With fears
about inflation now subsiding, many market observers believe that the yield curve will steepen only after the federal funds rate is lowered.
Not exact matches
Now that
inflation is back in the crosshairs of the markets, as investors try to understand what has caused such a swift correction in stocks, it's worth looking back at what Buffett has said
about inflation in the past.
INFLATION: The biggest, most commonly held fear investors are talking about right now is that inflation will rise sharply enough to force the Federal Reserve to accelerate interest rate i
INFLATION: The biggest, most commonly held fear investors are talking
about right
now is that
inflation will rise sharply enough to force the Federal Reserve to accelerate interest rate i
inflation will rise sharply enough to force the Federal Reserve to accelerate interest rate increases.
Now, if you think the economy is
about to fall off the rails, either it «s going to go into recession, or it «s — there «s going to be a tick off in
inflation, that might be a signal things are going to get worse.
An abrupt rise in interest rates, concerns
about rising
inflation, and a potentially more hawkish Federal Reserve have created an equity market tantrum that
now has the Dow and S&P 500 Index in full correction territory (a correction is a price decline of between 10 % and 20 %).
Assuming even a 4 % annual growth rate in prices —
inflation plus
about 1 to 2 percentage points — property prices should be significantly higher than where they are
now.
The FOMC statement had a couple of positive comments on developments, but also contained language suggesting the Fed isn't
about to start pulling its hair out because the
inflation target is
now in sight.
In fact, the Bank of Canada should
now be more concerned
about the exchange rate than the
inflation rate.
As the figure at the end shows,
inflation (core PCE) looks to be
about a point lower
now, give or take.
And then we've talked
about elevated media
inflation is our expectation right
now.
In the face of increased uncertainty
about underlying productivity growth, many economists
now argue that a central bank should not try to restrain an expansion until there is visible evidence that
inflation is rising.
Now the current levels of volatility have emanated from a number of different sources: political uncertainty, concerns
about rising
inflation, concerns
about rising interest rates, concerns
about a trade war, cybersecurity fears, all of these different things.
As usual, I don't place too much emphasis on this sort of forecast, but to the extent that I make any comments at all
about the outlook for 2006, the bottom line is this: 1) we can't rule out modest potential for stock appreciation, which would require the maintenance or expansion of already high price / peak earnings multiples; 2) we also should recognize an uncomfortably large potential for market losses, particularly given that the current bull market has
now outlived the median and average bull, yet at higher valuations than most bulls have achieved, a flat yield curve with rising interest rate pressures, an extended period of internal divergence as measured by breadth and other market action, and complacency at best and excessive bullishness at worst, as measured by various sentiment indicators; 3) there is a moderate but still not compelling risk of an oncoming recession, which would become more of a factor if we observe a substantial widening of credit spreads and weakness in the ISM Purchasing Managers Index in the months ahead, and; 4) there remains substantial potential for U.S. dollar weakness coupled with «unexpectedly» persistent
inflation pressures, particularly if we do observe economic weakness.
Let me
now make some observations
about inflation and monetary policy.
I've been using the theoretical rate of purchasing power change, calculated as outlined above, to construct long - term
inflation - adjusted (IA) charts for
about eight years
now.
As a result of what happened during just one of the past twenty decades (the 1970s), most people
now believe that a large rise in «price
inflation» or
inflation expectations is needed to bring
about a major rally in the gold price.
YRA HARRIS: Right
now, the 2 year yields dropped a little bit today, so we've
about neutral right
now using the 2 year on
inflation.
Now, they «re mainly talking
about commodity
inflation around metal prices like aluminum and steel and oil prices, which translates to the higher packaging costs for many companies.
For
now, the Strategic Total Return Fund continues to carry a limited duration of
about 2 years (meaning that a 100 basis point move in interest rates would be expected to impact the Fund by
about 2 % on the basis of bond price fluctuations), mostly in Treasury
Inflation Protected Securities.
The issue here is that
inflation - protected securities are
now so sought after that the economy would have to deliver long - term
inflation of
about 2.6 % just to match the already depressed yields on long - term Treasuries.
According to the Federal Reserve Bank of New York, consumers think
inflation will be
about 2.7 percent a year from
now.
Yet, with
inflation picking up and policymakers increasingly worried
about the distortive effect of multiple years of extraordinarily accommodative monetary policy, the US Federal Reserve (Fed)
now seems determined to keep raising interest rates.
There's more than enough punditry
now about rates and
inflation and investor sentiment.
The Work and Pensions Secretary Iain Duncan Smith said: «Earnings are
now rising at 3 percent and
inflation is running at
about zero.
WHEREAS the federal minimum wage would
now be more than $ 10 if it had kept up with
inflation, but Congress has tried to raise the minimum wage only three times in the last 30 years thereby leaving lowest - paid workers with just $ 7.25 an hour or
about $ 15,000 annually for persons working full - time; and
Locating these spectral distortions could therefore reveal details
about inflation on smaller scales, and later times, than is
now possible.
And if you look at a common gauge of future
inflation expectations — the difference between the yield on long - term Treasury bonds and that of Treasury Inflation - Protected Securities, now about 1.8 to two percentage points — investors apparently believe inflation will continue to mosey along at a relatively sluggish rate well into th
inflation expectations — the difference between the yield on long - term Treasury bonds and that of Treasury
Inflation - Protected Securities, now about 1.8 to two percentage points — investors apparently believe inflation will continue to mosey along at a relatively sluggish rate well into th
Inflation - Protected Securities,
now about 1.8 to two percentage points — investors apparently believe
inflation will continue to mosey along at a relatively sluggish rate well into th
inflation will continue to mosey along at a relatively sluggish rate well into the future.
If
inflation is at 2 %, you're actually losing ground, since your original $ 1,000 of capital
now has enough purchasing power to acquire
about $ 990 worth of goods.
In 1968 my parents salaries as skilled people were
about # 2000 a year... equivalent jobs
now pay closer to # 50,000... 25x salary
inflation in the time.
Also, think
about inflation, what seems like a big payment
now will not be so big toward the end of the mortgage.
Yet, with
inflation picking up and policymakers increasingly worried
about the distortive effect of multiple years of extraordinarily accommodative monetary policy, the US Federal Reserve (Fed)
now seems determined to keep raising interest rates.
Now that the gift and estate tax applicable exclusion is $ 5.25 million (adjusted for
inflation), most people won't have to worry
about paying gift tax.
Or how
about if over the course of a long retirement
now - dormant
inflation re-awakens to the point that your annuity payment can no longer cover as much of even your day - to - day expenses as it once did?
Example: With an average
inflation of 3 %, your $ 500,000 term life insurance policy is only worth
about $ 400,000 (in today's dollars) if something were to happen to you 8 years from
now.
I think that right
now is an exceptionally bad time for government bonds (except for maybe
inflation - protected and I am not sure
about those either).
I would not try to assume that stocks are a good
inflation hedge... Corporations have to buy raw materials and have to feed hungry workers... When the price of oil and foold go up it is very hard for corporations to improve on earnings, so if you think
about it, much of the benefits of a rise in CPI are negated by a rise in raw materials prices... Put more bluntly, we are in a period of stagflation right
now.
Meanwhile, with
inflation at
about 2.5 % for the last couple of years, putting money in savings accounts
now guarantees you'll lose purchasing power.
--
Now flush with confidence & becoming fearful
about inflation, he ploughs into a series of red - carpet property deals / syndicates — «bricks & mortar», my man, you can't go wrong...
At its core, investing is
about putting out money
now to get more in
inflation - adjusted dollars in the future.
«If we think
about the Wal - Mart model, it is incredibly fuel - intensive at every stage, and at every one of those stages we are
now seeing an
inflation of the costs for boats, trucks, cars,» said Naomi Klein, the author of «The Shock Doctrine: The Rise of Disaster Capitalism.»
(Even the (in) famous average rate of
inflation in India has been outrun by the increase in cost of education,) And
now,
about how much to invest in your child's future.