When will the Fed pivot?

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RYAN   By Guest Blogger Ryan Lewenza
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One of the key aspects of our roles as Portfolio Managers is to try to filter out the noise (stuff that is not critical to the economy and markets) from what is actually driving the global economy and financial markets.

Without a doubt the most important factor driving the US equity markets is when will inflation peak and rollover, which, in turn, will drive the decision by the Federal Reserve (Fed) to ‘pivot’ and stop hiking rates. Everything (the economy, stock and bond prices, crypto etc.) all hinges off this decision and timing.

I’m going on the record to declare that inflation has likely peaked (hopefully I don’t have to eat some humble pie with this declaration) and therefore I believe the Fed (and Bank of Canada) are getting close to pausing the rate hikes. More specifically, I believe interest rates could peak soon and I’m targeting roughly Q1/23. If correct, this should start to put a floor under the economy and equity markets, and ignite a recovery for both in 2023.

There are two types of inflation – headline which includes food and energy and core inflation which strips food and energy out. Headline inflation has already peaked. It hit a peak of 9.1% y/y in June, 8.5% in July, 8.3% in Aug and 8.2% in Sept. Why is this coming down?

Primarily because commodities and gasoline prices are falling. Oil peaked at $125/bbl. and today sits at $85. Copper is down from $5 to $3.5. Lumber is down 70% from its peak.

But core inflation remains hot at 6.6% y/y, which is what the Fed is most focused on. But I see this rolling over soon as well.

First, a number of individual inflation measures are rolling over (see table). For example, US wages have peaked. They hit at a high of 6.7% y/y early this year and now stand at 5.8%. Used vehicles went through the roof following the pandemic and were up over 50% y/y at the peak.

That’s nuts! As of October used car prices are down 10% y/y. Freight costs to move containers peaked at $10,000 per container and today sits at $3,145.

Lastly, a big component of core inflation is dwelling costs and US home prices are declining and I see rent prices cooling off as well they typically lag behind home prices.

So across a broad number of indicators, inflation looks to have peaked and I see monthly declines coming in US inflation readings in the coming months. This should then allow the Fed to take the foot off the pedal and stop hiking rates, which I see happening in the first quarter of next year. If correct, rates should peak over the next 3-6 months, which should then lead to a recovery in stock and bond prices

Key Inflation Indicators Pointing to a Peak

Click to enlarge. Source: Bloomberg, Turner Investments

The market seems to agree with this view as it is currently pricing in a peak in the fed funds rate of 5% by mid-2023. With the Fed’s 75 bps rate hike this week the fed funds rate now sits at 3.75-4%. In the Fed’s statement it hinted that the Fed could start to slow its rate hikes, essentially signaling a ‘step-down’ in future rate hikes.

This is exactly how the Fed operates. They start to tweak the language in their statements, and have Fed Presidents start to socialize the idea of adjusting their policy decisions, rather than making abrupt changes. They telegraph these changes to the markets and I think this week’s announcement and statement is the start of this process.

Currently the market is pricing in another 50 bps rate hike in December, followed by another 25 bps hike in January, with a peak of rates in in the spring. So we’re getting closer to the end of this cycle, in my view.

Market Expects a Peak in Fed Funds Rate in 2023

Source: Bloomberg, Turner Investments

Ok, so now that we have a potential playbook for interest rates in the coming months I need to connect this with the equity markets.

Below is the most important chart for the equity markets that illustrates the critical relationship between interest rates and the stock market. Below I overlay US interest rates (US Government 10-year real yields) with the S&P 500 price-to-earnings (P/E) ratio. I need to explain this chart so readers understand this connection.

In the chart I invert US interest rates to better show the relationship. This is the green line and means that as interest rates rise, the line is actually declining on the chart. So as the Fed hikes rates, this weighs on stock prices, and the P/E ratio for the S&P 500 contracts. But play this chart forward. As the Fed pauses and/or potentially ends their rate hikes, the stock market should start to recover, with the P/E ratio expanding.

This is what I see playing out next year and why I see a stock market recovery. Everyone these days are talking about a recession coming in 2023. But 1) much of the expected recession is already priced in the markets; 2) the stock market leads the economy by 6-9 months; and 3) as this chart shows, interest rates are a key driver of stock prices so if interest rates peak and decline next year as I expect, this should lead to a recovery in the stock market.

So there’s the playbook for 2023. Stay tuned for future updates.

Link Between Interest Rates & the US Stock Market

Source: Bloomberg, Turner Investments
Ryan Lewenza, CFA, CMT is a Partner and Portfolio Manager with Turner Investments, and a Senior Investment Advisor, Private Client Group, of Raymond James Ltd.

 

129 comments ↓

#1 IHCTD9 on 11.05.22 at 10:39 am

I hope these rates stick. It won’t be long before some new shtf event comes along. I don’t want to see the CB’s running into the woods screaming again.

We need a few years of 6%+ mortgages to grind down housing prices, and make housing speculation a risky business again.

#2 Grumpy Panda on 11.05.22 at 10:48 am

Higher interest rates and the election of either Republicans or Democrats will not cause Godzilla to attack the United States. Despite what you may have read.

#3 Bill zufelt on 11.05.22 at 10:54 am

18 months minimum but I wouldn’t bet against 36 —we’ve got very distorted markets and it’s going to take years(maybe even a decade or two) to bring them in line with reality. Canada,the US and others have been living way above their fighting weight on nothing but junk food.

#4 Stealth on 11.05.22 at 10:55 am

This is a very good article Ryan, as questions popped up in readers minds you answered them in the next paragraph. Thank you very much.

Have a great weekend.

#5 Eye on the Ground on 11.05.22 at 11:02 am

Thanks for the Blog Garth
Thanks for the Post Ryan
I agree inflation has peaked.
I am looking in stores bursting with inventory. Even Costco inventory is pack in the aisles.
In my opinion much of this inflation was due to shortages of inventory, US dollar up a crazy 20 plus percent.
Pent up demand, we all should have seen it coming!

Now like you say prices are falling. Used cars, lumber, oil.

I realize you cannot use everything in your analysis but I would have thought the dramatic rise in the US dollar was a major force behind world inflation?

What do you mean stocks will take off next quarter?
Yikes! October as up 14 percent.

One rant, I fully understand lowest incomes have been affected the most by inflation.
But…..
With eyes on the ground I look up and what do I see……Costco shopping baskets are overflowing, restaurants are full even in the middle of the day …. Reservations? no less.
At the pacific Center in Vancouver, wall to wall people all with bags.
Yes prices are up, but like my wife said yesterday….she got two prime rib for the price of one. Our favourite wine $3 dollars off. So we had a good laugh…..buy on the dips.

Have a great weekend everyone thanks for reading

November has many meanings from Movember to NaNoWriMo

But for me November 11 is the time we pause and reflect on the sacrifices people have made for our freedom.
We live in a great country.
Lest we forget.

Thank you!
Thank you!

#6 Robert B on 11.05.22 at 11:04 am

Ryan, thanks for the optimism.
If the economy recovers as you say wouldn’t oil rise
thus affecting inflation once again?
I see inflation with us longer as long as oil remains high.

#7 Yukon Elvis on 11.05.22 at 11:05 am

The losing streak is over for the benchmark price of a single-family home in the Central Okanagan.

According to Association of Interior Realtors data released Friday, the benchmark price of a single-family home in the Central Okanagan increased 1.5% in October from $981,800 to $997,000. The price had fallen for five consecutive months after topping out at $1.13 million in April.

https://www.castanet.net/news/Kelowna/394609/Single-family-home-benchmark-price-jumps-in-October-ending-five-month-slide#394609

#8 Andrewski on 11.05.22 at 11:08 am

Thanks Ryan, your explanation makes it easier to understand what’s happening in the markets. There will always be doomsayers who will not agree with facts, but the proof’s in the pudding.

#9 Bobcat on 11.05.22 at 11:10 am

Amazing analysis, thank you Ryan.
One question though: you said that the rents have probably peaked in US. I assume that rents there went up primarily because the real estate became unaffordable for some people that had to rent.
Do you see the same thing happening in Canada, for example GTA, or are we still a “special case” because of the huge number of new Canadians we get (about 430k/year) and the rents will keep going up until the real estate gets more affordable?

#10 Dharma Bum on 11.05.22 at 11:19 am

“This is what I see playing out next year and why I see a stock market recovery.” – Ryan
——————————————————————————————————–

Good call.

You can’t go wrong predicting a stock market recovery.

The stock market always recovers.

Since the advent of a stock market, all collapses and pullbacks have eventually been followed by a rally and a steady climb upwards over the decades.

The long term trajectory is onward and upward.

All you need is time and patience.

“Do you have the patience to wait
Till your mud settles and the water is clear?
Can you remain unmoving
Till the right action arises by itself?”

― Lao Tzu

Leave it to the ignorant masses to flit around like chickens with their heads cut off worrying about the commotion and turmoil.

#11 TurnerNation on 11.05.22 at 11:36 am

10th??

Party’s over. Paging Blackrock et all to Kanada. Shades of USA 2008, get in here and scoop up these properties for pennies on the dollar. We will own little/nothing and be happy!!??

https://www.thestar.com/real-estate/2022/11/05/developers-are-hitting-the-brakes-pandemic-buyers-are-panicked-as-appraisals-come-up-short-is-this-the-end-of-torontos-condo-mania.html
“Ujjwal Jain never thought when he bought his pre-construction condo in April 2020 that it would cost him his life savings.
As the date for him to take possession of the condo nears, the bank appraisal, which is done to ensure the current market value of a property is in line with the size of the mortgage loan, determined the unit is worth $150,000 less than what he agreed to pay for it two years ago, before shovels were in the ground.
What’s more, the variable mortgage rate advertised when he signed his purchase agreement in 2020 was around 1.5 per cent. Now, it’s closer to six per cent.
Instead of being able to borrow all the money he’ll need from the bank to pay the developer for the unit, he’ll have to put up cash to make up the difference. The transaction is set to close in 2023.
“How am I supposed to close the transaction? Appraisals are coming in so low, people don’t have $100,000 to $200,000. I have had friends who have had to declare bankruptcy, and I am in the same boat,” Jain said.”

—–
—– Yesterday’s comments section. What’s with the people pumping one-size-fits-all medical treatments? You see, there is NO profit in selling cures. Only ‘treatments’. That’s a no-brainer.

Still, I nailed in here Jan 01:

#8 TurnerNation on 01.01.22 at 11:17 am
2022 schedule (Thanks to our sponsor, Fizer):
January: TFSA contribution; 3rd booster
March: RRSP contribution; 4th booster
June: 5th booster
September: 6th booster
December: 7th booster. Annual winter lockdown

#12 al on 11.05.22 at 11:36 am

This blog should be called The Greater Oracle.

#13 VS on 11.05.22 at 11:40 am

Hi Ryan; great post today, a few comments if you do not mind.
– Oil price topped? Is it because Biden flooded market with reserves to win mid-term election? then after the election they have to re-buy at any price; then (hypothetical) Iran/Saudi conflict, so a good chance to get oil price elevate and stay high for longer. I guess the only chance to get oil price fall is the deep world recession which will kill the demand (for oil).
– Also i could be wrong but seems JP wants to get trust back; i interpret that this is about treasuries; it used to be safe haven for all countries (i mean long term bonds), now even junk bonds perform better. So i am buying TLT with a goal at least 120 in first half of 2023. And hope it will go higher faster than S&P.
– I agree that the rates will stay at 5-5.25% for awhile; meaning how profitable companies gonna be (so why the stocks will go up?). And customers optimism with HELOC at 6-8%? how much customers gonna buy with that rates?

#14 chalkie on 11.05.22 at 11:42 am

Good article today Ryan.

Staying invested through this turmoil of peaks and valleys will be the best outcome, if we get the Santa Claus rally & I suspect we will, I do not want to be left on the cash shelf throughout that period.

Buying into good Liquid stocks with a nice dividend will carry any worries, if it is a couple of months to get this train back on the rails again, you get paid while you wait.

It will be full steam ahead for the markets come spring, only the Real Estate will be crying the blues, they are in for a sideways price war for 5 to 8 years, once they find bottom.

Quote of the day: Stay liquid and enjoy the show and cash flow, GIC’s are like watching paint dry.

#15 TurnerNation on 11.05.22 at 11:46 am

Shades of 2020. Schools closed, chaos follows. Perfect, a new generation of dumbed down tax slaves ready to go into hella bank debt in order to buy a kando. See above…

Remote learning? Gee were the kids not trained on this 2020, 2021? The Long Game folks.
This sounds a tad permanent? It’s been given a cutesy name:

https://www.tdsb.on.ca/School-Year-2022-2023/Virtual-Learning/Exemptions-from-Synchronous-Learning

https://www.cp24.com/news/school-boards-are-moving-to-remote-learning-as-education-workers-strike-continues-here-s-what-you-need-to-know-1.6140362

.These schools are closed for Friday’s Ontario education worker walkout (cp24.com)

.Indiana school temporarily closes to stop the spread of flu, RSV (abcnews.go.com)

—– Central Bank Digital Currencies — openly mentioned in mainstream media like the G&M. What else happened in 2020? We were told that cash was bad, germy, and to move away from it. Gotta hand it to our Global Rulers. 2020 accomplished ALL goals.

——-

I trust the Science. This got buried fast:

https://www.newsweek.com/tylenol-pregnancy-adhd-autism-study-1468948
Study: Children Whose Mothers Took Acetaminophen D

#16 Palpha on 11.05.22 at 11:53 am

Good article. But we are seeing wage inflation and that has not played out yet. Everyone is expecting huge tips even when you buy liquor at the liquor store. In BC the BCGEU has seen significant raises. BC General Practitioners are getting significant raises and the nurses contract is still up.
https://www.radionl.com/2022/09/07/bcgeu-reaches-tentative-three-year-deal-with-bc-government/

#17 Shawn on 11.05.22 at 12:13 pm

Agree inflation has likely peaked.

Stock market rally in 2023? – I’m not so sure about that at all. P/E ratios are indeed the key. Are they low enough yet?

#18 Victor Llearna on 11.05.22 at 12:13 pm

too bad interest rates can’t go to 100%. houses would be almost freee

#19 Brammer on 11.05.22 at 12:21 pm

Good article!

Topic is explained in clear language. I especially like the inverted interest vs equities chart – well done!

#20 50 YEARS OF MAPLE LEAF INCOMPETENCE! on 11.05.22 at 12:24 pm

You make a good case for a stock market recovery, Ryan, thanks for that.

But could you please change today’s picture?

It is very traumatizing for GTAholes and Toronturds to see images of free-flowing traffic in such picturesque scenery. The cognitive dissonance this creates can be very harmful and dangerous.

All they get to experience on their GTA roads is relentless banging from unrepaired potholes and standstill traffic for hours. The Eglinton crosstown delayed forever, and now Adelaide about to be be blocked off creating even more chaos and psychopathic driver behavior. Driving to do anything in downtown 416 is a nightmare. The only scenic images they get to see there are cones and barrels blocking the road at soon-to-be abandoned condo construction sites, or police tape cordoning off crime scenes where even schoolchildren and police officers are being murdered now.

There is no lovely mountain scenery like your photo shows, and this only makes Toronthole losers think of Calgary, where a hockey team has actually won something in the lifetime of their parents. Nothing like the horrifically deplorable start to the NHL season by the pathetic Make Believes this year. Yet again.

Please Ryan, just go back to doggy photos.

#21 Sail Away on 11.05.22 at 12:24 pm

Thanks Ryan!

Markets are tasty. Buy rail, buy fertilizer, oil, Berkshire, broad market, Tesla, Costco and tech. Hey, that’s everything. If any time is a particularly good time to have free cash, that would be now. We’ll never stop producing people and they all seem to want more stuff like food and heat. Money shenanigans are sort of irrelevant to the big picture of supply and product.

Buy. Maybe not low-elevation oceanfront, but everything else.

#22 dave on 11.05.22 at 12:44 pm

Geopolitically the BRICS nations with Saudi help are doing everything in their power to drive up inflation.

There is a slight pause because Biden released the USA Oil strategic oil reserves to help with midterms.

Once the mid terms are done – isnt inflation going to get even hotter?

#23 Shawn on 11.05.22 at 12:48 pm

Has the S&P P/E ratio declined enough?

I have the forward GAAP earnings P/E ratio as of last November 12, 2021. It was 22.9 at that time. Today I see 18.9.

That’s a 17.5% valuation reduction in P/E ratio.

Is that enough given the fairly massive interest rate increases?

An 18.9 P/E is a 5.3% earnings yield. That sounds pretty good given earnings rise over time.

Time will tell if the P/E needs to get a bit lower. It depends on longer term inflation expectations.

The ten year U.S. treasury yield is at 4.2%.

Which is better a flat 4.2% that can never grow but will of a certainty mature at par. Or 5.3% that will assuredly grow (and it’s not a cash yield) but the P/E could decline?

Inflation will affect both equally so is not really relevant unless you think inflation will help earnings.

In the end balance remains appropriate. Some fixed, some equities. Long term bonds had garbage yields for a very long time. Now they are starting to be worth considering.

#24 Ponzius Pilatus on 11.05.22 at 12:49 pm

#118 Dharma Bum
Re: Arizona
————————-
It seems as if everyone and everything down here is absolutely thriving and flourishing. Businesses are insanely busy. The traffic is ridiculous, and the cars are all shiny, new, and expensive. The homes (if you ignore the slums) are gorgeous. People seem happy. Friendly. OK, maybe a little nutty. But in an enthusiastic way.
——————————-
Yeah,
Supply management in action.
Give them what they want.
Bread and circus.
Just another name for decadence.

#25 Jason on 11.05.22 at 12:59 pm

Agree with some other comments, that energy, specifically oil, prices are going to continue to rise given the current political climate. That being said, things change. Nuclear power is starting to gain some advocacy. There’s an enormous amount of natural gas that can be tapped, if there’s a will to do so. The problem with predictions is that they’re predicated on the false assumption that things will remain as they are now. But things change.

Energy prices will continue to rise as long as the political climate remains as it is now. But I suspect things will change.

#26 Quintilian on 11.05.22 at 1:14 pm

Primarily because commodities and gasoline prices are falling. Oil peaked at $125/bbl. and today sits at $85. Copper is down from $5 to $3.5. Lumber is down 70% from its peak.

Demand for commodities and fuel etc has not dropped; prices did, because the speculation component was huge and later fear took over ; the gamblers oops, the investors bailed out like rats out of a sinking ship.

The inflation that exists now is real and remains sticky.

Down in the trenches, in the real economy, business is booming, sales are through the roof, wages are climbing.

The big problem is rising costs.
The top line is growing, but the downward pressure on the bottom line does not seem to be abating.

Inflation is raging, it will be quite some time before the higher rates take effect.

#27 Wrk.dover on 11.05.22 at 1:24 pm

#24 Ponzius Pilatus on 11.05.22 at 12:49 pm
#118 Dharma Bum
Re: Arizona
————————-
It seems as if everyone and everything down here is absolutely thriving and flourishing. Businesses are insanely busy. The traffic is ridiculous, and the cars are all shiny, new, and expensive. The homes (if you ignore the slums) are gorgeous. People seem happy. Friendly. OK, maybe a little nutty. But in an enthusiastic way.
______________________________________

Prose can’t begin to describe the Valley Of The Sun.

Nothing rots there. It just stays gleaming, house, car, public space, roads grow no holes, no puddles, no pesky dew, so no mold, just money assets everywhere, gleaming in the arid windless sunlight.

The 202 loop is worth the flight to Sky Harbor, just to see what an airport and highway should look like.

Hell of a place to be with low income though.

And that type, lives outside the gated communities.

#28 WhereToNow on 11.05.22 at 1:25 pm

I am getting tired of paying highly inflated prices for everything I need. T2 and gang really messed up with all their spending, QE and CERB giveaways. Now we all pay. This past year feels like a guy going downhill on that switchback road at 80 kph smoking his doobie, enjoying the scenery and coming to the corner and thinking life is great !! Keep the rate increases coming until at least June/23 in order to put an end to this runaway inflation monster.

#29 Shawn on 11.05.22 at 1:32 pm

Three stocks and Chill?

Someone here at least 5 years ago suggested an interesting 3 stock portfolio. I believe it was Fortis Inc, CN Rail and Royal Bank.

You would not have gone wrong with that if bought anytime in probably the last 30 years and especially if you added regularly during your working years. A few scary moments so had to pledge to never sell.

At this time all three have significant U.S. operations as well so you even get that diversity. You get dividends and growth and blue chip risk profile.

If 3 is too few stocks then you could include Enbridge, very much on the same theme.

It’s hard to argue with the past performance of this unorthodox suggestion which I picked up from someone here. Opinions and theory are one thing. Long term performance is another. And all four of these names are virtually certain to be bigger and higher in value in 10 and 20 years. And will have spat out a lot of dividends. Just sayin’

#30 Ustabe on 11.05.22 at 1:54 pm

Just reading on the Internets that Elon ranked the Twitter employees by how many lines of code they had produced last year and then fired x% on the bottom.

Which means he got rid of everyone who worked on particularly difficult areas like security, privacy, performance, reliability.

Tesla shares down 37% since Elon’s little Twitter experiment began. Twitter ad revenue plunging as we read this. As he has put up not only his Tesla shares but actually used Tesla itself as a guarantor this doesn’t bode well unless things dramatically change.

Yes, one the blood diamond/emerald/child labour guy’s fan boys is still recommending you buy Tesla.

#31 Søren Angst on 11.05.22 at 1:57 pm

eat some humble pie with this declaration
-Ryan

Famous last words.

—————–

As for the Market, it doesn’t know it’s a$$ from a hole in the ground from what I’ve seen this year.

Your Boss, D.O.M., says the US & CDN economies are OVERHEATED. And he’s correct.

I mean Murphy, the Jobs Reports & vacancies SCREAM overheated.

After the US Midterms oil is going up, slowly, but up. Heck, my Covered Call Contango ETN says so or I wouldn’t be pocketing +40% divs from them.

Come 1st Qtr 2023 when Demand outstrips Supply handily, per the milquetoast “don’t worry, be happy” IEA, inflation will do this:

SOAR.

They’re (politically interfered with BoC, couldn’t care less about Dem whining US Fed) going to keep on having to raise rates.

And history says this:

Rates > Inflation for it to be stomped down.

Simple.As.That.

#32 Søren Angst on 11.05.22 at 2:00 pm

#23 Shawn

Good minutiae analysis.

Like polishing the portholes on a sinking ship.

#33 Søren Angst on 11.05.22 at 2:13 pm

TRAVEL TIP:

STAY.HOME.NORTH.AMERICA, AND.YOU.TO.EU.

We are being trampled. And you’ve ALL gone BATSH!T crazy here in Italia.

TOURISTS IN ITALY ARE BEHAVING BADLY THIS YEAR: HERE’S WHY *

https://edition.cnn.com/travel/article/italy-tourists-bad-behavior/index.html

International visitor numbers from January to July 2022 were up 172% on 2021 and even 57% on pre-pandemic records, according to ENIT, Italy’s tourist board or numerically speaking

500 MILLION visits/presences this year.

————–

* Grazie America for Mansplaining that to us Italians. Recall, we live here.

You’ve had you fun here TURISTI, now stay home. Leave us alone for a few months.

Povera Italia.

#34 Reality is stark on 11.05.22 at 2:24 pm

For all those who upsized houses with a VRM during the pandemic it’s not likely to be much of a Christmas, everyone else should survive.
It’s still going to be ugly. China keeping their archaic Covid policy to prove the west has no humanity because we like to watch people die in the ICU’s.
They won’t discuss how many of their folks commit suicide due to their moribund economy.
Nothing like a balanced portfolio for a stress free life, just roll with the punches, don’t listen to anyone, add to the pile, and laugh all the way to the bank.
And work 80 hours a week.
You’ll be fine.

#35 Feds on 11.05.22 at 2:30 pm

You forget to mention the central bank balance sheet runoffs. Those are not stopping. The federal reserve will suck about 1 trillion out of US economy next year, and the year after. Same thing with most first world central banks. So even if rates stop increasing, and we know they won’t decrease them, the monetary conditions will continue to tighten for years to come. Buy away, I’m selling.

#36 Shawn on 11.05.22 at 2:58 pm

FED balance Sheet shrinkage

#35 Feds on 11.05.22 at 2:30 pm
You forget to mention the central bank balance sheet runoffs. Those are not stopping. The federal reserve will suck about 1 trillion out of US economy next year, and the year after. Same thing with most first world central banks. So even if rates stop increasing, and we know they won’t decrease them, the monetary conditions will continue to tighten for years to come. Buy away, I’m selling.

**********************************
Yes fed balance sheet will shrink. I will confess to never having understood how the FED money injections worked or how the reverse works. Who actually got dollars to spend from the FED and who is the Fed taking spendable cash away from now?

I need to see debits and credits on balanced sheets to understand this. The CFA and CMA CPA in me demands precision in explanation. Show me the money! (flows)

#37 earthboundmisfit on 11.05.22 at 3:04 pm

Thanks for the post, Ryan. Even should you be asked to eat a slice of humble pie, it will likely be a small one, shared with Garth, and easily digestible.

#38 IHCTD9 on 11.05.22 at 3:05 pm

22 degrees in the sticks this aft. Just got back from town, and there are almost as many bikes, ATV’s, and SXS’s on the road as cars. The wind is cleaning the last few leaves off the trees.

In other news, the burly old TD9 is probably saying good-bye next week :( That will leave only one crawler left in the stable.

#39 ArionSerbon on 11.05.22 at 3:15 pm

There will not be PIVOT just brief stops on the way to double digits. This inflation is not supply/demand but due to SHORTAGES thanks to the Covid lockdowns.
Raising rates will just make inflation worse but the CB has no option as they they don’t control the Fiscal Side

#40 The Gold Standard on 11.05.22 at 3:23 pm

If the history of the 80’s is any guide then interest rates will need to be much higher than where they are now to tame inflation.

#41 I don't know on 11.05.22 at 3:27 pm

I agree with our weekender’s post.

The only people clamoring for higher and higher rates are the “burn it all down” folks.

That includes the cynical, jealous, envious, greedy, and plain old gullible. Social media does a great job of giving the illusion of knowledge to these people. Isn’t it incredible how many experts on German 1920’s monetary policy there are?

Yes the FED will pivot. Rate hikes take a few months to make their way through the system. The results will start showing, as our weekender has mentioned, next year (likely early next year). Central banks have been looking for an excuse to raise rates for a while now. Given the mismatch between supply and demand brought on the pandemic, the temporary blip in inflation is providing the perfect cover. FED chair Powell piles it on with his talk talk aimed at instilling a little fear, just for good measure.

Why do central banks want to raise rates to badly? So they can lower them again if need be of course.

Stocks? Stocks will explode upward once they get a whiff of the pivot. They are already sniffing it. Most of the selling pressure is already done. The market seems to be bouncing off a hard bottom formed around mid June.

Real estate? It will be fine. As always, it’s a more long term play.

IDK

#42 Faron on 11.05.22 at 3:31 pm

#30 Ustabe on 11.05.22 at 1:54 pm

Interesting if that was the sole criterion. Another factor is that the best programmers do much more with far less code. Less code equates to a smaller attack surface for hackers.

Another aspect of blind cutting is that workplace culture matters and eliminating jobs while ignoring worker happiness is a horrible idea if you want productive workers.

Tesla will bounce 1, 2 maybe 3 more times? I strongly suggest you short the SAGIs when they come. Or just sit back and chortle.

#43 Faron on 11.05.22 at 3:34 pm

#33 Søren Angst on 11.05.22 at 2:13 pm

* Grazie America for Mansplaining that to us Italians

You do realize that CNN is an American news organization with an American target audience, right?

#44 Josh Feldman on 11.05.22 at 3:39 pm

Tiff at the Bank of Canada already seemed to have pivoted by giving a measly rate hike and being dovish.

That is to protect the real estate bubble, prevent an economic recession under Justin Trudeau and also to replace middle class Canadians with a nation of rent serfs under the Century Initiative.

The Bank of Canada doesn’t have the interest of Canadians at heart: They are obliged to serve the interests of the politicians, elites, corporations and the secret cabal and gatekeepers.

Do you want a future in Canada? Then demand change.

#45 Nonplused on 11.05.22 at 3:42 pm

“I’m going on the record to declare that inflation has likely peaked (hopefully I don’t have to eat some humble pie with this declaration) and therefore I believe the Fed (and Bank of Canada) are getting close to pausing the rate hikes.”

Interest rates aren’t managed to “peak inflation”, they are managed to “2% inflation”. This is easy to prove with a simple thought experiment: Let’s assume that inflation “peaked” at 100%. Is it time to cut rates? Or pause? Clearly not. So then why is it time to “pause” when inflation is still at 6.9%, but the target is 2%?

Suddenly we are all talking about the “rate of change” of inflation, which is the derivative. But the inflation rate is already a “rate of change”, in other words the derivative of price. You can think of price as where we are at, inflation as how fast we are moving, and the change in the inflation rate as acceleration. The acceleration is negative right now, but we are still moving pretty fast. Much faster than 2%. It’s not time to let off the brakes.

We can think of what the Fed is doing by gradually increasing rates as a chauffeur attempting to not spill his passengers’ wine, but clearly reacting to a speed trap ahead. He knows he’s going 180 km/h in a 60 km/h zone, and he has to slow down, but he doesn’t want to upset the passengers and disrupt the party.

Let’s all remember that the inflation target is 2%. We got a ways to go. “Peak inflation” doesn’t really come into it other than we don’t want stuff flying around in the back if we hit the brakes too hard.

I think part of the problem, induced by these long years since 2008 and even before, is that we have come to think the goal is to “set rates as low as possible without causing inflation”. But that isn’t the goal. The goal is to “set rates as high as possible without causing deflation”. It often helps simplify the problem if you reverse the way the formula is written.

Also, why would bankers, who are in the business of lending money, want the rate as low as possible? That goes 100% against their self interest. They want them as high as possible. But without causing deflation, because then their loan losses go up. The point is to squeeze as much blood out as possible without killing the donor.

And as for where inflation is going, well, winter seems to be on its way and we have done precisely nothing to avoid the biggest energy crisis of all time, which will soon be made painfully obvious. We’re hoping for warmer weather just to get through. But hope isn’t a strategy.

So for those of you out there who are hoping for lower house prices and lower mortgage rates, dream on…. It may never happen again in our generation. We might get one, but not both.

#46 Ryan Lewenza on 11.05.22 at 3:49 pm

Rob B “Ryan, thanks for the optimism. If the economy recovers as you say wouldn’t oil rise thus affecting inflation once again?”

Yes but we’ll still be past peak inflation. I see commodities doing well over the next few years which will keep inflation elevated and above average. But 3-4% is different than 8-9%. – Ryan L

#47 yvr_lurker on 11.05.22 at 3:57 pm

#34 And work 80 hours a week.
You’ll be fine.
———
Another cheery post. This is what they tell engineering students at UBC when they undergo the trial by fire of first year. It leaves just enough time to eat and have a shower. If working 80 hours a week is the new minimum condition for success in Canada, might as well take a jump off the Lions gate.

#48 the Jaguar on 11.05.22 at 4:02 pm

“I believe interest rates could peak soon and I’m targeting roughly Q1/23. If correct, this should start to put a floor under the economy and equity markets, and ignite a recovery for both in 2023.” – SL +++

I’ll take that bet, Mr. Lewenza. Admittedly I don’t follow the intrigues, ruses, and maneuvers of complicated beasts such as the markets, but aren’t stocks generally considered to be overpriced, with some of the biggies not really even producing anything?

The world is also a pretty interconnected place these days, and if energy shortages impact countries overseas (Germany for one) and economies contract, don’t something called ‘earnings’ hit a road bump? The situation overseas is far from resolved with prognosis undetermined.

If the real estate gasbag and every industry dependent upon it (like lumber) take a dive, doesn’t that signal descent versus ascent?

I don’t see the future as grim. ‘On shoring’ production of industries that make silicon wafers for use in semiconductors to places like Texas and Oregon and who knows what else seems like an intelligent move, but these things don’t happen overnight. Meanwhile there is more pain coming as the determined Mr. Powell said. I think he’s the real deal and won’t quit until the job is done. We’ll just be in the jump seat here in Canada. Whatever happens it’s still a great time to be alive.

#49 crowdedelevatorfartz on 11.05.22 at 4:12 pm

@Ryan
You’re a brave brave lad throwing out those predictions :)

I’m not as optimistic as you and I also think ANY pivot, no matter how small in 2023 or the first half of 2024 would be too soon.

As someone mentioned.
The entire housing market needs a kick in the goolies.

#50 Hal on 11.05.22 at 4:15 pm

Inflation will not be 3% to 4%. They may state that but they always understate inflation by at least 2% a year on average so 3%+4%=7%/2=3.5%+2%=5.5% is the real annual inflation that will stick around for many years probably through 2030 minimum.

#51 ElGatoNeroYVR on 11.05.22 at 4:18 pm

#33 Søren Angst on 11.05.22 at 2:13 pm

* Grazie America for Mansplaining that to us Italians
===========
As much as we enjoy your posts here ,generaly speaking , shouldn’t you worry more about Melonomics and what will that do to European economies ? That would be a worthy subject given the last time the “PIGS of Europe” were in the world news.

#52 Yukon Elvis on 11.05.22 at 4:26 pm

#24 Ponzius Pilatus on 11.05.22 at 12:49 pm
#118 Dharma Bum
Re: Arizona
————————-
It seems as if everyone and everything down here is absolutely thriving and flourishing. Businesses are insanely busy. The traffic is ridiculous, and the cars are all shiny, new, and expensive. The homes (if you ignore the slums) are gorgeous. People seem happy. Friendly. OK, maybe a little nutty. But in an enthusiastic way.
——————————-
Yeah,
Supply management in action.
Give them what they want.
Bread and circus.
Just another name for decadence.
++++++++++

FYI Pfizer is coming out with a shot that increases your
IQ by 20 points.
Too bad, that won’t help you much.
But, they are working on one that will double your IQ.
At least then you’ll be about average.

And don’t forget the booster.

#53 fishman on 11.05.22 at 4:36 pm

Don’t be misled that int % rates make the world go around. That honour belongs to diesel fuel. The rumour is that diesel is over $3 in New Brunswick. Boy oh boy, can’t wait till diesel rationing. Us farmer/fishermen folk way high up on the government priority list. Who cares about stocks & bonds & R/E & working for a living. Imagine the federal government 3000 miles away allocating diesel fuel. All that government cheese going to high priority users like farmers/fishermen & long haul food mother truckers. A more honest group of Liberal loving Canadian patriots out west here you’ll never find. We’ll fly flags “Long Live Lil Potato”. A light foot & low inflation, thats our motto.

#54 Ryan Lewenza on 11.05.22 at 4:44 pm

ArionSerbon”There will not be PIVOT just brief stops on the way to double digits. This inflation is not supply/demand but due to SHORTAGES thanks to the Covid lockdowns. Raising rates will just make inflation worse but the CB has no option as they they don’t control the Fiscal Side.”

Yes but those supply chains are starting to improve as Covid transitions from a pandemic to endemic and billions of people revert back to spending on services (eg concerts, vacations and dental checkups). This means less demand for durable goods and I believe lower inflation. Semi conductors look to now be in oversupply as an example. – Ryan L

#55 under the radar on 11.05.22 at 4:44 pm

Higher for longer is the FED message. Rates may stop rising next year, but reverse is not on this Fed’s radar, unless a)
they overshoot and cause a serious recession or b) an exogenous event threatens the orderly functioning of credit markets.
As for Equity markets nobody knows, except to say, stay the course.
For myself, my brothers’ mortgage has been paid in full and I have forgiven one of my tenant’s arrears. Her struggle is less now. Nice to use money to help others.

#56 PBrasseur on 11.05.22 at 4:47 pm

I think inflation could be a problem for a long time still.

After all inflation is just a function of productivity vs demand which is driven above what it should be by excess credit and government spending.

Excess credit and government spending are nothing new but in recent decades have been countered by rapidly increasing productivity from China in particular. This era is now over and our tendency to kill productivity with high taxes and regulations and to overspend money we don’t have is from now on going to have it’s full natural consequences, and the first of these consequences is inflation.

We are, the western world, in serious trouble and no short term recovery will change that.

#57 Joseph R on 11.05.22 at 4:54 pm

#44 Josh Feldman on 11.05.22 at 3:39 pm

The Bank of Canada doesn’t have the interest of Canadians at heart: They are obliged to serve the interests of the politicians, elites, corporations and the secret cabal and gatekeepers.

————————————————–

There is no secret cabal and gatekeepers.

Twitter, not even once.

#58 Lord Garth of Izar on 11.05.22 at 4:59 pm

DELETED (Anti-immigration)

#59 rikk on 11.05.22 at 5:06 pm

“Another cheery post. This is what they tell engineering students at UBC when they undergo the trial by fire of first year … If working 80 hours a week is the new minimum condition for success in Canada, might as well take a jump off the Lions gate.”

So odd to hear that “80 hours a week” after all these years … back in the day work less and you were gone … seriously.

#60 Ponzius Pilatus on 11.05.22 at 5:19 pm

#42 Faron on 11.05.22 at 3:31 pm
#30 Ustabe on 11.05.22 at 1:54 pm

Interesting if that was the sole criterion. Another factor is that the best programmers do much more with far less code. Less code equates to a smaller attack surface for hackers.

Another aspect of blind cutting is that workplace culture matters and eliminating jobs while ignoring worker happiness is a horrible idea if you want productive workers.

Tesla will bounce 1, 2 maybe 3 more times? I strongly suggest you short the SAGIs when they come. Or just sit back and chortle.
————–
Yep,
That shows you what a bad manager of people the Musk is.
We used to call that “Spaghetti Code”.
Endless lines of code leading nowhere.
It’s the same like paying people just for “FaceTime”.

#61 Nora Lenderby on 11.05.22 at 5:21 pm

#38 IHCTD9 on 11.05.22 at 3:05 pm
“22 degrees in the sticks this aft…”
Strong south winds for days. Not many Canadians are complaining!

“In other news, the burly old TD9 is probably saying good-bye next week :( That will leave only one crawler left in the stable.”
Sad, to lose an old friend. Classic doesn’t really cover it.

#62 Ponzius Pilatus on 11.05.22 at 5:29 pm

Herr Scholz went to Beijing.
Rather than to Washington to show some support for the faltering Democrats.
Are the alliances shifting?
Very little attention by the Western Media.
But American leaders (right or left) cannot ignore it.

#63 Stoph on 11.05.22 at 5:32 pm

#45 Nonplused on 11.05.22 at 3:42 pm

——————————————————–

In engineering, control loops are often based on PID control (proportional, integral and derivative). I’m sure you’re well aware of this.

If you only considered the proportional aspect (the difference between where you’re at and your target), you’d end up with a yo-yo situation where you overshoot your target and then have to reverse course. (This is one of the things the bank is trying to avoid and why they aren’t increasing the interest rate by larger steps).

It seems to me that the CB is including the ‘derivative’ aspect in trying to determine the correct interest rate needed control inflation. The inflation rate has stopped increasing and is now decreasing meaning that what they are doing is working.

Yup, rates aren’t going back down anytime soon, but there’s no reason for large increases in interest rates anymore as long as inflation continues to drop. If this changes and inflation stops decreasing, then yes, it makes sense to increase interest rates some more.

#64 SW on 11.05.22 at 5:42 pm

The caveat to your thesis is what the $USD is going to do. IF and that is a big if, the USD is rolling over here, we will likely see another leg up in commodities as it provides a tailwind to all things priced in USD. That is inflationary. Maybe stocks and commodities run together next year.

#65 Tony on 11.05.22 at 5:50 pm

Re: #9 Bobcat on 11.05.22 at 11:10 am

Rent is a lagging indicator and the increases in U.S. rent should be fully factored into the CPI by March 2024.

#66 Shawn on 11.05.22 at 5:53 pm

Deiesl?

#53 fishman on 11.05.22 at 4:36 pm
Don’t be misled that int % rates make the world go around. That honour belongs to diesel fuel.

*******************************
Could be. Years ago I had the thought that oil is very much the fuel of the economy.

After the credit crisis I concluded that credit (access and price to borrow) is the essential grease of the economy.

As the economy has modernized and become more digital and service oriented, oil is less important. But still important.

Credit I think remains absolutely essential to a grow the economy. Not much in the way of physical goods or even intangible services moves or transacts without credit.

Lower credit (due to lack of access or high cost interest) = lower growth, count on it.

#67 Tony on 11.05.22 at 5:54 pm

I think inflation will peak in February 2023 and the first rate cut in America will be March 2024 or whatever month the FOMC meeting is near that date. The stock market will be driven by a falling American dollar in 2023 and 2024. 2024 should be a good year for stocks.

#68 Joseph R on 11.05.22 at 5:56 pm

#60 Ponzius Pilatus on 11.05.22 at 5:19 pm

On Twitter, the “tweets” are the product sold. The advertisers are the client.

Imagine you own a grocer and, suddenly, your apple provider you usually do business with, would be sold to a new owner. That new owner would stop doing quality control (moderation) and sell all his/her apples, regardless of disease, rot, and other parasites. “Every apple is equal: I’m an absolutist! ” slogan.
But you, as the client, don’t get to look and choose your apples: they are sold in a black bag that you know no quality control is been done anymore. As stated before, the lack of quality control is a source of pride, and the apple grower will remind you of it .

Not only that, the new apple grower, before taking over the apple farm, made fun of it and tried to destroy its reputation publicly. In the end, he was forced to buy it because he was afraid of litigation and purchased the farm at the last minute because he was scared to reveal information to a court.

Would you buy them apples?

#69 MDQ on 11.05.22 at 6:04 pm

There are 17 mentions of peak in this article…

Peak means top, it does not mean back to normal.
A 6% inflation could be sticky, as everyone is increasing prices just because.

CBs staying at 4% or 5% wont fix it, and there could be a need for more pain. Unless, of course; thats your 2% inflation rate :) (6 – 4 = 2)

#70 Tony on 11.05.22 at 6:15 pm

Re: #40 The Gold Standard on 11.05.22 at 3:23 pm

The difference back then in America was it took 13 years to kill the housing market.

#71 Søren Angst on 11.05.22 at 6:19 pm

#43 Faron

Faron mansplains the mansplaining.

That never crossed my off scale Cattell III B test result mind.

I am forever in your debt.

—————–

And FYI the knucklehead Americani keep saying that France gets more visitors than Italia which is BS. Venezia gets more visits than they do. ENIT numbers vs. Fantasyland CNN back my assertion up.

N. American flights typically land in London, Paris, Frankfurt and Amsterdam. The second you step off the plane, even when waiting for a connecting flight to say Italia, they count you as a presence. Most turisti do not fly direct to Italia.

And Paris, besides its imported cuisine from the Medici Sisters, overpriced/overhyped everything, and wrought iron tower, only has copious visitors because of the Louvre and we all know why people go there AND it ain’t to see 2nd String art by the French, and mile high ceilings of nothingness, it’s because of this guy:

Leonardo

and her …

La Gioconda (her proper name but you “Conscenti” call her Mona Lisa)

and that’s it.

Turisti are so dumb there and of single mind they do not realize that just outside La Gioconda’s boudoir, a mere 5 m right out of the entrance across the hall are a bevy of more paintings by Da Vinci.

They all just breeze by, the Art & Culture Historians that they are – of course, coached by venerable “TripAdvisor” where the dumb advise the dumber.

The rest of note is by the Greeks. Winged Victory and Venus de Milo.

CNN is your typical Americani know nothing about Italia e-Rag.

#72 Søren Angst on 11.05.22 at 6:27 pm

Now Ryan,

don’t get me wrong.

I am secretly hoping you are correct.

I just don’t see it, the pivot, right now and for obvious economic reasons including historical fact.

BoC apparent pivot was a feint, political interference and your Boss agrees, and I with him.

All else, to me you have been a Rock Star in your predictions.

And you got my sorry a$$ out of growth stocks into value stocks JIT. Merci beaucoup. I owe you one.

#73 Scott in Gibsons on 11.05.22 at 6:27 pm

The recent spike in borrowing costs shut off the oxygen to a wide range of financial assets. They are being asphyxiated now. B&D will be pressured until the markets can see a future end to this culling process. Most participants don’t even see it coming.

#74 Wrk.dover on 11.05.22 at 6:29 pm

ATV news, confirms N.B. 68 cent increase to $3.04/litre.

That’s only $13.80/gallon, in a town with a refinery and a port that unloads tankers from anywhere in the world, unless Europe out bids.

Nothing to see here folks, it’s just diesel…..

Ryan’s wish, well?

#75 Søren Angst on 11.05.22 at 6:40 pm

To belabour the point that the economy is overheated and rates are having little or no impact on DEMAND, peruse this recent Retail Trade chart:

https://twitter.com/bsant54/status/1589022818187939841

Retail Trade represents about 60% of Consumer Spending.

Do you see Retail Trade abating; hence, Demand abating?

I don’t.

Unless something cataclysmic has happened since Aug 2022. The only cataclysm I have noted is incessant Cdn whining about inflation yet, Cdns keep on spending and at an ever increasing rate per the above chart.

Liars. Pants on …

Clearly and Self-Evident, BoC rate increases thus far have done NOTHING to abate Demand.

More rate increase are needed. Thus, unlikely they will pivot unless they are politically interfered with again.

#76 Ponzius Pilatus on 11.05.22 at 6:50 pm

#63 Stoph on 11.05.22 at 5:32 pm
#45 Nonplused on 11.05.22 at 3:42 pm

——————————————————–

In engineering, control loops are often based on PID control (proportional, integral and derivative). I’m sure you’re well aware of this.

If you only considered the proportional aspect (the difference between where you’re at and your target), you’d end up with a yo-yo situation where you overshoot your target and then have to reverse course. (This is one of the things the bank is trying to avoid and why they aren’t increasing the interest rate by larger steps).

It seems to me that the CB is including the ‘derivative’ aspect in trying to determine the correct interest rate needed control inflation. The inflation rate has stopped increasing and is now decreasing meaning that what they are doing is working.
—————–
I think you’re giving the CB too much credit by implying that they are using science to calculate how much interest rates x have to rise to reduce inflation by y.
I think it’s more trial and error, and they are more likely to overshoot, just to be on the safe side.
Elasticity of consumer demand would probably a better measure to calculate at what level of x, inflation would drop by x.
But then we’d have to cross over into the “dismal science” territory, which one must tread more careful  when forecasting outcomes.
Some would say that taming high inflation is more an art than science.
So let’s cut the CB some slack.

#77 Ponzius Pilatus on 11.05.22 at 6:55 pm

#68 Joseph R on 11.05.22 at 5:56 pm
#60 Ponzius Pilatus on 11.05.22 at 5:19 pm

On Twitter, the “tweets” are the product sold. The advertisers are the client.

Imagine you own a grocer and, suddenly, your apple provider you usually do business with, would be sold to a new owner. That new owner would stop doing quality control (moderation) and sell all his/her apples, regardless of disease, rot, and other parasites. “Every apple is equal: I’m an absolutist! ” slogan.
But you, as the client, don’t get to look and choose your apples: they are sold in a black bag that you know no quality control is been done anymore. As stated before, the lack of quality control is a source of pride, and the apple grower will remind you of it .

Not only that, the new apple grower, before taking over the apple farm, made fun of it and tried to destroy its reputation publicly. In the end, he was forced to buy it because he was afraid of litigation and purchased the farm at the last minute because he was scared to reveal information to a court.

Would you buy them apples?
—————-
Are we comparing Apples and Oranges?

#78 Sail Away on 11.05.22 at 7:03 pm

#38 IHCTD9 on 11.05.22 at 3:05 pm

22 degrees in the sticks this aft. Just got back from town, and there are almost as many bikes, ATV’s, and SXS’s on the road as cars. The wind is cleaning the last few leaves off the trees.

In other news, the burly old TD9 is probably saying good-bye next week :( That will leave only one crawler left in the stable.

———

Not here. 5 in town and below zero and snowy on the mountains. Slippery run there today.

Sorry to hear the IH is leaving. If you don’t mind, I may have left an envelope under the left track.

#79 Albertaguy in AB on 11.05.22 at 7:10 pm

#36 Shawn on 11.05.22 at 2:58 pm
FED balance Sheet shrinkage

i am no economist but this is interesting…

The Federal Reserve’s Balance Sheet
https://youtube.com/playlist?list=PLlBLhmhkHZntoJvoeKimCdCJrQxxqYMso

Monetary Policy Updates
https://www.youtube.com/playlist?list=PLlBLhmhkHZntoJvoeKimCdCJrQxxqYMso

#80 Albertaguy in AB on 11.05.22 at 7:13 pm

correction on 2nd link

Monetary Policy Updates
https://youtube.com/playlist?list=PLlBLhmhkHZnuXsy2E5tiOnjtdb7J_yBG8

#81 baloney Sandwitch on 11.05.22 at 7:15 pm

Neat chart. However rates are unlikely to fall. Most likely the Fed will pause for an extended period of time. Some analysts are expecting ~3 to 4% inflation for years.

#82 Getz Heard on 11.05.22 at 7:24 pm

Pretty good analysis but people need to stop using this term pivot as it is a misleading marketing term to encourage investors by implying that it is a singular event. In fact, rates will fluctuate up and down till the end of time….

#83 crowdedelevatorfartz on 11.05.22 at 7:31 pm

@#74 Wrk.Dvr
“ATV news, confirms N.B. 68 cent increase to $3.04/litre.

That’s only $13.80/gallon, in a town with a refinery and a port that unloads tankers from anywhere in the world, unless Europe out bids.’

+++

A $0.68 per liter increase?
Wow!
I’m sure the voters/taxpayers are thrilled at the latest price increase.
Perhaps someone should remind the New Brunswick voters they might of had an oil pipeline from Alberta running through their Province by now if it wasn’t for their amis in Quebec and Ottawa boycotting it…..

Nothing like ignoring Canadian Crude when you can compete for offshore oil against the fuel starved EU…..

#84 kommykim on 11.05.22 at 7:45 pm

#30 Ustabe on 11.05.22 at 1:54 pm
Just reading on the Internets that Elon ranked the Twitter employees by how many lines of code they had produced last year and then fired x% on the bottom.

=======================================

I guess some coders will be changing their style in Twit ville:

i
n
t
m
a
i
n
(
)

#85 millmech on 11.05.22 at 8:40 pm

SPY LEAPS, TQQQ, easy money

#86 Peter in AB on 11.05.22 at 9:13 pm

Top tier post Mr. Fluenza, I’m taking your advice and loading up on Bitcoin once again, and the Bitcoin miners which give leveraged gains relative to the underlying asset.

What of the common wisdom which states that inflation can only be tackled once interest rates are approx. equal to the core inflation rate?

#87 Ustabe on 11.05.22 at 9:15 pm

For your reading pleasure, 7 tweets all in a single thread.

https://threadreaderapp.com/thread/1588696157794242560.html?

My team pulled me out of Twitter some time back, I now am beginning to see how prescient they were.

#88 Ponzius Pilatus on 11.05.22 at 9:19 pm

#82 Getz Heard on 11.05.22 at 7:24 pm
Pretty good analysis but people need to stop using this term pivot as it is a misleading marketing term to encourage investors by implying that it is a singular event. In fact, rates will fluctuate up and down till the end of time….
—————-
Agree.
My preferred term is “flip flop”.

#89 Summertime on 11.05.22 at 9:30 pm

So with inflation of necessities firmly in double digits, some ‘peak’ CPI reported at 8 – 9 % (I am talking about countries that lie less about real inflation) a rate of 3.75, maybe 4.25 % is enough and we can pause rate increases?

Really?

And somehow with firmly established negative real rates for decades things will be OK and we will have somehow ‘growth’?

Growth can only come once we reduce real debt.
The plan to reduce real debt is through inflation.
Inflation is shrinking economic activities.

So there it is/the bright growth future:
– Pain in reducing economic activities through inflation in order to reduce debt – that for a very long time.
– Bring on new immigrants on massive scale in order to
keep the debt bubble going through new entrants.
Side effect of that will be capped wages, inability to scale infrastructure in the big cities.
– Going ‘green’ reduced additionally spending on infrastructure

There is no way for the planned new massive immigration waves/cheap labour to be from educated people from developed countries. That means even lower productivity, enforcing the ‘ultra expensive labour camp combined with ultra cheap labour’ strategy.

Enjoy responsibly.

#90 Ed on 11.05.22 at 9:56 pm

Many useless lefties criticizing Musk (another leftie) in spite of. Well I’ll leave it there haha.

#91 Doug t on 11.05.22 at 10:21 pm

PIVOT? the CB’s need to GIVE IT – they will be lame ducks if they pivot in 2023 – but hey who has a spine anymore – dog help us all

#92 Elon losing money? on 11.05.22 at 10:47 pm

The people pretending to be concerned about Elon losing money are so hilariously transparent.

It’s over Joseph, he owns Twitter and will fix it, and will probably make another $20B doing so.

The left’s control over the narrative, on the other hand, might not do so well.

And we all know that’s what you’re really worried about.

p.s. Netflix has how many subscribers and has what market cap? And they don’t have the advertising (yet) that TWTR has. Hmm. So much potential.

#93 Neo on 11.06.22 at 1:06 am

What a cool mill buys when your government isn’t a criminal organization. Voting is futile.

https://www.redfin.com/TX/Spring/27-Carriage-Pines-Ct-77381/home/33229942

#94 Faron on 11.06.22 at 1:56 am

#74 Wrk.dover on 11.05.22 at 6:29 pm
ATV news, confirms N.B. 68 cent increase to $3.04/litre.

That’s only $13.80/gallon,

Check yer math.

#95 Diharv on 11.06.22 at 1:58 am

How can the stock market recover DURING a recession? Everyone is feeling poorer and crappy about things. If the market has priced in the expected recession by taking a dump all year, won’t it just dump even further during the actual time of the recession? I don’t know what I’m missing here.

#96 Faron on 11.06.22 at 2:03 am

#90 Ed on 11.05.22 at 9:56 pm
Many useless lefties criticizing Musk (another leftie).

LOL, no. Like any fraud, Elon is whatever he needs to be to dupe the greatest number of people. At first that was left leaning greenies in CA. He is registered republican now and moved to Texas — he’s courting the right. Someone suggested recently that Teslas are the Axe Body Spray of cars. Democrats and left wingers are smart enough to see through his schtick by now. He needs new marks and right wing goobs are a near bottomless source.

#97 Faron on 11.06.22 at 2:11 am

#38 IHCTD9 on 11.05.22 at 3:05 pm

That will leave only one crawler left

So sorry you are leaving us! But no, there are many more infantile crawlers who comment here than just you and Sail Away. Anyhow, best of luck!

#98 Faron on 11.06.22 at 2:53 am

#36 Shawn on 11.05.22 at 2:58 pm
FED balance Sheet shrinkage

… I will confess to never having understood how the FED money injections worked or how the reverse works…

Here’s the balance sheet. Google is your friend.

https://www.federalreserve.gov/releases/h41/20221103

At the risk of triggering you, here’s my understanding. Money is created when debt is issued. For a traditional loan/debt agreement with a bank, that’s a zero sum prospect because the loan will be repaid and return the money supply to where it was prior.

With the Fed’s BS, the US treasury issues debt and the Fed “buys” treasuries, notes and MBS (not Mohammed Bin Salman :-) ). For the US debt on the balance sheet, the purchase is done by simply assigning the bond/treasury to the fed rather than an open market purchase although I believe open market bond/treasury buying also happens. Without an outside buyer of the treasury debt, the effect is adding to the money supply. The US treasury gets money to spend without a counter party needing to take money out of circulation — importantly in financial markets — to purchase that debt. This serves to both suppress rates (by decreasing the supply/upping demand of bonds and thus raising the price) and “create” dollars in that the US treasury gets to fund the gov’t as it would have anyway and typical bond buyers are driven to use their money elsewhere (BUY STONKS!!!).

When the fed rolls off its balance sheet it has to sell those bonds, MBS and treasuries. In this case I believe it has to be done on the open market. This over supplies bonds/treasuries and MBS driving prices down and rates up and will thus raise rates on top of what the Fed is doing elsewhere at the overnight end of the yield curve with benchmark rates.

If the Fed wants to tweak the yield curve while rolling off its balance sheet, all it has to do is sell or withhold specific maturities.

The US deficit is 1 to 2 trln of late and the bond market has happily absorbed that. Adding another 1 trln will be absorbed, but necessarily at a lower price.

For a brief period during the pandemic, the Fed was buying corporate debt which is direct stimulus to large corps.

#99 The real Kip (Ret) on 11.06.22 at 6:57 am

You’ll be eating humble pie by this time next week. Artificially controlled oil prices will spike once the SPR stimulus dries up.

#100 crowdedelevatorfartz on 11.06.22 at 9:00 am

@#94 faron
Check yer Math
+++++

There are 4.546 liters in an Imperial (Canadian) gallon.

$3.04 x 4.546 lt = $13.81 per Imperial gallon.

Perhaps “Faron the Infallable” was calculating ‘Liters per US Gallon”?
(Please note; the US gallon, like a US football, is tiny compared to the Canadian version)

Some places in New Brunswick are reporting $3.07/lt

Nova Scotia , PEI and NFLD also have seen diesel jump unexpectedly.

Inflation and the Cost of Living ain’t dropping yet.

#101 Penny Henny on 11.06.22 at 9:33 am

#33 Søren Angst on 11.05.22 at 2:13 pm

You’ve had you fun here TURISTI, now stay home. Leave us alone for a few months.
//////////////////

Only if you leave this blog.

#102 Penny Henny on 11.06.22 at 10:01 am

#94 Faron on 11.06.22 at 1:56 am
#74 Wrk.dover on 11.05.22 at 6:29 pm
ATV news, confirms N.B. 68 cent increase to $3.04/litre.

That’s only $13.80/gallon,

Check yer math.
///////////////

Imperial gallon is 4.54 litres.

3.04 x 4.54= 13.80

Math checks out.

#103 Shawn on 11.06.22 at 10:09 am

Trudeaus (plural) Legacy

Pierre Trudeau’s charter of rights and freedom and/or constitution is under attack by the use of the not withstanding clause.

Justin Trudeau may now decide he needs to do something about that. How far will he go? “Just watch him”. Feds have the power to overturn ANY legislation of any provincial legislature. Last used the power in 1943. They go nuclear, Trudeau can go nuclear.

Justin Trudeau will not be vacating the PM chair anytime soon.

Pass the popcorn.

#104 Tony on 11.06.22 at 10:19 am

Re: #99 The real Kip (Ret) on 11.06.22 at 6:57 am

Once the midterms are over in America, yearend profit taking on the U.S. dollar and zero Covid rumours coming out of China as well as cold winter predictions will all push oil prices a lot higher. Oil prices have been kept artificially low until the midterm elections are over.

#105 Tony on 11.06.22 at 10:31 am

Re: #95 Diharv on 11.06.22 at 1:58 am

Bloomberg, CNBC, Cramer et al. have been spreading rumours as truisms about a recession in hopes the Fed will pivot and stocks will rise. All of them are stock pumpers. Sickening to say the least.

#106 Ryan Lewenza on 11.06.22 at 10:41 am

Diharv “How can the stock market recover DURING a recession? Everyone is feeling poorer and crappy about things. If the market has priced in the expected recession by taking a dump all year, won’t it just dump even further during the actual time of the recession? I don’t know what I’m missing here.”

No because the stock market is pricing in the recession today even though it will likely hit next year. The stock market leads the economy. By the time we know we’re in recession stocks will have already started to rally. – Ryan L

#107 Shawn on 11.06.22 at 10:41 am

Fed Balance Sheet Shrinkage Impact?

Albertaguy in AB on 11.05.22 at 7:10 pm
#36 Shawn on 11.05.22 at 2:58 pm
FED balance Sheet shrinkage

i am no economist but this is interesting…

The Federal Reserve’s Balance Sheet
https://youtube.com/playlist?list=PLlBLhmhkHZntoJvoeKimCdCJrQxxqYMso

correction on 2nd link

Monetary Policy Updates
https://youtube.com/playlist?list=PLlBLhmhkHZnuXsy2E5tiOnjtdb7J_yBG8

***************************************
Thank you Alberta Guy. Those are good links to a reliable source. The second one is 41 minuties dso a lot but I listened carefully to all of it.

They gave actual asset adn liability debit and credit analysis.

In the end he says he is not sure that quantitative tightening, (Fed balance sheet drawdown) will have much if any impact on the markets but says it COULD put even more pressure on interest rates (Which makes sense).

To me Fed buying bonds clearly lowers interest rates and selling bonds (or even stopping buying) increases interest rates. What I am always less clear on is when people throw out the terms “injecting liquidity” and “removing liquidity”. In that case I need to see debits and credits. I do have a reasonable understanding of it but it’s a lot more complicated than just tossing around the word “liquidity”.

#108 Doug in London on 11.06.22 at 10:53 am

So in other words, if you’re heavily invested just stay put and ignore the day to day noise. Nothing new to see here folks, move on. Just forget about it and go outside on this Sunday and have fun. Say, are the mountain bike trails at Boler Mountain still open today?

#109 Gus on 11.06.22 at 11:03 am

@crowdedelevatorfartz

Looks like we found the gas station attendant!

#110 crowdedelevatorfartz on 11.06.22 at 11:27 am

Ho Hum.
Another hidden Federal sin Tax to grasp money from beleaguered taxpayers…

https://vancouver.citynews.ca/2022/11/05/bc-beer-wine-new-federal-tax-alcohol-pricier/

When will Liberal voters realize the Woke posturing narcissists in charge (T2 and Free-lend)….aren’t your friends….?

#111 Wrk.dover on 11.06.22 at 11:40 am

#100 crowdedelevatorfartz on 11.06.22 at 9:00 am
@#94 faron
Check yer Math
+++++

There are 4.546 liters in an Imperial (Canadian) gallon.
____________________________

No wonder cross border professionals need re-education. I’m embarrassed for Faron!

$3.04 x 4.546 lt = $13.81 per Imperial gallon.

I knock off the .006, 454 big block Chev, easy to remember.

#112 Shirl Clarts on 11.06.22 at 11:41 am

Ryan, I don’t think anyone uses the term telegraph anymore. This will only confuse the millennials. Peeps, he means ‘tweet’ or ‘post’.

#113 jess on 11.06.22 at 12:00 pm

https://ero.ontario.ca/notice/019-6217

Minister of Municipal Affairs and Housing Steve Clark is announcing a 30-day consultation on removing about 7,400 acres of land from the Greenbelt over 15 different areas.

Steve says IN THE GREENBELT, MR. WILKES? DO YOU THINK WE SHOULD BE BUILDING HOUSING IN THE GREENBELT?

Dave says NO.

Steve says NO.

Dave says THE BOTTOM LINE OF THAT IS NO. I SAID THAT AT THE TOP. THE GREENBELT IS OFF THE TABLE. MZOs DO NOT APPLY TO LANDS WITHIN THE GREENBELT AND THE GOVERNMENT HAS REPEATEDLY SAID THAT THE GREENBELT REMAIN UNTOUCHED.
https://www.tvo.org/transcript/2641867

The Greenbelt Council’s chair David Crombie and six other members of the council resigned en masse in December over deeply felt concerns that the government of Ontario was overruling conservation authorities and allowing development too close to the Greenbelt. David Crombie talks to Steve Paikin about his concerns

lookback :https://www.tvo.org/video/archive/greenbelt

#114 jess on 11.06.22 at 12:24 pm

Bivens has a Ph.D. in Economics from the New School for Social Research and is the Director of Research at the Economic Policy Institute. The blog post was titled: “Corporate profits have contributed disproportionately to inflation. How should policymakers respond?”

Included in the blog post was a graph showing that corporate profits account for 53.9 percent of the recent rise in inflation versus an average of 11.4 percent for the period 1979 through 2019.

https://www.epi.org/blog/corporate-profits-have-contributed-disproportionately-to-inflation-how-should-policymakers-respond/

#115 jess on 11.06.22 at 12:48 pm

This year, reports in Bloomberg, The New York Times, and CNN exposed the role of Meroe Gold Limited, a Sudanese company within the Wagner network, alleging that Wagner was giving support and advice to Sudan’s brutal dictatorship in order to access gold. Now, OCCRP, working in partnership with Le Monde, has obtained leaked documents, including contracts, letters, and internal memos, that provide new details of how Meroe’s parent company M Invest — which is owned by Prigozhin — paid millions of dollars to a company operated by Sudanese military intelligence. In exchange, it obtained access to residence permits and weapons for its Russian personnel. Meroe also appears to have received special treatment from the Sudanese presidency, according to leaked correspondence.

https://www.occrp.org/en/investigations/documents-reveal-wagners-golden-ties-to-sudanese-military-companies

#116 Shawn on 11.06.22 at 1:05 pm

Share Buy Backs?

#121 Tony on 11.05.22 at 3:54 pm

Re: #101 Shawn on 11.04.22 at 8:29 pm

Share buybacks are pure insider trading. The corporations can buyback shares knowing profits went through the roof before the earnings are made public. Tell me what the difference between insider trading and share buybacks are?

*********************************
Okay, that may be a bit of a concern.

But consider:

Share Buyback programs have to be approved by the regulator in advance and that is public. In Canada in my experience they have to renew the application every year. In the U.S. it seems they get longer approvals.

In Canada they are normally subject to blackout periods after the end of the quarter until earnings are released. But they enter automatic purchase arrangement sto get around that. But I agree they can often buy knowing profits will be strong.

In Canada we have long had a fantastic web site at SEDI.ca where buybacks are posted within just a couple days of it being done. I look at this frequently for some companies.

In the U.S. it seems they only have to report in the quarterly well after the fact.

In Canada at least, you can follow both insider trading and company buy backs and you can buy if you think you see a positive signal.

Also insider trading is not at all illegal except when they have material inside info (which I agree is probably always but that regulators have a different view of what is material). But again in Canada insider trades are posted within a couple days. Follow it if you think it is a good signal.

I have followed insider trading for over 20 years and honestly it rarely gives a good signal. Insiders are usually notoriously too bullish. And they often sell just to get cash. I have dumped shares when insiders did do only to regret it.

Tony, you are adamant that share buy backs are evil and will never be convinced. But you asked me a question. I still think you should look up what Buffett has written about share buy backs in his annual letters.

Frankly, rather than worrying that the system is rigged by buy backs or in any other way why don’t you just invest as best you can within the rules of the game as they are? Spitting in the wind is not going to help. If life’s not fair you still have to get on with it.

#117 Ustabe on 11.06.22 at 1:05 pm

@ #90 Ed and #92 Elon Losing Money?

VW, Ford, General Mills, CVS, United Airlines, GM, Audi, Porsche, American Express, Coca-Cola, Johnson & Johnson, Levi Straus, Spotify, Dyson, Forbes, DIRECTV, Nintendo, Unilever, among many others, have all publicly withdrawn their ads and advertising dollars from Twitter.

But ya, blame it on some leftie vapour bad guys.

Here is a thought experiment for you. Imagine you are as rich as Sail Away says he is but instead of spending your time killing wild animals, drinking passion fruit cocktails while you wait on your high colonic cleanse to kick in at some fancy US resort, while posing on here that we should be buying Tesla. (Can’t figure out how to end that thought without getting deleted!)

Instead you are an Internet punching bag, hunched over your phone, begging strangers on Twitter for $8 per month. You both are almost, just about, like Elon Musk, eh?

#118 crowdedelevatorfartz on 11.06.22 at 1:25 pm

@#107 Gas ( no not THAT gas)
“Looks like we found the gas station attendant!”

+++
Gas Pump jockeys were usually pretty good at adding and subtracting back in the days before “self serve” and “debt card terminals”.
Cash was King.

#119 Quintilian on 11.06.22 at 1:55 pm

#110 crowdedelevatorfartz on 11.06.22 at 11:27 am

When will Liberal voters realize the Woke posturing narcissists in charge (T2 and Free-lend)….aren’t your friends….?

We realized that a long time ago. For most of us it was when we read Animal Farm.

But the curmudgeons don’t realize just how much more evil and more corrupt are the rightwing, bible thumping, rural grade, bombastic fools.

Have you not read the political history of BC just as a starter?

#120 Sail Away on 11.06.22 at 1:59 pm

#117 Ustabe on 11.06.22 at 1:05 pm

Here is a thought experiment for you. Imagine you are as rich as Sail Away says he is but instead of spending your time killing wild animals, drinking passion fruit cocktails while you wait on your high colonic cleanse to kick in at some fancy US resort, while posing on here that we should be buying Tesla.

———

Haha. Is this what you spend your time pondering? Well, today so far consisted of an early morning directors’ meeting to vote on next years’ company sponsorships (spoiler: community youth sports, theatre, university scholarships, food bank), and now I’m whiling away this rainy day by relaxing in front of the fire with the animals overlooking Departure Bay and hand-sewing a pair of shearling-lined, self-tanned moosehide slippers. Leatherwork is so satisfying.

#121 Old Boot on 11.06.22 at 2:17 pm

#117 Ustabe on 11.06.22 at 1:05 pm

@ #90 Ed and #92 Elon Losing Money?

VW, Ford, General Mills, CVS, United Airlines, GM, Audi, Porsche, American Express, Coca-Cola, Johnson & Johnson, Levi Straus, Spotify, Dyson, Forbes, DIRECTV, Nintendo, Unilever, among many others, have all publicly withdrawn their ads and advertising dollars from Twitter.

But ya, blame it on some leftie vapour bad guys.

Here is a thought experiment for you. Imagine you are as rich as Sail Away says he is but instead of spending your time killing wild animals, drinking passion fruit cocktails while you wait on your high colonic cleanse to kick in at some fancy US resort, while posing on here that we should be buying Tesla. (Can’t figure out how to end that thought without getting deleted!)

Instead you are an Internet punching bag, hunched over your phone, begging strangers on Twitter for $8 per month. You both are almost, just about, like Elon Musk, eh?

—————

Here’s a thought experiment for you. Imagine you’re a 14 year old sex-trafficking victim whose abuse images are plastered all over pre-Elon Twitter, despite your repeated pleas to have them taken down. Twitter claims that these images do not violate their terms of service. Not a single company withdraws their advertising dollars in protest.

Now: 21 year old former sex trafficking victim watches hypocritical, performative virtue signallers lose their sh!t over the possibility some dude who looks uncannily like both a trucker AND the prostitute he just murdered, might get misgendered.

#122 jess on 11.06.22 at 2:26 pm

“Today’s settlement marks the fourth resolution that our office has achieved as we seek to root out fraud in the electronic health record technology field,” said U.S. Attorney Nikolas P. Kerest for the District of Vermont. “It is imperative that medical providers be able to trust the health record systems with which they document important and sensitive patient information, and for too long electronic health record vendors have prioritized only sales. The government alleges that for years, ModMed, through a variety of schemes, engaged in illegal kickbacks that distorted both the EMR and pathology lab markets, in addition to providing its users with a deficient product. This resolution reflects the seriousness of the government’s allegations and the determination of the Department of Justice to restore integrity to the electronic health record field.”

As a result of this conduct, the government alleges that ModMed improperly generated sales for itself and for Miraca, while causing health care providers to submit false claims for reimbursement to the federal government for pathology services, and for incentive payments from the Department of Health and Human Services (HHS) for the adoption and “meaningful use” of ModMed’s EHR technology.

In January 2019, Miraca (now known as Inform Diagnostics) agreed to pay $63.5 million to resolve allegations that it violated the Anti-Kickback Statute and the Stark Law by providing to referring physicians subsidies for EHR systems and free or discounted technology consulting services. 2019 Press Release.

https://www.justice.gov/opa/pr/modernizing-medicine-agrees-pay-45-million-resolve-allegations-accepting-and-paying-illegal

#123 huh? on 11.06.22 at 2:30 pm

#117 Ustabe

Did that actually make sense to you when you wrote it?

Because it’s pure gibberish to the rest of us.

Stick to telling us how the richest man in the world is a terrible businessman. That never gets old.

#124 Arian Serbin on 11.06.22 at 2:47 pm

ArionSerbon”There will not be PIVOT just brief stops on the way to double digits. This inflation is not supply/demand but due to SHORTAGES thanks to the Covid lockdowns. Raising rates will just make inflation worse but the CB has no option as they they don’t control the Fiscal Side.”

Yes but those supply chains are starting to improve as Covid transitions from a pandemic to endemic and billions of people revert back to spending on services (eg concerts, vacations and dental checkups). This means less demand for durable goods and I believe lower inflation. Semi conductors look to now be in oversupply as an
————————————————————————————————
Emerging Markets export Inflation. They have load up on cheap US loans now with US Dollar gaining strength in respect to their domestic currency they facing 20-40% owing more that they have to compensate. Capital Flows are coming to North America for safety and security from both Europe and Asia so US dollar will go higher in respect to Emerging Market that will cause loans getting more expensive that they will pass on to their products.

Fiscal Policy both Democrats and Liberals is to SPEND SPEND … Borrowing against Government Bonds is INFLATIONARY.

So we have INFLATION wave coming and Central Banks have no other option but HIKE as don’t wanna blame for it.

#125 JSS on 11.06.22 at 3:00 pm

#29 Shawn on 11.05.22 at 1:32 pm

The three-stock combo is the one that I recommended years ago. Common shares of RBC, Fortis, and CN Rail.
If you don’t need the income, then drip them.

It is simple, no brains Or rebalancing required. Has worked for me for nearly a decade and a half

#126 Regjeg on 11.06.22 at 3:01 pm

Powell and the Fed will pivot when they see incontrovertible evidence that inflation has been wrung out of consumers’ expectations of future price increases.

My guess is that won’t occur before Q4 2023.

#127 Faron on 11.06.22 at 3:05 pm

#111 Wrk.dover on 11.06.22 at 11:40 am
#100 crowdedelevatorfartz on 11.06.22 at 9:00 am

Got it. You are calculating in a unit of measure that has been irrelevant in Canada for more than 40 years. Silly me for expecting commonly used measures. I shall henceforth report distances in shackles, cables and AUs, weight in slugs and volume in pecks.

#128 Bdwy on 11.07.22 at 10:17 am

ExxonMobil presently at another all time high.

#129 JDAWG68 on 11.07.22 at 1:17 pm

I think inflation has absolutely peaked in the short term but give it 9-12 months and I think you will see it start to drastically pick up again. This will be right around the time when they are thinking about a rate cut again. People underestimate the supply side factors (all the companies that supply goods are facing huge debt costs) that are going to exacerbate inflation big time. All the companies that supply the things you buy have been able to keep inflation in check because of the innovation and supply side efficiencies created by cheap debt. As a result, I can’t see how inflation will be lower in the longer term.