Economist David Rosenberg Says the Bond Market Has Inflation Right
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26 Comments
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2 years ago
If the fed’s been operating outside of it’s lawful bounds, why would that ever stop?
2 years ago
“Bond Market…”
LOL….
What “Bond Market”?
You mean the one the Fed has completely destroyed with $TRILLIONS created out-of-thin-air?
2 years ago
Core inflation strips out energy, food, and housing. And the rise in these categories, which are in all our consumer baskets, may never come down. It’s just like reporting numbers on a seasonally mal-adjusted basis, which never corresponds to the non-seasonally adjusted #s. Tell me how to buy gas at last year’s pumps #s.
2 years ago
….that cloud of milk in my coffee did weird things this morning and my cat’s tail has been mostly pointing northwards in recent days…..so I think some got it wrong and others will get it right, if you know what I mean, well you probably don t….. and I definitely won t reveal my secrets….would be a fool if I did…..and then I didn t even telll you about the four leaf clover I found in my garden…..
2 years ago
Count me in the small boat too. It will be proven correct in the next 2-3 quarters.
2 years ago
So you think the goldilocks economy of the 1990s is back??? 4% annual GDP and 2% annual inflation???? Nothing about growth or unemployment in these predictions
2 years ago
Well, you are also extrapolating from the present when you use bond yields to argue that inflation is transitory. However, with that out of the way, I do think a change in interest rate trends will have be the confirmation that inflation isn’t transitory- the bond market has been right basically the entirety of the last 40 years. One thing I will note, though- everytime the inflation print gets above the 10 Y yield in that chart was a recession indicator, not a growth indicator.
2 years ago
It gets back to definitions…..if increasing the money in circulation is inflation I think the inflation is transitory. Hunt is correct that we are following the Japanese model…..but it isn’t clear to me that we end up exactly like Japan. Americans are not as likely to embrace austerity as Japan, nor or they as likely to buy bonds with no yield and no room for price appreciation. The government might force retirement accounts to hold treasuries, I guess. Or the Fed can buy everything…….for as long as that works.
If you measure inflation by the prices of various necessities like food, energy, cars, health insurance, and a roof over your head, then you might get a different view than if you view inflation only as a monetary phenomenon.
Continued money give-aways are a source of monetary inflation, of course. I hope we don’t go down that road. I think that is highly inflationary no matter how you define inflation.
Prices are going up on a lot of things and I don’t expect them all to miraculously drop right back to previous levels UNLESS we have a major deflationary event…….some kind of global credit crisis. We live in a very unstable world with regards to money. It could happen. But it’s hard to call.
All these people leaving the workforce is a strong deflationary force……and those people will now be taking distributions and not buying the S&P, at least not like they have been for the last five years. This is a trend that won’t end soon either. The last boomers don’t even turn 70 until 2035. We’ve got 10-15 years of Japanification to get through. At least we have the millennials, who are our new consumers, and tax donkeys.
There are bubbles…but some market bubbles are more apt to pop than others. I’ll take my Austin RE over stocks, bonds, and gold, although I think gold is going to trend higher, and it makes sense to be in metals and miners now.
Gold did what I expected today , and now we will see if 1850 holds. I expect metals to reverse hard and make a good move very soon…..I make no attempts to call a top. I just expect a nice tradable trend.
2 years ago
Everyone is confusing price inflation with money supply and liquidity and velocity.
There is massive monetary inflationary attempts but the money doesn’t create velocity. It just gets vaporized or stuck in the wealthy bank accounts and asset reflation attempts. The price inflation is a reaction to supply and demand.
The average American doesn’t have access to zero rate loans from the FED. The average American is shedding debt which is not very inflationary at all
2 years ago
I agree with regards to inflation, look at lumber prices that have never been as high, yet saw mills are sitting on massive stockpiles of lumber, one of the reason that the US has restarted its soft lumber war with Canada…The reason prices have risen is disruption in the production chain, when everything was shut for 4/5 months, these shut downs are now trickling down to end users.
Yet, I was in Home Depot yesterday, where until two weeks ago there was a shortage of drywall, guess what they had 45 stacks in the covered court, and they were expecting another 90 stacks by the end of next week. The manager told me, that they are calling everyone that had ordered dry wall and they have a team worrying full time, conveyor belt style to load contractors and ordinary people with all the dry wall they could want. Guess what, they expect the price to fall 30/40% in the next months.
And that ‘s just a stupid example.
The huge amount of debt that has been built up by households and company has to lead to a reduction in consumption as people rebuild their depleted nest-eggs savings that they consumed during the pandemic.
Have a good day
2 years ago
So the bond market (that is so thoroughly rigged by the Fed) has it right???? Mmmmkay!
2 years ago
You forget even if the FED is buying bonds, this is not a new phenomenon. They did that from the 20s onwards. Operation Twist in the late 50s.
And if the FED has been a buyer, so have the other Central Banks. And that has been part of the Bond market forever. Do if they DO buy or sell, that will effect the bond markets like it or NOT. If The FED thinks economy is tanking, which it will, then they have to put it back on life support. Then try and make the dead body alive, then put the electrodes on. Rinse and repeat. The free markets died in 2011
2 years ago
Sure, the Fed has bought bonds before. But not on a scale that saw the balance sheet go up by $7T in a little more than 10 years. And yes, the free markets died long ago, probably as far back as the time when they did the LTCM bailout.
2 years ago
So we now DO live in Lalaland or is the land of OZ or Alice’s Wonderland even ? Anyway ,Utopia does exist after all ! A UBI is what we still need …for each and everyone… and his dog…. a abundance of free vaccines is essential too, of course…..Complete and eternal happiness is just around the corner! Only fools won t see this ….
2 years ago
I think we have transitory inflation on top of rising long term inflation. Will inflation stay at 10%? Not likely. Could we get long term inflation of 5%? I think it’s likely. At least in the US where the USD is going to have its value eroded over time.
2 years ago
I’d expect the bond market to reflect a transitory view on inflation because that’s the Fed’s view and the Fed is the largest buyer keeping yields down.
Let Bond Prices truly float and then see what happens.
2 years ago
‘let bond prices float’….if you want a never seen before financial meltdown that is…. We are now in unearthly unchartered territory ….only extraterrestrians can save us from total demise…guess what : they won t !
2 years ago
Price level has shifted in some sectors and won’t fully fall back but rate of increases will now abate.
Long bond has it right.
Gold will probably not fully satisfy expectations of many too. Lo
oks like it might fall back now, no higher than 2150 by year end, not 2500+ level.
I go with Hunt & Rosenberg.
2 years ago
Lacy hunt can’t buy stocks. He manages a long only bond fund. He has no choice but to believe that bonds will go up in price. Otherwise he might as well quit his job.
2 years ago
Keep in mind that traditional market signals have been broken a long time ago. Nothing works. Just buy S&P500 and enjoy the ride.
2 years ago
Don’t listen to him. He’s one of those uber bears that gets it wrong. Lost a lot by sitting in cash because of people like him.
2 years ago
I mean sitting in cash since after the GFC. He threw in the towel and turned bullish after the market was well past its previous highs. Who pays these guys?
2 years ago
All of us old timers actually have been expecting mr market to assert itself. The FED and central banks have been able to force interest rates down far longer than most of us thought possible. With real interest rates on a RE mortgage running at -1% this sh$t is gonna blow soon. Real estate prices are now gonna go to infinity.
2 years ago
I know expecting for the last 12 years. Won’t happen. If it does, expect the fed to acquire even more power to keep things propped up.
2 years ago
The reason that this time it won’t be transitory is because people have lost confidence, in government, really just about everything. We shall see.
2 years ago
I am beginning to think that you are correct now that there will not be another humongous stimulus. No real change in business conditions from prior to the pandemic. I do feel however that in the long term it would be good for interest rates to rise to at least 2% short term and 5% long term.