Inflation

[divs4ever]

Blocked drain pipe at home today, the main one from the house to the sewer main out in the street.

Got a plumber to come and cut the tree roots out of it using a machine. All good, problem fixed, tree roots have been removed from the pipe.

Cost was 123.3% higher than the same pipe having the same cleaning done, using the same method, 6 years ago when I bought the place.

I'm not complaining about the plumber's work saying they shouldn't earn a living, just posting it as a data point for "real world" inflation.

amazing how 'real world ' can vary from 'official ' , isn't it ?

but yes i have had 'sticker shock ' it other places

 

[over9k]

And it's a slaughter!

Worst day since 2022. My previous "this year's bull run might be over" prediction might have been accurate.

And the markets were like "Hold my beer".


I've made worse predictions.

 

[over9k]

Blocked drain pipe at home today, the main one from the house to the sewer main out in the street.

Got a plumber to come and cut the tree roots out of it using a machine. All good, problem fixed, tree roots have been removed from the pipe.

Cost was 123.3% higher than the same pipe having the same cleaning done, using the same method, 6 years ago when I bought the place.

I'm not complaining about the plumber's work saying they shouldn't earn a living, just posting it as a data point for "real world" inflation.

For anyone wondering, 6 years' of "regular" inflation compounding should be about a third higher.

So this is 4x that.

 

[over9k]

This is well worth the three minutes.

60-80 years after a baby boom you have a healthcare boom, and it's HERE.

The real challenge for the pointy shoes in canberra is to figure out just how this is all going to be paid for.

 

[waterbottle]

US 2yr - 10 yr spread is getting close to uninverting now....

 

[divs4ever]

US 2yr - 10 yr spread is getting close to uninverting now....

and that historically ( in the short term ) is not a good thing

will it be different this time ?

 

[over9k]

Van eck reckoned they were still overpriced even now.

My previous post about this year's bull run being over looks to have been quite prescient.

 

[mullokintyre]

View attachment 181437View attachment 181436

Van eck reckoned they were still overpriced even now.

My previous post about this year's bull run being over looks to have been quite prescient.

beat ya.
Said that back in March (see post #6 ).
Mick

 

[over9k]

beat ya.
Said that back in March (see post #6 ).
Mick

The top was nowhere near march

 

[divs4ever]

Van eck reckoned they were still overpriced even now.

they seem to be over-priced to me , also

but worst since 2020 , golly it was only since 2022 when i looked earlier

the punchline will be was the drop broadly based ( not just say 10 or 20 stocks )

broadly-based suggests some covering of margin loans

 

[waterbottle]

When are we going to start the degen SQQQ plays?

 

[over9k]

When are we going to start the degen SQQQ plays?

SOXS and FNGD bottle, c'mon.

And I called it a few days back

 

[waterbottle]

SOXS and FNGD bottle, c'mon.

And I called it a few days back

Too early maybe? Gotta wait until the Fed cuts before we see a sustained downtrend.
Canadians have had their second cut overnight.

 

[over9k]

This thing is going around the world now. Aus & Asia's in freefall, Europe will be next.

U.S futures being green is doing little to ease concerns.

 

[over9k]

For anyone wondering how this is connected to inflation:

Markets are in freefall because earnings reports have missed estimates something shocking. This tells you that all the price rises we've seen (in all kinds of stuff) have not just been BS excuses to crank prices and increase margins. They have been a legitimate passing on of costs to the consumer.

This means that the price increases are supply driven, not demand. Which means that interest rate rises will not solve the problem, or at least not doing so without tipping things into a pretty painful contraction.

Stagflation is now here.

 

[over9k]

In fact, if price inflation is a supply side issue, rate rises can't solve it. Normally, pummeling the demand side with a rate rise will result in margins getting squeezed. But if there's no margin to squeeze, a rate rise won't do squat. It will simply cause volume to fall, which ironically, may actually do nothing for prices because economies of scale will start to be squeezed as well.

Money is also squeezed out of productive investments and put back into things like simple cash accounts, only exacerbating the supply side problem.

They simply cannot rebalance the equation without pummeling (restricting, through rate rises) the demand side as well. There is no other option other than to let inflation run.

Policy makers are now backed into a corner.


Add the amount of debt the country is in (and couldn't even begin to pay off with 8% interest rates) and it becomes clear that hot inflation is here to stay.

 

[over9k]

If inflation continues at anywhere near present rates that's a default in practice. Technically it isn't but in practice it is.

And herein lies the other side of why they'll let inflation run hot - to monetise debt they simply could not pay off legitimately.

As smurf says, it's a de facto default - if the money you're being paid back with is worth, say, 10% less than it should be, this is effectively them only paying back 90% of what they owed.

Considering that fixed income (bonds, which are loans) was already an extremely defensive play to begin with, the question then becomes where you park your cash if your cash itself is depreciating?

Ordinarily you would say where the newly printed cash is going, but if the inflation is not being driven by printed cash then you need to find what is inflating because of the supply restrictions and park it in that.


And that, my friends, is commodities

 

[over9k]

And if you're really shitting yourself about how no asset class can make you a buck in real terms, the most defensive of all defensive plays looks a little something like this for the year:



The only curveball on this one is trump. Even yellen is now on record saying that U.S debt levels (and the entire world's, but let's just stick with U.S on this one as the USD is the last defensive play before gold) are reaching unsustainable levels at current interest rates/budget deficits.

So either trump gets interest rates dumped (and everything predictable from that will be the play) or he doesn't and the U.S monetises the debt (pays it off with printed cash).

Should it be the latter, gold will soar.

Should it be the former, they're only delaying the inevitable monetisation (without a budget balancing, that is) anyway.


So the question is not whether to buy some gold, the question is only when to do it.

 

[Dona Ferentes]

.....and that, my friends, is commodities

nice narrative, @over9k

 

[over9k]

nice narrative, @over9k

Thankyou, thankyou.

I'm here 'til thursday.