am too lazy to research this elsewhere: if inflation is being caused by an oversupply of money, why are stocks falling?  

Economics is more than just 1 thing. The cheap lending / low rates is just 1 of many factors

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8 minutes ago, 52-80 said:

Economics is more than just 1 thing. The cheap lending / low rates is just 1 of many factors

Yep. Lending rates don't effect our buyers. Put a 2100 sq.ft.house on the market on Monday, for $625k. It's Brazos River front, but not a great hole of water. We have two offers, both full price, cash buyers, have waived appraisals, will not ask for any repairs, and willing to pay for the seller's title policy. 

People, in their prime earning years, are negotiating to work at home, and go into the office once or twice a week. They are taking the equity from their more expensive urban/desirable suburban home by selling it. They are going out and use that equity to pay cash, and pocket the difference, on rural, and small town residences about forty-five minutes to an hour out from their main office. In our area, that's Granbury and Glen Rose. I haven't been out that way for a while, but would think the same is happening in Burnet, Johnson City, and Blanco. 

CHIEF

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Just now, fattyflattie said:

For us in West Houston, that’s always been higher priced than most of the burbs.  But to your statement, it’s gotten even worse. 

Yeah, I looked at my last little 2000 sq. ft. house in Cedar Park. I got a helluva deal on it in 2003 when the housing market had a small hiccup at the beginning of the Iraq war. The builder was trying to close out construction on the east side of Anderson Mill Rd. to move across and have all of his contractors on the west side. I went to look at it at $185k, and he immediately dropped the price to $163k. I built a covered porch on the back for about $12k, and put in a sprinkler system. The house is on the appraisal books, today, at $601,101. I was paying in enough extra to have the house paid off in about 18 years. I could buy the same house, currently, in my neighborhood for about $400k, and put $200k in my pocket.

CHIEF

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On 5/17/2022 at 12:42 PM, Snake Diggity said:

I am too lazy to research this elsewhere: if inflation is being caused by an oversupply of money, why are stocks falling?  Wouldn’t everyone having too much cash and nowhere to spend it result in people buying more stocks as a store of value, causing the market to rise?  Or is the shift in sentiment forcing people to pull money out of stocks to pay for other things that have gone up in price?

flight to safety.  stocks are at historically high valuations.  all of a sudden you have inflation-protected government bonds paying out guaranteed rates or 7 - 8 percent when they were paying out 2% six months ago.  where would you rather put your money?

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16 minutes ago, gsoda3 said:

flight to safety.  stocks are at historically high valuations.  all of a sudden you have inflation-protected government bonds paying out guaranteed rates or 7 - 8 percent when they were paying out 2% six months ago.  where would you rather put your money?

TINA!!! TINA!!!

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26 minutes ago, gsoda3 said:

flight to safety.  stocks are at historically high valuations.  all of a sudden you have inflation-protected government bonds paying out guaranteed rates or 7 - 8 percent when they were paying out 2% six months ago.  where would you rather put your money?

This makes sense, thanks for this answer.

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flight to safety.  stocks are at historically high valuations.  all of a sudden you have inflation-protected government bonds paying out guaranteed rates or 7 - 8 percent when they were paying out 2% six months ago.  where would you rather put your money?

Which bonds? Ibonds? Tips? Something else?

Don’t ibonds have a max $10k annual investment? How much stock can that be offsetting.
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2 hours ago, tbone_ said:


Which bonds? Ibonds? Tips? Something else?

Don’t ibonds have a max $10k annual investment? How much stock can that be offsetting.

ibonds are actually at 9.62%, crazy.  yes there's a limit of $10k / person / year. 

 

there are multiple reasons sentiment has turned bearish but this is one of the main ones.  we've seen free money flow into the markets for the past 2 years and now we're seeing what happens when that tide washes out.

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to answer your question about the $10,000 limit- how big of an impact did the covid stimulus money have on markets?  that was less than $10,000 per person.  it's not a perfect corollary but you get an idea of the amplitude that amount of money has on the system. 

 

other than those record ibond rates other gvt paper rates have increased to an amount not seen for several years and money has been pouring into those.  since about the beginning of the year there's been a positive correlation between equities and treasuries but the past week the correlation's broken down which when considering the huge equity selloff is a last ditch flight to safety.  is it capitulation?  i don't think so, not yet.  we'll see though.

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5 hours ago, gsoda3 said:

ibonds are actually at 9.62%, crazy.  yes there's a limit of $10k / person / year. 

 

there are multiple reasons sentiment has turned bearish but this is one of the main ones.  we've seen free money flow into the markets for the past 2 years and now we're seeing what happens when that tide washes out.

Can I short those?

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