While I do subscribe to the general opinion that "supply shortage inflation" is momentary (or transitory, as the FED would like you to think of it), I think that the underlying balloon of Inflation, built up under a century (beginning in 1914), is much more important to watch. Supply shortage might be a catalyst for that, or not. Said supply shortages might also cause the currently restarting/overheating economy to grind to a halt, thus temporarily killing deflating its own inflation. (Fire by fire)
In the very long run, however, deflation seems equally likely. (Although we might see a new little baby-boomer generation coming now. Lotsa kids born during covid. So maybe in medium-long term, moderately high inflation.)
Speculation about how inflation/deflation will pan out is almost certainly a waste of time, however.
What seems more obvious is that there's lots of balls in the air. Lots of ways for things to go wrong.
One thing seems clear:
Now is the time to get ready. I am not as much of a bear as I was during latter part of 2020 and first half of 2021, when everything just seemed to spiral completely out of control. Now everything has calmed down somewhat, and we've had a chance to re-assess the situation. With all the money that has been printed, stocks actually still look cheap IMO (at least the ones with reasonable valuations (PE's of < 15 on 10 year avg. earnings or so)). I am cautiously piling up on stocks, as some household names with div's around 5 % are falling in price, as they have been last month. Feels kinda like buying into the dip during September of 92 years ago though... But I've been anticipating crashes from the day that I started investing (and even before that), and I've learned that 1) that's hard and 2) there's more money to be made being mostly invested, collecting and reinvesting dividends. Compound interest quickly reimburses you for your impatience.
Even though I do not hold a 90 % drop to be unlikely, I don't really hold a 90 % increase to be that unlikely either. And while a 180 % drop is impossible, a 180 % increase is fully possible and to be expected, as long as world GDP continues to increase (as I do expect it to – we still have a larger part of the world growing (demographically) at very high rates. As long as demographic transition isn't completed, stocks will keep providing a healthy return; and probably even after that – maybe still more so, as ppl have more time to invent stuff and be generally ingenious, creative and industrious.)
That said, I'm starting to reinvest from a very high cash % position (~75 %). Still a bear at <3 :')
But everyone's a bear right now – IDK, it makes me a little bullish! #contrarian |
