The 2020's: A decade of Inflation

[BigFatWhale]

With the current spiralling food prices leading to a food crisis, it would lead to better prospects for the cold storage industry.

We look at 4 stocks that could benefit from this trend in this article.

https://thebigfatwhale.com/food-crisis-a...-industry/

[weijian]

Me as well just remember the high level story - as learnt from Warren Buffett's discussion of interest rates changes from the 1960s to 1980s. But I do know that real life is more complicated than using narratives alone. There is convolution of factors and then interactions that produce 2nd order/3rd order effects...

And as usual, the cure for high prices is high prices. So the cure for inflation, is high inflation (and as we have seen that the cure for deflation is deflation that lures everyone to believe it will last for a long time)

Volcker and Inflation…

Of course, everyone knows the high-level story; Volcker broke the back of inflation by taking rates into the stratosphere, inducing a recession, taking the heat from politicians and the populace, and sticking to his principles. He had only one mission; defeating inflation. Nothing stood in his way, and he kept at it until the mission was accomplished. As a result of Volcker’s sacrifices, we’ve since experienced four consecutive decades of economic boom. Or that’s how everyone seems to remember the situation today. What if there were other contributing factors?

https://adventuresincapitalism.com/2022/...inflation/

[Behappyalways]

Investors beware.....

https://www.clevelandfed.org/our-researc...sting.aspx

[Behappyalways]

Trying to prepare you for the news ...

https://mobile.twitter.com/therecount/st...2599671810

[Behappyalways]

Food for thought...is the current interest rate enough???



https://mobile.twitter.com/biancoresearc...6277347330

[weijian]

Of course, Munger is rich enough to afford to ignore inflation (in fact, most of us are too - we are not going to go lose our basic needs because of inflation). But I guess some Mungerism is always good for some reminders. If 98year old Munger intends to live through inflation, me too!

Investors should look beyond the inflation spike, back fossil fuels and renewable energy, and “never touch” cryptocurrencies, the Berkshire Hathaway vice-chairman says.

“I’m 98½ years of age, and I’ve seen a lot of inflation. I intend to live through inflation.

https://www.afr.com/markets/equity-marke...705-p5az7y

[CY09]

In my view, interest rates are going to keep rising for medium term. What causes inflation is the age old saying: "too much money chasing too few goods". The most effective solution is to take away the money by extreme QT instead of throwing in the kitchen sink of 75 or even 100 basis points.

As an investor, I am preparing for this scenario where interest will only rise for 1 year with the Fed raising rates as their (ineffective) policy of choice but will eventually reduce rates in 2-3 years time once they realize the use of a wrong policy tool and will switch to QT.

[BlueKelah]

In my view, interest rates are going to keep rising for medium term. What causes inflation is the age old saying: "too much money chasing too few goods". The most effective solution is to take away the money by extreme QT instead of throwing in the kitchen sink of 75 or even 100 basis points.

As an investor, I am preparing for this scenario where interest will only rise for 1 year with the Fed raising rates as their (ineffective) policy of choice but will eventually reduce rates in 2-3 years time once they realize the use of a wrong policy tool and will switch to QT.

FED will likely have to reduce rates later this year as the US treasury with 30trillion+  debt cannot afford more than 3%(means 900billion in repayments) which the short term bond yields are already at. Add in the start of a recession (TBA later End July) FED will have to PIVOT very soon. And it will be like 1970s all over again where incompetent FED and gov policy makers failed to tame inflation beast. 

Just like the 1970s, I see gold and silver doing 4x or 5x this decade (maybe even 10x if the USD falls apart) as inflation panic sets in and FED starts printing again. 

have a look at this video from kitco where they interview  former Reagan advisor Arthur Laffer.
https://www.youtube.com/watch?v=viO4Gww7-B4

[Behappyalways]

The US govt can always repay debts even if interest rates goes up. They just need to increase their debt ceilings and the fed buys the debts. Just that you probably have depreciating currency like what Japan is facing

Watch 13:00

https://m.youtube.com/watch?v=yJEs2L4zqsc&t=228s

[BlueKelah]

The US govt can always repay debts even if interest rates goes up. They just need to increase their debt ceilings and the fed buys the debts. Just that you probably have depreciating currency like what Japan is facing

Watch 13:00

https://m.youtube.com/watch?v=yJEs2L4zqsc&t=228s

Yes they can increase debt ceilings to fund the interest rate payments, which is currently already 900billion @ 3%(which bond yields are roughly at short and long ends). But the USD will then depreciate a lot and you get into a situation where inflation gets worse(imports cost more) and worse global loss in confidence of the dollar. Already with current rate rises it has plunged economy into a recession. Another 1-2% rate rise would probably plunge the country into a depression. 

In addition, USA Gov is expected to book a 1 TRILLION budget deficit this year. Biden is not cutting spending much so there you go.

So even if they can fund the  massive debt repayments at rate rises beyond 2%, I believe rate rises cant go up any further without causing a depression scenario. FED is now caught in a bind finally.

Stagflation is already here. I dont think US gov currently has the political will to dig out of this mess (they will need to redo their welfare and taxation system and do other stuff to increase productivity). 

This curent FED will just continue to raise rates till the system breaks (overcorrect) then PIVOT and we will get continued high inflation with very low interest rates and lotsa USD depreciation. With Powell in office for another 4 years till 2026, we are likely to see a good show next few years lol, very possibly weak USD and negative interest rates.