1/4 There has been a massive underinvestment in the industries that represent the things people consume due to the cost of equity in areas like energy generation, food making, clothing, etc. being artificially inflated (i.e., think 20-30% cost of equity currently vs. 7-9% in…
https://twitter.com/elerianm/status/1450036730611044359
2/4… normal times); resultantly, the investment decision in these segments has demanded stock buybacks over reinvestment in the underlying biz. Consequently, due, largely to Central Bank manipulation of all stocks (w/ much of the new money creation going to asset managers like…
3/4… Blackrock/Vanguard, who allocate money virtually blindly with VERY little ACTUAL due-diligence), all equities are being bid higher, no matter what’s happening in the underlying business, driving up the cost of equity (& thus discouraging reinvestment in businesses…
4/4… that might otherwise need it). This, in turn, suggests inflation is more structural than transitory, & NOT simply a by-product of supply chain issues (as Central Banks, & thus everyone who parrots what they say, would have you believe). Expect MUCH higher prices to persist.
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