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Strategies & Market Trends : The Residential Real Estate Post-Crash Index-Moderated
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From: Cal Amari6/20/2022 11:16:26 AM
1 Recommendation

Recommended By
Smiling Bob

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Rant posted elsewhere:

A lot of people are looking at the same trade in bonds as a short term event, more than ever before. Few remember the seventies and eighties when high inflation ruled for a decade. That may be the major difference this time. Everyone expects interest rates to go up, the Fed to blink, and lower them again. Will this inflation be killed off so quickly, or is it more like seventies and eighties?

The feds have been kicking the can down the road by flooding the market with ever cheaper money since 2000 and all types of debt have ballooned, especially in the last two years. This has allowed a "spend now and forget about debt" mindset to become ubiquitous. It appears that at least one third of Americans have high debt levels. If 120 million people suddenly can't borrow and buy, what affect does that have on goods and services?

I see nothing that can stop the inflation at present. There is no China or Mexico to continue to allow importation of ever cheaper goods. Governments are becoming inward thinking which is destroying the global trading that has allowed goods and services deflation to bring down prices to low levels. Technological gains that have curbed and lowered inflation appear to be leveling off. Prices of everything are on the rise, including services and wages.

Population increases appear to have topped out as political conflicts appear to be escalating to wars. A limited nuclear war appears possible (frightening). Supply chain disruptions appear to be escalating for many reasons. The fixes may take many more years than people think. China made supply of ever cheaper goods look easy, but the Chinese people may not let this continue, especially if there are food shortages in the cities. The laws of diminishing returns are exerting themselves world wide. Governments are imposing trade restrictions in increasing amounts.

These factors above appear to make easy fundamental analysis impossible. As a result, the markets are very jumpy and unpredictable. Technical indicators are jumping around so much as to make them dangerous to use.

I will wait for inflation to show signs of easing and technical indicators to settle down. I think a lot more financial asset wealth must go to money heaven before inflation gets wrestled to the ground. Too many consumers are still too cash flush and willing to pay whatever vendors ask. There are too many help wanted signs. There is still a lot of commercial and residential construction and renovations. There is a bit of demand destruction, but not enough to reverse inflation. Governments still believe they can throw money at a problem and fix it, and they are inventing problems that may not exist, and throwing money at them.

The inflation story is not over and that is what is different from the last 30 years. I think we are crashing into the debt wall.

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