Ritholtz argues inflation will be mostly transitory

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prioritarian
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Ritholtz argues inflation will be mostly transitory

Post by prioritarian »

Prices have risen in many areas, and the question is whether the annualized rate of increase will stay high, or fall back to normal, from these elevated levels. I suspect we are two-thirds through a reset in prices, many of which will prove sticky, but are unlikely to continue at these elevated rates of change.

Low-end wages won’t go back to pre-pandemic levels, but used car prices and gasoline will; “Aspirational” single-family home prices are likely to go away as more supply comes online from new construction and more people selling their existing homes. Rentals are back in many places to pre-Covid levels, but the supply shock might be a substantial conversion of overbuilt office space to residential usage.

Many of the current prices we see are the “new normal,” but much of the current annualized rate of increase is not.
https://ritholtz.com/2021/11/structural-or-transitory/
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Re: Ritholtz argues inflation will be mostly transitory

Post by nedsaid »

If Barry says inflation is transitory, run for the hills. :wink:

What makes me even more nervous is that he says "mostly." So two words here to parse, "mostly" whatever that means and "transitory" whatever that means. I suppose President Hindenburg at the Weimar Republic during the early 1930's said that inflation was transitory but don't worry, we got it under control. When people say not to worry, that is when I get worried. "Transitory" could take us out to the 2030's. :wink:
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Re: Ritholtz argues inflation will be mostly transitory

Post by prioritarian »

nedsaid wrote: Tue Nov 23, 2021 5:32 pm If Barry says inflation is transitory, run for the hills. :wink:

What makes me even more nervous is that he says "mostly." So two words here to parse, "mostly" whatever that means and "transitory" whatever that means. I suppose President Hindenburg at the Weimar Republic during the early 1930's said that inflation was transitory but don't worry, we got it under control. When people say not to worry, that is when I get worried. "Transitory" could take us out to the 2030's. :wink:
What I liked about this post is that he discussed most of the actual components of price increases driving the recent surge in inflation. I suspect that most people who are worried about inflation don't realize that many of these price components are already on their way down which will likely be reflected in future inflation prints. I like a good bear vs bull argument but the bears usually have cogent arguments for why bad things will happen and this seems to be missing in many (but not all) inflation discussions here. As Barry noted, the trajectory of owner equivalent rent is a question mark but the move back to cities and the massive backlog of new homes about to be completed suggests that this too may be more...erm...transitory than is commonly believed.
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nedsaid
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Re: Ritholtz argues inflation will be mostly transitory

Post by nedsaid »

I think used car and energy prices are headed down. Lumber prices went way up and then went down, not sure where they are now. For the first time, I started to see the difference in food prices a bit last week when I ordered online. No relief on gas prices, still up but the rate of increase has slowed. Inflation isn't something that increases across the board, probably lots of things haven't budged yet.

It was a good article, there are components in inflation that are volatile like food and energy, they can go up and all the way back down again. Rents, on the other hand are pretty sticky, much harder for them to come down.
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Re: Ritholtz argues inflation will be mostly transitory

Post by UpperNwGuy »

nedsaid wrote: Tue Nov 23, 2021 5:32 pm If Barry says inflation is transitory, run for the hills. :wink:

What makes me even more nervous is that he says "mostly." So two words here to parse, "mostly" whatever that means and "transitory" whatever that means. I suppose President Hindenburg at the Weimar Republic during the early 1930's said that inflation was transitory but don't worry, we got it under control. When people say not to worry, that is when I get worried. "Transitory" could take us out to the 2030's. :wink:
Is this why you are not buying bonds these days?
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Re: Ritholtz argues inflation will be mostly transitory

Post by rockstar »

I feel confident that used cars prices won't go up 25% more next year, so I agree with him on that point. I don't know if gas will go down next year, but it's unlikely to go up as much next year as it did this year. I think the same can be said for rents and home prices.

The rest feels sticky to me as it's less than 10% YoY increases.
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Re: Ritholtz argues inflation will be mostly transitory

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UpperNwGuy wrote: Tue Nov 23, 2021 7:00 pm
nedsaid wrote: Tue Nov 23, 2021 5:32 pm If Barry says inflation is transitory, run for the hills. :wink:

What makes me even more nervous is that he says "mostly." So two words here to parse, "mostly" whatever that means and "transitory" whatever that means. I suppose President Hindenburg at the Weimar Republic during the early 1930's said that inflation was transitory but don't worry, we got it under control. When people say not to worry, that is when I get worried. "Transitory" could take us out to the 2030's. :wink:
Is this why you are not buying bonds these days?
Yep. Inflation spikes can be devastating to bond investors and to stock investors. Hope we aren't seeing a rerun of the 1970's, I don't think so but we will see. All I am doing is putting a pause on bond purchases. If I get scared, might switch more nominal bonds for TIPS. Hopefully, we will see this start to cool down with the November CPI data.
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Re: Ritholtz argues inflation will be mostly transitory

Post by prioritarian »

rockstar wrote: Tue Nov 23, 2021 7:02 pm I feel confident that used cars prices won't go up 25% more next year, so I agree with him on that point. I don't know if gas will go down next year, but it's unlikely to go up as much next year as it did this year. I think the same can be said for rents and home prices.

The rest feels sticky to me as it's less than 10% YoY increases.
Inflation is a measure of aggregate price velocity and has nothing to do with price stickyness. If prices were perfectly stick inflation would be zero.
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Re: Ritholtz argues inflation will be mostly transitory

Post by quattro73 »

nedsaid wrote: Tue Nov 23, 2021 6:56 pm I think used car and energy prices are headed down. Lumber prices went way up and then went down, not sure where they are now. For the first time, I started to see the difference in food prices a bit last week when I ordered online. No relief on gas prices, still up but the rate of increase has slowed. Inflation isn't something that increases across the board, probably lots of things haven't budged yet.

It was a good article, there are components in inflation that are volatile like food and energy, they can go up and all the way back down again. Rents, on the other hand are pretty sticky, much harder for them to come down.
There is an excellent Odd Lots podcast with a guy talking about lumber prices - around October. Highly recommend checking it out.

It really highlights the supply chain disruptions and how they are rippling through.

I think if the supply chain can be rebalanced, many inflationary drivers are likely to be mitigated. Not sure things come down, and labor costs will stay higher, but I think the acceleration will slow. That and $50 (formerly 50 cents) will buy you a cup of coffee.
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Re: Ritholtz argues inflation will be mostly transitory

Post by mikejuss »

nedsaid wrote: Tue Nov 23, 2021 7:25 pmYep. Inflation spikes can be devastating to bond investors and to stock investors. Hope we aren't seeing a rerun of the 1970's, I don't think so but we will see. All I am doing is putting a pause on bond purchases. If I get scared, might switch more nominal bonds for TIPS. Hopefully, we will see this start to cool down with the November CPI data.
That may well be true, but it isn't true right now for stocks.
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Re: Ritholtz argues inflation will be mostly transitory

Post by skierincolorado »

prioritarian wrote: Tue Nov 23, 2021 7:40 pm
rockstar wrote: Tue Nov 23, 2021 7:02 pm I feel confident that used cars prices won't go up 25% more next year, so I agree with him on that point. I don't know if gas will go down next year, but it's unlikely to go up as much next year as it did this year. I think the same can be said for rents and home prices.

The rest feels sticky to me as it's less than 10% YoY increases.
Inflation is a measure of aggregate price velocity and has nothing to do with price stickyness. If prices were perfectly stick inflation would be zero.
Stickyness is a common term to refer to persistently high inflation. Specifically it refers to how sometimes inflation can be self-propagating and people start to expect it. Consumers/employees/employers all start expecting/demanding/planning for future price increases which makes those future price increases more likely to occur. Stickiness can also help explain the persistently below forecast inflation 2009-2018. People just got used to and expecting low inflation which made the low inflation more persistent despite Fed intervention.
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Re: Ritholtz argues inflation will be mostly transitory

Post by mikejuss »

nedsaid wrote: Tue Nov 23, 2021 5:32 pmIf Barry says inflation is transitory, run for the hills. :wink:
Is Barry not well-liked among the Bogleheads?
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Re: Ritholtz argues inflation will be mostly transitory

Post by prioritarian »

skierincolorado wrote: Tue Nov 23, 2021 7:50 pm
prioritarian wrote: Tue Nov 23, 2021 7:40 pm
rockstar wrote: Tue Nov 23, 2021 7:02 pm I feel confident that used cars prices won't go up 25% more next year, so I agree with him on that point. I don't know if gas will go down next year, but it's unlikely to go up as much next year as it did this year. I think the same can be said for rents and home prices.

The rest feels sticky to me as it's less than 10% YoY increases.
Inflation is a measure of aggregate price velocity and has nothing to do with price stickyness. If prices were perfectly stick inflation would be zero.
Stickyness is a common term to refer to persistently high inflation. Specifically it refers to how sometimes inflation can be self-propagating and people start to expect it. Consumers/employees/employers all start expecting/demanding/planning for future price increases which makes those future price increases more likely to occur. Stickiness can also help explain the persistently below forecast inflation 2009-2018. People just got used to and expecting low inflation which made the low inflation more persistent despite Fed intervention.
Prices can be sticky and inflation expectations can become embedded. However, inflation expectations have been a terrible way to forecast actual inflation as shown by the persistently high inflation expectations following the great recession.
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Re: Ritholtz argues inflation will be mostly transitory

Post by prioritarian »

mikejuss wrote: Tue Nov 23, 2021 7:46 pm
nedsaid wrote: Tue Nov 23, 2021 7:25 pmYep. Inflation spikes can be devastating to bond investors and to stock investors. Hope we aren't seeing a rerun of the 1970's, I don't think so but we will see. All I am doing is putting a pause on bond purchases. If I get scared, might switch more nominal bonds for TIPS. Hopefully, we will see this start to cool down with the November CPI data.
That may well be true, but it isn't true right now for stocks.
Or bond investors for that matter but I'm betting that my long bond positions will require extensive rebalancing in the next few years (it's part of my investment plan so that's all right). It's strange that some bogleheads with >70% equities positions are surprised by/worried about the possibility of treasury bonds showing a 7-15% loss 1.5 years after a 30% equities loss.
Last edited by prioritarian on Tue Nov 23, 2021 8:19 pm, edited 2 times in total.
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Re: Ritholtz argues inflation will be mostly transitory

Post by skierincolorado »

prioritarian wrote: Tue Nov 23, 2021 7:57 pm
skierincolorado wrote: Tue Nov 23, 2021 7:50 pm
prioritarian wrote: Tue Nov 23, 2021 7:40 pm
rockstar wrote: Tue Nov 23, 2021 7:02 pm I feel confident that used cars prices won't go up 25% more next year, so I agree with him on that point. I don't know if gas will go down next year, but it's unlikely to go up as much next year as it did this year. I think the same can be said for rents and home prices.

The rest feels sticky to me as it's less than 10% YoY increases.
Inflation is a measure of aggregate price velocity and has nothing to do with price stickyness. If prices were perfectly stick inflation would be zero.
Stickyness is a common term to refer to persistently high inflation. Specifically it refers to how sometimes inflation can be self-propagating and people start to expect it. Consumers/employees/employers all start expecting/demanding/planning for future price increases which makes those future price increases more likely to occur. Stickiness can also help explain the persistently below forecast inflation 2009-2018. People just got used to and expecting low inflation which made the low inflation more persistent despite Fed intervention.
Prices can be sticky and inflation expectations can become embedded. However, inflation expectations have been a terrible way to forecast actual inflation as shown by the persistently high inflation expectations following the great recession.
No but that's kind of the whole point. The market expected inflation to go up based on Fed action. But actual consumers/employers/employees did not. Most people aren't really that financially aware. What they do know is that 2-3% raises became the norm. The low rate of inflation was self-reinforcing.
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Re: Ritholtz argues inflation will be mostly transitory

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mikejuss wrote: Tue Nov 23, 2021 7:56 pm
nedsaid wrote: Tue Nov 23, 2021 5:32 pmIf Barry says inflation is transitory, run for the hills. :wink:
Is Barry not well-liked among the Bogleheads?
Barry is fine. He is a contributor here. Making a comment about "mostly" and "transitory". The article was actually good. I just get nervous when people say things are fine.
A fool and his money are good for business.
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Re: Ritholtz argues inflation will be mostly transitory

Post by prioritarian »

skierincolorado wrote: Tue Nov 23, 2021 8:03 pm
prioritarian wrote: Tue Nov 23, 2021 7:57 pm
skierincolorado wrote: Tue Nov 23, 2021 7:50 pm
prioritarian wrote: Tue Nov 23, 2021 7:40 pm
rockstar wrote: Tue Nov 23, 2021 7:02 pm I feel confident that used cars prices won't go up 25% more next year, so I agree with him on that point. I don't know if gas will go down next year, but it's unlikely to go up as much next year as it did this year. I think the same can be said for rents and home prices.

The rest feels sticky to me as it's less than 10% YoY increases.
Inflation is a measure of aggregate price velocity and has nothing to do with price stickyness. If prices were perfectly stick inflation would be zero.
Stickyness is a common term to refer to persistently high inflation. Specifically it refers to how sometimes inflation can be self-propagating and people start to expect it. Consumers/employees/employers all start expecting/demanding/planning for future price increases which makes those future price increases more likely to occur. Stickiness can also help explain the persistently below forecast inflation 2009-2018. People just got used to and expecting low inflation which made the low inflation more persistent despite Fed intervention.
Prices can be sticky and inflation expectations can become embedded. However, inflation expectations have been a terrible way to forecast actual inflation as shown by the persistently high inflation expectations following the great recession.
No but that's kind of the whole point. The market expected inflation to go up based on Fed action. But actual consumers/employers/employees did not. Most people aren't really that financially aware. What they do know is that 2-3% raises became the norm. The low rate of inflation was self-reinforcing.

Inflation expectations were all over the place and had little predictive power.

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Re: Ritholtz argues inflation will be mostly transitory

Post by averagedude »

I have had the opinion that inflation will run hotter and longer than what the fed says, but inflation will ultimately settle back down to the 2.5% range in mid to late 2022. Nobody really knows, so don't take any action on what I think, what Ritholtz thinks, or any other opinion that you here in the financial media. Stay the course.
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Re: Ritholtz argues inflation will be mostly transitory

Post by steve r »

prioritarian wrote: Tue Nov 23, 2021 6:45 pm ...As Barry noted, the trajectory of owner equivalent rent is a question mark but the move back to cities and the massive backlog of new homes about to be completed suggests that this too may be more...erm...transitory than is commonly believed.
I guess it depends on what "transitory" means. Home prices changes are more likely permanent and cannot be blamed on people moving out of and back into the cities as we did not see price declines in the city. Case Shiller National Home price index is up from 212 in 2/2020 to nearly 270 today. Again this is nationwide.

Macroeconomist are debating what is being discussed. Are the price increases "primarily" because of supply side issues (supply chain) (think Krugman) or demand side because of a massive spike in M2 and the broader money supply (think Larry Summers)?

There is evidence that inflation is occurring for both reasons. The question (in my mind) is what is primarily driving things.

https://fred.stlouisfed.org/series/CSUSHPINSA
Last edited by steve r on Tue Nov 23, 2021 8:44 pm, edited 1 time in total.
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Re: Ritholtz argues inflation will be mostly transitory

Post by prioritarian »

nedsaid wrote: Tue Nov 23, 2021 8:08 pm
mikejuss wrote: Tue Nov 23, 2021 7:56 pm
nedsaid wrote: Tue Nov 23, 2021 5:32 pmIf Barry says inflation is transitory, run for the hills. :wink:
Is Barry not well-liked among the Bogleheads?
Barry is fine. He is a contributor here. Making a comment about "mostly" and "transitory". The article was actually good. I just get nervous when people say things are fine.
He does point to housing as the most worrisome component. I agree that this is the CPI component that seems to have the greatest risk of a major upside surprise. And here I go making the inflationista's argument for them... :oops:
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Re: Ritholtz argues inflation will be mostly transitory

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steve r wrote: Tue Nov 23, 2021 8:22 pm

There is evidence that inflation is occurring for both reasons? The question (in my mind) is what is primarily driving things. I suspect there is simply too much money chasing too few goods.

https://fred.stlouisfed.org/series/CSUSHPINSA
I agree and would add that supply shocks are worsening this excess savings-driven demand so perhaps a mix of Krugman and Summers in the short term. However, I expect Summers to be wrong next year when the excess savings are spent out by the ever reliable USanian consumer. I think housing/OER is the big question and there is a finite supply of this newly financialized asset (at least in the medium/short-term).
Last edited by prioritarian on Tue Nov 23, 2021 8:41 pm, edited 1 time in total.
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Re: Ritholtz argues inflation will be mostly transitory

Post by skierincolorado »

prioritarian wrote: Tue Nov 23, 2021 8:17 pm
skierincolorado wrote: Tue Nov 23, 2021 8:03 pm
prioritarian wrote: Tue Nov 23, 2021 7:57 pm
skierincolorado wrote: Tue Nov 23, 2021 7:50 pm
prioritarian wrote: Tue Nov 23, 2021 7:40 pm

Inflation is a measure of aggregate price velocity and has nothing to do with price stickyness. If prices were perfectly stick inflation would be zero.
Stickyness is a common term to refer to persistently high inflation. Specifically it refers to how sometimes inflation can be self-propagating and people start to expect it. Consumers/employees/employers all start expecting/demanding/planning for future price increases which makes those future price increases more likely to occur. Stickiness can also help explain the persistently below forecast inflation 2009-2018. People just got used to and expecting low inflation which made the low inflation more persistent despite Fed intervention.
Prices can be sticky and inflation expectations can become embedded. However, inflation expectations have been a terrible way to forecast actual inflation as shown by the persistently high inflation expectations following the great recession.
No but that's kind of the whole point. The market expected inflation to go up based on Fed action. But actual consumers/employers/employees did not. Most people aren't really that financially aware. What they do know is that 2-3% raises became the norm. The low rate of inflation was self-reinforcing.

Inflation expectations were all over the place and had little predictive power.

Image

Image
Again what the market expects and what joe shmo expects for a raise or for a new car are not really related.
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prioritarian
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Re: Ritholtz argues inflation will be mostly transitory

Post by prioritarian »

skierincolorado wrote: Tue Nov 23, 2021 8:29 pm
prioritarian wrote: Tue Nov 23, 2021 8:17 pm
skierincolorado wrote: Tue Nov 23, 2021 8:03 pm
prioritarian wrote: Tue Nov 23, 2021 7:57 pm
skierincolorado wrote: Tue Nov 23, 2021 7:50 pm

Stickyness is a common term to refer to persistently high inflation. Specifically it refers to how sometimes inflation can be self-propagating and people start to expect it. Consumers/employees/employers all start expecting/demanding/planning for future price increases which makes those future price increases more likely to occur. Stickiness can also help explain the persistently below forecast inflation 2009-2018. People just got used to and expecting low inflation which made the low inflation more persistent despite Fed intervention.
Prices can be sticky and inflation expectations can become embedded. However, inflation expectations have been a terrible way to forecast actual inflation as shown by the persistently high inflation expectations following the great recession.
No but that's kind of the whole point. The market expected inflation to go up based on Fed action. But actual consumers/employers/employees did not. Most people aren't really that financially aware. What they do know is that 2-3% raises became the norm. The low rate of inflation was self-reinforcing.
Well I did post on market predictions (e.g. bond spreads) and they all seem to be pointing to low inflation (even though they got this current bout of modest inflation wrong).
Inflation expectations were all over the place and had little predictive power.
Again what the market expects and what joe shmo expects for a raise or for a new car are not really related.
Completely agree which is why I posted about breakevens here:

viewtopic.php?f=10&t=361804

Breakevens did not predict this modest spike but have been a more reliable measure than joe schmoe and can be adjusted for the effects of "Fed intervention" as I discussed in my thread.
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Re: Ritholtz argues inflation will be mostly transitory

Post by NoRegret »

prioritarian wrote: Tue Nov 23, 2021 5:31 pm
Prices have risen in many areas, and the question is whether the annualized rate of increase will stay high, or fall back to normal, from these elevated levels. I suspect we are two-thirds through a reset in prices, many of which will prove sticky, but are unlikely to continue at these elevated rates of change.

Low-end wages won’t go back to pre-pandemic levels, but used car prices and gasoline will; “Aspirational” single-family home prices are likely to go away as more supply comes online from new construction and more people selling their existing homes. Rentals are back in many places to pre-Covid levels, but the supply shock might be a substantial conversion of overbuilt office space to residential usage.

Many of the current prices we see are the “new normal,” but much of the current annualized rate of increase is not.
https://ritholtz.com/2021/11/structural-or-transitory/
Like anything else, there needs to be a time frame associated with these pronouncements so we can later evaluate their accuracy. I've no issue with inflation (as measured by CPI) lower by this time next year -- a bear market/recession will surely take care of that. But I also believe over the next 5-10 years inflation will likely be higher than the 2-3% (or lower) that we've been conditioned to expect.

It is true that supply-shock induced price increases are not the same as inflation due to increase in the quantity of money (cf. Jeff Snider) -- at least as of this moment and if one ignores last year's increases. However, this argument does not take into account the velocity of money which has a lot to do with consumer psychology.
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Re: Ritholtz argues inflation will be mostly transitory

Post by mikejuss »

prioritarian wrote: Tue Nov 23, 2021 8:01 pm
mikejuss wrote: Tue Nov 23, 2021 7:46 pm
nedsaid wrote: Tue Nov 23, 2021 7:25 pmYep. Inflation spikes can be devastating to bond investors and to stock investors. Hope we aren't seeing a rerun of the 1970's, I don't think so but we will see. All I am doing is putting a pause on bond purchases. If I get scared, might switch more nominal bonds for TIPS. Hopefully, we will see this start to cool down with the November CPI data.
That may well be true, but it isn't true right now for stocks.
Or bond investors for that matter but I'm betting that my long bond positions will require extensive rebalancing in the next few years (it's part of my investment plan so that's all right). It's strange that some bogleheads with >70% equities positions are surprised by/worried about the possibility of treasury bonds showing a 7-15% loss 1.5 years after a 30% equities loss.
Aren't many bonds lagging inflation right now? In any event, yeah, why anyone who has stayed invested in the stock market over the past few years is up at night worrying about bond yields beats me. Isn't your portfolio way up right now?
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Re: Ritholtz argues inflation will be mostly transitory

Post by rockstar »

mikejuss wrote: Tue Nov 23, 2021 9:40 pm
prioritarian wrote: Tue Nov 23, 2021 8:01 pm
mikejuss wrote: Tue Nov 23, 2021 7:46 pm
nedsaid wrote: Tue Nov 23, 2021 7:25 pmYep. Inflation spikes can be devastating to bond investors and to stock investors. Hope we aren't seeing a rerun of the 1970's, I don't think so but we will see. All I am doing is putting a pause on bond purchases. If I get scared, might switch more nominal bonds for TIPS. Hopefully, we will see this start to cool down with the November CPI data.
That may well be true, but it isn't true right now for stocks.
Or bond investors for that matter but I'm betting that my long bond positions will require extensive rebalancing in the next few years (it's part of my investment plan so that's all right). It's strange that some bogleheads with >70% equities positions are surprised by/worried about the possibility of treasury bonds showing a 7-15% loss 1.5 years after a 30% equities loss.
Aren't many bonds lagging inflation right now? In any event, yeah, why anyone who has stayed invested in the stock market over the past few years is up at night worrying about bond yields beats me. Isn't your portfolio way up right now?
Because we would really like to buy bonds.
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Re: Ritholtz argues inflation will be mostly transitory

Post by mikejuss »

rockstar wrote: Tue Nov 23, 2021 9:44 pm
mikejuss wrote: Tue Nov 23, 2021 9:40 pm
prioritarian wrote: Tue Nov 23, 2021 8:01 pm
mikejuss wrote: Tue Nov 23, 2021 7:46 pm
nedsaid wrote: Tue Nov 23, 2021 7:25 pmYep. Inflation spikes can be devastating to bond investors and to stock investors. Hope we aren't seeing a rerun of the 1970's, I don't think so but we will see. All I am doing is putting a pause on bond purchases. If I get scared, might switch more nominal bonds for TIPS. Hopefully, we will see this start to cool down with the November CPI data.
That may well be true, but it isn't true right now for stocks.
Or bond investors for that matter but I'm betting that my long bond positions will require extensive rebalancing in the next few years (it's part of my investment plan so that's all right). It's strange that some bogleheads with >70% equities positions are surprised by/worried about the possibility of treasury bonds showing a 7-15% loss 1.5 years after a 30% equities loss.
Aren't many bonds lagging inflation right now? In any event, yeah, why anyone who has stayed invested in the stock market over the past few years is up at night worrying about bond yields beats me. Isn't your portfolio way up right now?
Because we would really like to buy bonds.
And now's a perfect time to do so--with all that dough you made from equities.
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Re: Ritholtz argues inflation will be mostly transitory

Post by rockstar »

mikejuss wrote: Tue Nov 23, 2021 9:45 pm
rockstar wrote: Tue Nov 23, 2021 9:44 pm
mikejuss wrote: Tue Nov 23, 2021 9:40 pm
prioritarian wrote: Tue Nov 23, 2021 8:01 pm
mikejuss wrote: Tue Nov 23, 2021 7:46 pm

That may well be true, but it isn't true right now for stocks.
Or bond investors for that matter but I'm betting that my long bond positions will require extensive rebalancing in the next few years (it's part of my investment plan so that's all right). It's strange that some bogleheads with >70% equities positions are surprised by/worried about the possibility of treasury bonds showing a 7-15% loss 1.5 years after a 30% equities loss.
Aren't many bonds lagging inflation right now? In any event, yeah, why anyone who has stayed invested in the stock market over the past few years is up at night worrying about bond yields beats me. Isn't your portfolio way up right now?
Because we would really like to buy bonds.
And now's a perfect time to do so--with all that dough you made from equities.
TIPS still have negative yields. Once they go positive, I'll feel better about buying bonds. Hopefully, I can buy some at auction next summer.

I'm maxing I Bonds, but that's about it. And I'm still negative real after taxes on those.
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Re: Ritholtz argues inflation will be mostly transitory

Post by mikejuss »

rockstar wrote: Tue Nov 23, 2021 9:47 pm
mikejuss wrote: Tue Nov 23, 2021 9:45 pm
rockstar wrote: Tue Nov 23, 2021 9:44 pm
mikejuss wrote: Tue Nov 23, 2021 9:40 pm
prioritarian wrote: Tue Nov 23, 2021 8:01 pm

Or bond investors for that matter but I'm betting that my long bond positions will require extensive rebalancing in the next few years (it's part of my investment plan so that's all right). It's strange that some bogleheads with >70% equities positions are surprised by/worried about the possibility of treasury bonds showing a 7-15% loss 1.5 years after a 30% equities loss.
Aren't many bonds lagging inflation right now? In any event, yeah, why anyone who has stayed invested in the stock market over the past few years is up at night worrying about bond yields beats me. Isn't your portfolio way up right now?
Because we would really like to buy bonds.
And now's a perfect time to do so--with all that dough you made from equities.
TIPS still have negative yields. Once they go positive, I'll feel better about buying bonds. Hopefully, I can buy some at auction next summer.

I'm maxing I Bonds, but that's about it. And I'm still negative real after taxes on those.
I hear you, but what you're doing is market timing, and should a recession intervene between now and next summer, you might be kicking yourself. I can deal with a small drag on my portfolio, knowing that I'll have assets with which to rebalance should stocks dip. I'm fine with my 20% rate of return at present.
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9-5 Suited
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Re: Ritholtz argues inflation will be mostly transitory

Post by 9-5 Suited »

rockstar wrote: Tue Nov 23, 2021 9:47 pm
mikejuss wrote: Tue Nov 23, 2021 9:45 pm
rockstar wrote: Tue Nov 23, 2021 9:44 pm
mikejuss wrote: Tue Nov 23, 2021 9:40 pm
prioritarian wrote: Tue Nov 23, 2021 8:01 pm

Or bond investors for that matter but I'm betting that my long bond positions will require extensive rebalancing in the next few years (it's part of my investment plan so that's all right). It's strange that some bogleheads with >70% equities positions are surprised by/worried about the possibility of treasury bonds showing a 7-15% loss 1.5 years after a 30% equities loss.
Aren't many bonds lagging inflation right now? In any event, yeah, why anyone who has stayed invested in the stock market over the past few years is up at night worrying about bond yields beats me. Isn't your portfolio way up right now?
Because we would really like to buy bonds.
And now's a perfect time to do so--with all that dough you made from equities.
TIPS still have negative yields. Once they go positive, I'll feel better about buying bonds. Hopefully, I can buy some at auction next summer.

I'm maxing I Bonds, but that's about it. And I'm still negative real after taxes on those.
I’m curious why you (and many investors on the forum, it seems) feel so comfortable timing the bond market when the same statements about equities (e.g. stock earnings yields are so low, once they go higher I’ll get back into equities) would be considered heretical to the general principles espoused here? It seems like a behavioral error borne of the negative gut reaction to seeing a negative real yield.
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nedsaid
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Re: Ritholtz argues inflation will be mostly transitory

Post by nedsaid »

prioritarian wrote: Tue Nov 23, 2021 8:22 pm
nedsaid wrote: Tue Nov 23, 2021 8:08 pm
mikejuss wrote: Tue Nov 23, 2021 7:56 pm
nedsaid wrote: Tue Nov 23, 2021 5:32 pmIf Barry says inflation is transitory, run for the hills. :wink:
Is Barry not well-liked among the Bogleheads?
Barry is fine. He is a contributor here. Making a comment about "mostly" and "transitory". The article was actually good. I just get nervous when people say things are fine.
He does point to housing as the most worrisome component. I agree that this is the CPI component that seems to have the greatest risk of a major upside surprise. And here I go making the inflationista's argument for them... :oops:
Rents are almost unaffordable now in certain high cost of living areas of the United States. There is a Boulevard in Los Angeles where people park in their RV's because they can't afford rents. I shudder to think of rents going even higher. Glad that I bought in 1999, not sure I could afford to rent my place today.

Jeremy Seigel predicted 20% inflation over about 3 years, I think that is a high estimate but so far he has been right. Pudding cups which cost $1 for years are right now $1.33. Food costs for me haven't gone up much yet, but I am starting to see things creep up here and there.
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chw
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Re: Ritholtz argues inflation will be mostly transitory

Post by chw »

nedsaid wrote: Tue Nov 23, 2021 6:56 pm I think used car and energy prices are headed down. Lumber prices went way up and then went down, not sure where they are now. For the first time, I started to see the difference in food prices a bit last week when I ordered online. No relief on gas prices, still up but the rate of increase has slowed. Inflation isn't something that increases across the board, probably lots of things haven't budged yet.

It was a good article, there are components in inflation that are volatile like food and energy, they can go up and all the way back down again. Rents, on the other hand are pretty sticky, much harder for them to come down.
IMO, some of this is anecdotal based on locality and demand (especially rents). Inflation has a tendency to show up quickly when not expected. It seems this time around, the main driver is the supply chain mess caused for the most part by the disruption in shipping getting through our ports, as well as severe labor shortages (such as drivers to deliver consumer goods). The supply chain/labor issues have been exacerbated by COVID, and should continually ease as COVID improves (or we learn to live with it). With that inflationary pressures should ease for many segments, but some may face headwinds (such as rents in housing constrained markets).
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Re: Ritholtz argues inflation will be mostly transitory

Post by rockstar »

9-5 Suited wrote: Tue Nov 23, 2021 9:51 pm
rockstar wrote: Tue Nov 23, 2021 9:47 pm
mikejuss wrote: Tue Nov 23, 2021 9:45 pm
rockstar wrote: Tue Nov 23, 2021 9:44 pm
mikejuss wrote: Tue Nov 23, 2021 9:40 pm

Aren't many bonds lagging inflation right now? In any event, yeah, why anyone who has stayed invested in the stock market over the past few years is up at night worrying about bond yields beats me. Isn't your portfolio way up right now?
Because we would really like to buy bonds.
And now's a perfect time to do so--with all that dough you made from equities.
TIPS still have negative yields. Once they go positive, I'll feel better about buying bonds. Hopefully, I can buy some at auction next summer.

I'm maxing I Bonds, but that's about it. And I'm still negative real after taxes on those.
I’m curious why you (and many investors on the forum, it seems) feel so comfortable timing the bond market when the same statements about equities (e.g. stock earnings yields are so low, once they go higher I’ll get back into equities) would be considered heretical to the general principles espoused here? It seems like a behavioral error borne of the negative gut reaction to seeing a negative real yield.
I'm not timing. I'm buying a bond when I can get a real return. Why would I buy a bond that gives me a negative real return pre-tax intentionally?

As for equities, I have no idea when I'm overpaying or underpaying. But I can use the 200 or 300 day moving average as guardrails.
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Re: Ritholtz argues inflation will be mostly transitory

Post by rockstar »

mikejuss wrote: Tue Nov 23, 2021 9:50 pm
rockstar wrote: Tue Nov 23, 2021 9:47 pm
mikejuss wrote: Tue Nov 23, 2021 9:45 pm
rockstar wrote: Tue Nov 23, 2021 9:44 pm
mikejuss wrote: Tue Nov 23, 2021 9:40 pm

Aren't many bonds lagging inflation right now? In any event, yeah, why anyone who has stayed invested in the stock market over the past few years is up at night worrying about bond yields beats me. Isn't your portfolio way up right now?
Because we would really like to buy bonds.
And now's a perfect time to do so--with all that dough you made from equities.
TIPS still have negative yields. Once they go positive, I'll feel better about buying bonds. Hopefully, I can buy some at auction next summer.

I'm maxing I Bonds, but that's about it. And I'm still negative real after taxes on those.
I hear you, but what you're doing is market timing, and should a recession intervene between now and next summer, you might be kicking yourself. I can deal with a small drag on my portfolio, knowing that I'll have assets with which to rebalance should stocks dip. I'm fine with my 20% rate of return at present.
If I owned bonds this year, I'll be kicking myself. BND is down 8% real YTD. And Vanguard's TIP fund is still negative real this year.
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Re: Ritholtz argues inflation will be mostly transitory

Post by 9-5 Suited »

rockstar wrote: Tue Nov 23, 2021 9:56 pm
9-5 Suited wrote: Tue Nov 23, 2021 9:51 pm
rockstar wrote: Tue Nov 23, 2021 9:47 pm
mikejuss wrote: Tue Nov 23, 2021 9:45 pm
rockstar wrote: Tue Nov 23, 2021 9:44 pm

Because we would really like to buy bonds.
And now's a perfect time to do so--with all that dough you made from equities.
TIPS still have negative yields. Once they go positive, I'll feel better about buying bonds. Hopefully, I can buy some at auction next summer.

I'm maxing I Bonds, but that's about it. And I'm still negative real after taxes on those.
I’m curious why you (and many investors on the forum, it seems) feel so comfortable timing the bond market when the same statements about equities (e.g. stock earnings yields are so low, once they go higher I’ll get back into equities) would be considered heretical to the general principles espoused here? It seems like a behavioral error borne of the negative gut reaction to seeing a negative real yield.
I'm not timing. I'm buying a bond when I can get a real return. Why would I buy a bond that gives me a negative real return pre-tax intentionally?

As for equities, I have no idea when I'm overpaying or underpaying. But I can use the 200 or 300 day moving average as guardrails.
That’s the definition of market timing though. You’re adapting your AA to market conditions and saying you’ll get back into one asset class when the price becomes more favorable to you. What else could market timing mean?

The challenge with it is that bond yields could go up, down, or sideways from here so you could have an out of whack (i.e. too equity heavy portfolio) for a very long time.

I completely get why it feels crappy to lock in a negative real yield, but I don’t believe the relative future returns of equities vs. bonds (the equity risk premium) has changed. We are all just probably going to have to live with lower expected returns.
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Re: Ritholtz argues inflation will be mostly transitory

Post by mikejuss »

9-5 Suited wrote: Tue Nov 23, 2021 9:51 pm
rockstar wrote: Tue Nov 23, 2021 9:47 pm
mikejuss wrote: Tue Nov 23, 2021 9:45 pm
rockstar wrote: Tue Nov 23, 2021 9:44 pm
mikejuss wrote: Tue Nov 23, 2021 9:40 pm

Aren't many bonds lagging inflation right now? In any event, yeah, why anyone who has stayed invested in the stock market over the past few years is up at night worrying about bond yields beats me. Isn't your portfolio way up right now?
Because we would really like to buy bonds.
And now's a perfect time to do so--with all that dough you made from equities.
TIPS still have negative yields. Once they go positive, I'll feel better about buying bonds. Hopefully, I can buy some at auction next summer.

I'm maxing I Bonds, but that's about it. And I'm still negative real after taxes on those.
I’m curious why you (and many investors on the forum, it seems) feel so comfortable timing the bond market when the same statements about equities (e.g. stock earnings yields are so low, once they go higher I’ll get back into equities) would be considered heretical to the general principles espoused here? It seems like a behavioral error borne of the negative gut reaction to seeing a negative real yield.
I'm no behavioral psychologist, but my own sense is that investors have come to expect positive yields at all times, and therefore cannot see how--in the perhaps not-too-distant future--a negatively yielding asset class could come in quite handy should the economic environment change.
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Re: Ritholtz argues inflation will be mostly transitory

Post by JBTX »

One thing about rents, as I understand it, rents are factored in based upon what people are currently paying, not the going market rate. Most apartment and home leases have a fixed price for a period, like a year. When those leases renew in the future, at higher rates, there will be inflation, but even though market rates are going up now, the actual inflation to consumers will lag due to fixed leases. New Market rents could level off to zero now, but if they had been going up 10%, that will flow through and lag up to the next year or so.

Given the bump in single family home prices, that could lead to higher rents, which flows though inflation measures for months/years ahead.
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Re: Ritholtz argues inflation will be mostly transitory

Post by sycamore »

rockstar wrote: Tue Nov 23, 2021 9:47 pm ...I'm maxing I Bonds, but that's about it. And I'm still negative real after taxes on those.
So you're reporting your I Bond interest every year and paying taxes on them? Curious why you decided to do that rather than defer reporting them until cashing in the I Bonds?
printer86
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Re: Ritholtz argues inflation will be mostly transitory

Post by printer86 »

nedsaid wrote: Tue Nov 23, 2021 9:52 pm
Jeremy Seigel predicted 20% inflation over about 3 years, I think that is a high estimate but so far he has been right. Pudding cups which cost $1 for years are right now $1.33. Food costs for me haven't gone up much yet, but I am starting to see things creep up here and there.
You seem to be referring to much followed growth in PCI...Pudding Cup Indicator.
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steve r
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Re: Ritholtz argues inflation will be mostly transitory

Post by steve r »

9-5 Suited wrote: Tue Nov 23, 2021 9:51 pm I’m curious why you (and many investors on the forum, it seems) feel so comfortable timing the bond market when the same statements about equities (e.g. stock earnings yields are so low, once they go higher I’ll get back into equities) would be considered heretical to the general principles espoused here? It seems like a behavioral error borne of the negative gut reaction to seeing a negative real yield.
This would be an interesting thread. Probably best not buried in an Ritholtz / inflation discussion. It may also be like the tilting / SCV / international discussions without end and at time overly contentious.

Just for the sake of discussion (as I would like to think more about it) I would counter by asking:

Why do people continue to pour into a product that they know will provide them a negative real return? Is this a status quo bias? All of finance says they reason to save and reduce consumption today is for even higher consumption in the future. Simba data shows us that for 150 years bonds and ITT had a positive real return of 2.5 percentage point average.

The answer to my question, it is probably a mixture of perceived safety relative to equities and TINA.

As far as timing the market, my guess is that it is because the return on a ten year treasuries is very strongly predicted by the coupon of such a bond at the time you buy it. Equities may / may not have a similar risk from rising rates, but the lack of certainty clouds judgement making "timing" more complex. Also, there are "bond" substitutes like iBond, paying off mortgage, CDs, cash, etc.
"It's much easier than most investors expect to get satisfactory investment returns and it is much more difficult than they expect to get better results than that." Benjamin Graham
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Re: Ritholtz argues inflation will be mostly transitory

Post by Whakamole »

If inflation is transitory, does this mean Dollar Tree items will be back to costing a dollar once this is over?
Zeno
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Re: Ritholtz argues inflation will be mostly transitory

Post by Zeno »

steve r wrote: Wed Nov 24, 2021 10:48 am Why do people continue to pour into a product that they know will provide them a negative real return?
I don't know that they will provide a negative real return over the time frames that matter to me. I don't know anything about the future.

We are 57 and 61. Within the SORR. AA 65/32/3. No TIPs; instead most of the "32" is in BND and the like.

I don't worry about the performance of individual components of our portfolio; instead, I care about how it performs in aggregate.

As to the aggregate performance of our portfolio, we are up 10x over the past 12 months. It sounds flippant and I don't mean it that way -- and subject to reevaluating our AA every few years or so as we age -- but I don't actually care whether BND is up, down, or sideways currently, and/or what it is forecast to do over the next month, year, decade, or half century. I don't believe in forecasts. BND is part of our passive, lazy portfolio that in aggregate is working hard for us, and that is good enough for us.
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prioritarian
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Re: Ritholtz argues inflation will be mostly transitory

Post by prioritarian »

JBTX wrote: Tue Nov 23, 2021 10:10 pm One thing about rents, as I understand it, rents are factored in based upon what people are currently paying, not the going market rate. Most apartment and home leases have a fixed price for a period, like a year. When those leases renew in the future, at higher rates, there will be inflation, but even though market rates are going up now, the actual inflation to consumers will lag due to fixed leases. New Market rents could level off to zero now, but if they had been going up 10%, that will flow through and lag up to the next year or so.

Given the bump in single family home prices, that could lead to higher rents, which flows though inflation measures for months/years ahead.
Single family rental prices are markedly increasing and these rents correlate with BLS OER estimates which is the single largest component of inflation.

Image

The question is how much of an impact this will have on inflation given that many components are now decreasing. I agree with Barry Ritholtz that the massive bulge of delayed inventory under construction (new SFR housing is increasingly built to rent) and demographic flows back to cities make the impact of single family rent prices on OER unclear.
3funder
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Re: Ritholtz argues inflation will be mostly transitory

Post by 3funder »

mikejuss wrote: Tue Nov 23, 2021 7:56 pm
nedsaid wrote: Tue Nov 23, 2021 5:32 pmIf Barry says inflation is transitory, run for the hills. :wink:
Is Barry not well-liked among the Bogleheads?
I have no problem with him.
Global stocks, US bonds, and time.
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steve r
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Re: Ritholtz argues inflation will be mostly transitory

Post by steve r »

Zeno wrote: Wed Nov 24, 2021 11:15 am
steve r wrote: Wed Nov 24, 2021 10:48 am Why do people continue to pour into a product that they know will provide them a negative real return?
I don't know that they will provide a negative real return over the time frames that matter to me. I don't know anything about the future.

We are 57 and 61. Within the SORR. AA 65/32/3. No TIPs; instead most of the "32" is in BND and the like.

I don't worry about the performance of individual components of our portfolio; instead, I care about how it performs in aggregate.

As to the aggregate performance of our portfolio, we are up 10x over the past 12 months. It sounds flippant and I don't mean it that way -- and subject to reevaluating our AA every few years or so as we age -- but I don't actually care whether BND is up, down, or sideways currently, and/or what it is forecast to do over the next month, year, decade, or half century. I don't believe in forecasts. BND is part of our passive, lazy portfolio that in aggregate is working hard for us, and that is good enough for us.
Would it change anything if I use the word expect. We do not know the future, but we do know the current yield and that as a very strong predictor of future returns for the next decade for primarily intermediate term products. I suspect not, your main point, as I take it, is that BND is only part of a larger picture. Fair point.

By 10x do you mean ten fold or ten percent? If ten fold, I am in the wrong lazy portfolio. :beer and very curious what the "3" is in 65 / 32 / "3".
"It's much easier than most investors expect to get satisfactory investment returns and it is much more difficult than they expect to get better results than that." Benjamin Graham
JackoC
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Re: Ritholtz argues inflation will be mostly transitory

Post by JackoC »

steve r wrote: Wed Nov 24, 2021 10:48 am
9-5 Suited wrote: Tue Nov 23, 2021 9:51 pm 1. I’m curious why you (and many investors on the forum, it seems) feel so comfortable timing the bond market when the same statements about equities (e.g. stock earnings yields are so low, once they go higher I’ll get back into equities) would be considered heretical to the general principles espoused here? It seems like a behavioral error borne of the negative gut reaction to seeing a negative real yield.
This would be an interesting thread. Probably best not buried in an Ritholtz / inflation discussion. It may also be like the tilting / SCV / international discussions without end and at time overly contentious.

Just for the sake of discussion (as I would like to think more about it) I would counter by asking:

Why do people continue to pour into a product that they know will provide them a negative real return? Is this a status quo bias? All of finance says they reason to save and reduce consumption today is for even higher consumption in the future. Simba data shows us that for 150 years bonds and ITT had a positive real return of 2.5 percentage point average.

The answer to my question, it is probably a mixture of perceived safety relative to equities and TINA.

2. Also, there are "bond" substitutes like iBond, paying off mortgage, CDs, cash, etc.
I don't think it's that different actually than Rithotlz discussion as his generic point is the market expectation. The 5 yr TIPS breakeven is 3%, the 10 yr breakeven 2.62%. Thus recent year over year reads of 5-6% inflation in recent months are not expected to persist very long relative to 5 yrs, and the implied expected inflation rate measured by CPI-U between 5 and 10 yrs from now is in the low 2's. It's not very radical to say your best estimate is similar to the market's. Although the realized outcome could of course be much different than market's expectation.

Likewise for rates or stocks there's some need for consistency in identifying and evaluating expectations which are in line with the market vs. ones which aren't. Nothing wrong with people having their views, or IMO betting their money on them (realizing somebody has to lose in doing that for others to win). It's more dicey IMO when people try to make out betting on some things as inherently dumb while OK for other things.

There is no particular reason to think 'waiting' to invest in bonds is any more likely to work than 'waiting' to invest in stocks because valuations of either are too high. And TIANA, there is *always* no alternative to what riskless and risky assets* offer *now* except to trade, and trading is a zero sum game across the market, axiomatic for all asset classes. This may hang up on some people's idea that stock expected return is somehow a constant equal to the past realized return: bond yields have gone down, so now there's no reason for bonds. I believe a more realistic view is that the expected returns for both stocks and bonds have come down similarly vs. historical average, IOW the expected Equity Risk Premium is in the ballpark of historical (I think it's also lower now than historical, but no need for drawn out debate about that) and the relative attractiveness therefore broadly similar. That the absolute expected returns are so low for both compared to historical realized is just tough luck, as I see it.

2. It's true in certain cases at certain times you can optimize 'bonds' (basically credit riskless investing) with those methods but it doesn't as I see it fundamentally contradicting what I said in 1. Paying off a mortgage can be a riskless investing optimization...if you have a mortgage. I-bonds are an absolute no brainer at 0% real pre tax return when the 5 yr TIPS (I-bonds are puttable with full interest at 5 yrs so that's the right comparison) yield -1.67%...but only for $10k/person/yr plus $5k paper in a tax refund. My CD portfolio averaged 1.38% spread over comparable treasuries when purchased (4-5+ yr original maturities)...but currently the best 5 yr CD I see on 'depositaccounts.com' at 1.25% (the view will depend where you live wrt eligibility for various credit unions) is at -.08% to yesterday's 5 yr note yield. Anyway these are tactics to optimize a strategy to invest something in 'bond's in my view, not a different strategy. Similarly for muni's if individual tax situation would make them far superior to treasuries even considering the extra risk.

*assuming there isn't a risky asset much better than stocks. Many people here seem to believe stocks are much better than any other risky asset. A few think some other risky asset, like rental real estate, is much better than stocks. I invest in both and don't think either is categorically superior.
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Re: Ritholtz argues inflation will be mostly transitory

Post by 3funder »

My math background is way too limited for me to successfully navigate an econometrics course; however, I see today's inflation (for the most part) as a direct result of the pandemic. I'm also of the mind that the US government really can borrow a lot (not an unlimited amount, though) before there's an actual problem afoot. We have the strongest currency in the world, and I just don't see that changing in my lifetime. Owning the printing press comes with a set of perks.
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Re: Ritholtz argues inflation will be mostly transitory

Post by Charon »

rockstar wrote: Tue Nov 23, 2021 9:56 pm I'm not timing. I'm buying a bond when I can get a real return.
This is the literal definition of timing.
rockstar wrote: Tue Nov 23, 2021 9:56 pm Why would I buy a bond that gives me a negative real return pre-tax intentionally?
Bonds have a secondary market, which means their value can change regardless of the yield. So they could go up. You don't know. Just like you don't know about equities. Also, bonds cushion you when equities drop, which is the reason we all hold them. Equities have a higher expected return, so you're either arguing for a 100/0 AA all the time, or you don't understand why you hold bonds.
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nedsaid
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Re: Ritholtz argues inflation will be mostly transitory

Post by nedsaid »

printer86 wrote: Wed Nov 24, 2021 9:16 am
nedsaid wrote: Tue Nov 23, 2021 9:52 pm
Jeremy Seigel predicted 20% inflation over about 3 years, I think that is a high estimate but so far he has been right. Pudding cups which cost $1 for years are right now $1.33. Food costs for me haven't gone up much yet, but I am starting to see things creep up here and there.
You seem to be referring to much followed growth in PCI...Pudding Cup Indicator.
Okay then, inflation is up 33% in 2021. How about that? :wink:
A fool and his money are good for business.
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Re: Ritholtz argues inflation will be mostly transitory

Post by carolinaman »

One thing many people tend to ignore is the psychology of inflation. Companies are now raising prices because it is almost expected by consumers since so many price increases have occurred, even though there is not a commensurate increase in costs by these companies. There is more to inflation that just supply and demand.
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