My new favourite chart! Tavi has a different interpretation than me (he admits to falling more in the deflationary camp), but this chart illustrates the ABSOLUTE DISCONNECT BETWEEN ACTUAL CPI AND FORECASTED INFLATION.
Question to ask is always "what's priced in?"
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Question to ask is always "what's priced in?"
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Inflation is the most underpriced risk out there. Don't bother sending me your notes about the three D's (debt, demographics and deflation from technology) - I know them.
And the point I want to make - so DOES THE MARKET. That's why Tavi's chart is so brilliant.
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And the point I want to make - so DOES THE MARKET. That's why Tavi's chart is so brilliant.
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Tavi's chart illustrates clearly the market is completely complacent about inflation. Yeah, I know the deflationists will argue that it will resolve itself with a GFC-type-bust. Maybe, but true financial crises occur when something happens that NO-ONE-BELIEVES-CAN-HAPPEN.
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