Barry Ritholtz Profile picture
Jun 22, 2021 40 tweets 13 min read Read on X
0 for 14.

That is the track record the "Inflationistas" have amassed in predicting Inflation, Deflation, Disinflation - really ANY "Flation - so far in the 21st century.

0 for 14

My advice: Pour yourself a tall glass of STFU + go find another expertise to pretend to have...
How can any economist have missed 3 decades of deflation?

Automation, global labor arbitrage, digitalization + outsourcing/offshoring all have worked to drive global prices lower.

Missing this and/or ignoring it explains that awful inflation-predicting track record
Hence, why my preferred framework is:

"Deflation, punctuated with spasms of inflation"

The concern that "Spiking Commodity prices" are running away from buyers has been thoroughly debunked.

Commodity traders know that "The cure for high prices is high prices..."
Example: Lumber prices

They dropped almost 40% from the record high reached on May 10.

Sawmills are catching up with rampant homebuilding demand in N.America that fueled rally beset by supply shortages.

Buyers balked at historically elevated prices + supplies increased.
"Costs soared partly because of do-it-yourselfers’ spending stimulus checks, but a month of declines show that consumers aren’t about to trigger runaway [inflation]."
nytimes.com/2021/06/21/bus…
This timeline nicely explains what occurred over the past 16 months:

Ask yourself how similar or different today is versus the 1970s. Your answer likely determines how concerned you are about whether rising prices are transitory or longer-lasting

WSJ: What Investors Can Learn From the History of Inflation

wsj.com/articles/what-… Image
What surprises me is why anyone -- the media, investors, policymakers -- ever gives these "neverrights" any oxygen.

If you were this bad a stock-picking, who would ever listen to you?
Things that are cheaper today than 1 year ago:

TVs
Toys
Food
Clothes
Software
Broadband
Mobile service
Entertainment
Mortgage Rates
Apartment rents in big cities
My colleague @boes_ reminds us that New York Fed President John Williams is also looking at "Downside inflation risks"

I like the idea of looking at inflation over a 2-year period

Paulie the K knows what I am talking about
Rising Inflation Looks Less Severe Using Pre-Pandemic Comparisons

wsj.com/articles/infla… Image
The word of the day is #TRANSITORY

Lumber, among the world’s best-performing commodities as the pandemic sent construction demand soaring + stoked fears of inflation, has officially wiped out all of its staggering gains for the year.

Lumber = Flat YTD

bloomberg.com/news/articles/…
Transitory Inflation, work truck edition:

Semiconductor shortage hurting biz: Companies are paying more for work vehicles when they can find them in stock. Instead of discounts of 8%+ from MSRP; Now, commercial customers are paying over sticker price.

wsj.com/articles/chip-…
I am in the same camp as @DanielAlpert that most of the CPI surge is associated with re-opening:

What we are seeing are the effects of the vaccines, massive fiscal stimulus + ZIRP via @jasonfurman

Here is the official CEA take on inflation:
I hate to cherrypick data, but for Lumber, I will make this one time only exception:

CPI inflation is still about reopening + motor vehicle supply issues.

"Outside of a few categories that are experiencing significant idiosyncratic supply constraints or healthy price normalization, prices rose as much as could reasonably be expected."

theovershoot.co/p/us-cpi-infla…
One of the reasons I started The Big Picture was to counter the many MSM economic reporting fails I saw.

Economic reporting has improved a lot, but there are still occasional backslides: Like this one, which conflates budgeting, credit + inflation.

wsj.com/articles/how-m…
Inflation worries focused on the 1970s are misguided: Oil Embargo, Energy Prices, Cartel driven shortages are so very different than the current environment: Economic boom/Reopening, Pandemic shortages, monetary stimulus.

The 2020s are not the 1970s

marketwatch.com/story/worried-… Image
Today in Transitory Inflation:

Supply chain shortages of new cars sent Used Car prices skyward. In July they were flat. The Inflationistas managed to scare everyone with their usual nonsense.

#Beyondwrong

fredblog.stlouisfed.org/2021/05/the-ju… Image
Adjusted for Inflation, the 2022 Ford Maverick is Less Expensive Than the 1908 Model T

The original Model T cost $850 -- adjusted for inflation, that is ~$25,000. All in, the 2022 Maverick's price is $21,490.

via @mrlevine

newsweek.com/adjusted-infla…
Inflation Is Higher in the U.S. Than Elsewhere, but Don’t Panic

wsj.com/articles/infla… Image
The never-ending LOL Inflation saga continues...

Iron Ore, which is used to make steel, plummets in price:

What do you do for an encore after you were wrong about, inflation, deficit spending, stimulus, and well, pretty much everything?

washingtonpost.com/opinions/2021/…
If your name is Lawrence H. Summers, you keep penning nonsensical editorials, fail to acknowledge your terrible track record, then accuse everyone who mentions your terrible track record as going ad hominem (even as you make ad hominem attacks yourself).

noahpinion.substack.com/p/interview-la…
Automobiles = largest component of inflation in 2021; Prices went ballistic earlier this year due to chip shortages caused by woes in restarting semiconductor production.

As Supply/Demand imbalance normalizes, prices soften.

Understand this, understand "transitory inflation." Image
Nobody Really Knows How the Economy Works: Many experts are rethinking longstanding core ideas, including the importance of inflation expectations.

“It requires more humility and acceptance that not everything fits into one model yet.”

nytimes.com/2021/10/01/ups… Image
"The problems that have been crimping recovery from the pandemic recession seem, by and large, to be global rather than local."

nytimes.com/2021/10/29/opi…
The temporary shift in consumption from services to goods is behind broken supply chains, component shortages + increased prices.

It is a great visualization of the impact of WFH/lockdowns.

It also suggests these increases are likely to be temporary.

“Burning rubber to rejoin highway traffic is not the same thing as overheating the engine.”

@delong explains why the current uptick in US inflation is highly likely to be simply rubber on the road, resulting from the post-pandemic recovery.

project-syndicate.org/commentary/us-…

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More from @Ritholtz

Aug 27
A few quick thoughts about yesterday's discussion on how we got here...

FOMC seems 2b always behind the curve, historically, going back to the 1990s under Greenspan.

They are a big + boring conservative institution & are fearful of error. They tend to be less aggressive when making decisions, with significant ramifications.

Consider the errors of just the past 2 decades and you can see the biggest mistake they make is either arriving way too late to the party or once they are there, overstaying their welcome: Image
Read 11 tweets
May 19, 2023
FinTV comments I keep hearing:

1. Only 5 stocks driving markets
2. Recession is inevitable
3. Breadth is terrible
4. AI is a bubble
5. Debt ceiling = disaster
6. Problematic new lows
7. Consumers running out of money
8. Earnings will fail THIS Q
9. HH Debt!
10. Rally faltering
Let's see if I can find something to undercut each of those 10 items:
Only 5 stocks driving markets?

Then why are Equal-weighted indices doing so well?
Read 12 tweets
Mar 11, 2023
.@baldassarreted Congrats on picking up Certina as a brand -- they are wildly underappreciated.

My PH200M is a favorite daily wear -- it has a great retro flavor to it, and a wonderful mesh bracelet Image
One of the very best dive watches you can find for under $1,000. It just feels great on . . .

I always smile when a random stranger asks about it, in a way they wouldn't with a Rolex, Omega, or Tag Heuer.
I am a fan of Teddy's Youtube channel -- he avoids the overhyped stuff and has a deep knowledge of brands from Nomos to Glashutte to Junghans.

Check out:

youtube.com/@TeddyBaldassa…
Read 4 tweets
Mar 10, 2023
The Fed is Breaking Things (and it could get worse) dlvr.it/SkhPB7 Image
I interviewed Greg Becker, who was CEO of Silicon Valley Bank, in 2021...

ritholtz.com/2021/08/mib-gr…
The full transcript is here:

ritholtz.com/2021/08/transc…
Read 9 tweets
Jan 11, 2023
What drives market returns? These rolling 10-year total returns going back to 1909 (via Crestmont Research) show an average ~10% annual total return over any 10-year long period.
Ed Easterling (of Crestmont) breaks down those returns into these components: EPS, Dividend Yield, and P/E Increase (or decrease).

Note how cyclical P/E expansion/contraction is...
This is why it is important to include whether P/Es are expanding or contracting in any definition of a bull or bear market.

ritholtz.com/2017/08/redefi…
Read 7 tweets
Jan 3, 2023
Observations to Start 2023 dlvr.it/SgJkSr
It takes the Earth 365 days, 6 hours, 9 minutes + 9.76 seconds to complete 1 orbit – to return to the exact same place relative to the sun. Our planet has done this about 4.54 billion times.

What does this unit of time have to do with investing?

Alas, utterly nothing...
This is an example of the irrelevant nature of the calendar - I'd be curious to see what the data looks like for successive rolling 12-month periods rather than calendar years; it might also be more useful than using January - December periods

statista.com/chart/28401/an…
Read 4 tweets

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