Everyone currently panic about high inflation and a weak labour supply, which has catapulted front-end pricing central banks higher. I would prefer to not take a bet against gravity!
Thank you very much for writing this post. There are two ideas I don't really get:
- "The price of natural gas in Rotterdam can increase to 500€ (from current 92€) and still ultimately lead to a smaller inflationary impact (in YoY terms) compared to today. " I cannot see how a +400% increase in energy prices can have small inflationary impact. Actually, one of the reasons why I think inflation will be temporary in the US but will stay in the EU for longer is that in Europe energy prices have gone through the roof, and this has come here to stay. Trends in energy prices ripple in the economy across the board. The same logic I think applies to the analysis and the relations on Freight rates and inflation, though the relation is not that stronger.
- "A weak labour market supply will force digitization to re-accelerate over the medium-term". Assuming this happens this way, the trend would be self-reinforcing: less labour supply will lead to even less labour supply due to substitution of humans brought by more digitization. People leaving the workforce also want to have food in their plate. That leads to more government-sponsored programs, subsidies, aids, etc. and all of that comes with more inflationary pressure.
Could you please explain more on the above? It would be very appreciated.
Hi Steno, thank you so much for your excellent service! I really appreciate it. It's good to have you back. I would be very interested to see an example of what a thought process for a forex trade looks like from a professional in the forex and bond business. And especially how you figure out if a currency is cheap or expensive relative to the current yield market and trade balance. What is your time horizon in trading?
Great to see you back commenting markets! You have been one of my favorite sources of non-consensus takes for years.
Maybe you can quickly help me with my current problem. I'm trying to arrive at the 'credit growth slowing'-conclusion using FRED database, but somehow I'm getting all-time high growth rates for money creation in Q4/21. Formula I'm using for calculating the amount of money in real economy: monetary base + bank credit - bank reserves - TGA. Did I forget to subtract something essential?
Hallelujah. Your rates and bond focus is your world not ours, but from an equity perspective we agree. Folks think the rotation to value is underway. We 100pc disagree. The rotation to value already happened through the course of 2021, reaching a crescendo in January-22. The move back to growth is now the theme we expect to see. We believe this will take folks by surprise. Keep up the good work!
Har du et forslag til et engelsk/dansk oversættelses program der ikke skære for’ mange genveje…Apple… jeg bruger megen tid på at få dine guldkorn på plads og misser for mange, fornemmer jeg vh Peter Vaisgaard
Nice job on the central scenario which I mostly agree with. But no risk assessment. What could go wrong here? In particular, what are the repercussions of China easing/reacceleration in your view? Thanks
Fantastic Job Andreas. I disagree only because I think inflation will persist as secondary energy effects roll through the economy this year. I value your arguments though as they are inciteful, as always. I look forward to reading your posts in the future. You are also one of the best thinkers who is unconstrained by institutional bounds and always have very thoughtful supported arguments.
Hi Andreas. Where do you see steel and copper go from here? Are we in the late stages of a bull market as prices of raw material goes up? And what is you opinion about the real estate cycle( Homer Hoyt), Lars Tvede argue that we could look into a crash in 2026-2030. Can you share your thoughts on this ? Best regards Benjamin
QUOTE: "So yes, the Jay-Man may hike several times this year (I don’t find that more than 4 hikes is feasible), but the current trends are ultimately dovish… Low(er) for longer is the endgame."
^Regarding above - do you assign any probability into "a walked-back" rate hike ? Where say for example Jay hikes, risks assets plunge/sideways, economic slowdown etc... CB eases off hiking and even potentially eases ?
Maybe we see yields weaken steadily and then the long bond really soars.
Please feel free to leave questions, comments and feedback here. Hope you all enjoyed it!
Hi Steno,
Thank you very much for writing this post. There are two ideas I don't really get:
- "The price of natural gas in Rotterdam can increase to 500€ (from current 92€) and still ultimately lead to a smaller inflationary impact (in YoY terms) compared to today. " I cannot see how a +400% increase in energy prices can have small inflationary impact. Actually, one of the reasons why I think inflation will be temporary in the US but will stay in the EU for longer is that in Europe energy prices have gone through the roof, and this has come here to stay. Trends in energy prices ripple in the economy across the board. The same logic I think applies to the analysis and the relations on Freight rates and inflation, though the relation is not that stronger.
- "A weak labour market supply will force digitization to re-accelerate over the medium-term". Assuming this happens this way, the trend would be self-reinforcing: less labour supply will lead to even less labour supply due to substitution of humans brought by more digitization. People leaving the workforce also want to have food in their plate. That leads to more government-sponsored programs, subsidies, aids, etc. and all of that comes with more inflationary pressure.
Could you please explain more on the above? It would be very appreciated.
Thank you very much indeed.
Best regards
Javier
Hi Steno, thank you so much for your excellent service! I really appreciate it. It's good to have you back. I would be very interested to see an example of what a thought process for a forex trade looks like from a professional in the forex and bond business. And especially how you figure out if a currency is cheap or expensive relative to the current yield market and trade balance. What is your time horizon in trading?
Great to see you back commenting markets! You have been one of my favorite sources of non-consensus takes for years.
Maybe you can quickly help me with my current problem. I'm trying to arrive at the 'credit growth slowing'-conclusion using FRED database, but somehow I'm getting all-time high growth rates for money creation in Q4/21. Formula I'm using for calculating the amount of money in real economy: monetary base + bank credit - bank reserves - TGA. Did I forget to subtract something essential?
Hallelujah. Your rates and bond focus is your world not ours, but from an equity perspective we agree. Folks think the rotation to value is underway. We 100pc disagree. The rotation to value already happened through the course of 2021, reaching a crescendo in January-22. The move back to growth is now the theme we expect to see. We believe this will take folks by surprise. Keep up the good work!
Hej Andreas
Har du et forslag til et engelsk/dansk oversættelses program der ikke skære for’ mange genveje…Apple… jeg bruger megen tid på at få dine guldkorn på plads og misser for mange, fornemmer jeg vh Peter Vaisgaard
Nice job on the central scenario which I mostly agree with. But no risk assessment. What could go wrong here? In particular, what are the repercussions of China easing/reacceleration in your view? Thanks
Fantastic Job Andreas. I disagree only because I think inflation will persist as secondary energy effects roll through the economy this year. I value your arguments though as they are inciteful, as always. I look forward to reading your posts in the future. You are also one of the best thinkers who is unconstrained by institutional bounds and always have very thoughtful supported arguments.
Great first post. Thanks Andreas.
I can't understand a thing, am I stupid?
Hi Andreas. Where do you see steel and copper go from here? Are we in the late stages of a bull market as prices of raw material goes up? And what is you opinion about the real estate cycle( Homer Hoyt), Lars Tvede argue that we could look into a crash in 2026-2030. Can you share your thoughts on this ? Best regards Benjamin
QUOTE: "So yes, the Jay-Man may hike several times this year (I don’t find that more than 4 hikes is feasible), but the current trends are ultimately dovish… Low(er) for longer is the endgame."
^Regarding above - do you assign any probability into "a walked-back" rate hike ? Where say for example Jay hikes, risks assets plunge/sideways, economic slowdown etc... CB eases off hiking and even potentially eases ?
Maybe we see yields weaken steadily and then the long bond really soars.
I love that base effect argument, a ‘duh’ moment for me thanks!