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Post by Deleted on Jul 11, 2022 9:46:34 GMT
Norbert - I skimmed these 4 cites. First - no one is arguing there hasn't been an effect on commodity prices due to the war. The discussion was how it affected overall inflation. One of the articles notes the US is somewhat buffered, 2 seem to be projections - what may occur, and one notes that the war is the latest situation to affect commodity prices. If ending the war in the Ukraine is what it will take for you to deploy cash - I understand. Going back to how this began - and I will conclude my part in it here - the war is not a major source of the inflation that is occurring and that we are feeling here, and discussing military strategies seems to have little relevance and belongs in another thread. Thanks.
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Post by Norbert on Jul 11, 2022 11:56:02 GMT
Norbert - I skimmed these 4 cites. First - no one is arguing there hasn't been an effect on commodity prices due to the war. The discussion was how it affected overall inflation. One of the articles notes the US is somewhat buffered, 2 seem to be projections - what may occur, and one notes that the war is the latest situation to affect commodity prices. If ending the war in the Ukraine is what it will take for you to deploy cash - I understand. Going back to how this began - and I will conclude my part in it here - the war is not a major source of the inflation that is occurring and that we are feeling here, and discussing military strategies seems to have little relevance and belongs in another thread. Thanks. I'm getting the feeling that you're also "skimming" our posts, as I never said that ending the war is directly linked to deploying cash. I and others did argue that a peace deal would likely have an impact on the markets and therefore represent an opportunity. Also, there was no discussion of "military strategies"; R48 was simply arguing that Uh might be wrong with his timing and explained why. (Those posts were made on 8 July in case you'd like to reacquaint yourself with their substance.) A discussion of inflation is surely important for helping with investment decision making. Certain posts may therefore not deal purely with inflation in an academic sense, but drift into investment issues. That seems normal and healthy to me. Inflated commodity prices are having a significant effect in many parts of the world and are affecting consumer sentiment and behavior. I'm not grasping why you want to sweep this under the carpet. This has been an excellent thread offering much insight into various inflation-related issues. Please let's not adopt a Draconian attitude towards well-intentioned posters. It's not like we're going off about "risk-adjusted returns" or something ...
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Post by mnfish on Jul 14, 2022 11:18:19 GMT
Recent comments by Larry Summers -
"I think it is unlikely — very unlikely — that we will see inflation come down to target range without a significant economic downturn," Summers said on Wednesday during a panel discussion hosted by the Economic Club of New York.
"If you want to have inflation come out of the system, you have to get below capacity, where supply exceeds demand. My best guess would be that we're not out of this without a significant interval, 6% unemployment."
"I think the proposition here is when inflation starts to come down, and when there's evident weakness, does that mean that monetary policy has moved enough to achieve a durable victory again inflation, or only a remission? Those are going to be very difficult judgments for our central bank."
A snippet from a chart at The Balance - and they had this also "It may seem counterintuitive to think unemployment can get too low, but it can" Year Unempl GDP Growth Inflation YOY 1967 3.8% 2.7% 3.0% 1968 3.4% 4.9% 4.7% 1969 3.5% 3.1% 6.2% 1970 6.1% 0.2% 5.6% (Recession) 2018 3.9% 2.9% 1.9% 2019 3.6% 2.3% 2.3% (I removed 2020 due to the short-lived pandemic effect on unemployment) 2021 3.9% 5.7% 7.0% 2022 3.6% -1.4%(1st qtr) 9.1%
The DJIA essentially traded flat from 1966 to 1982. Besides a recession what is 2023 going to bring as far as markets if the FED is truly going to continue to raise rates and reduce the balance sheet? Are some of you prepared to stay in cash for 16 years?
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Post by Deleted on Jul 14, 2022 11:55:01 GMT
Norbert - I skimmed these 4 cites. First - no one is arguing there hasn't been an effect on commodity prices due to the war. The discussion was how it affected overall inflation. One of the articles notes the US is somewhat buffered, 2 seem to be projections - what may occur, and one notes that the war is the latest situation to affect commodity prices. If ending the war in the Ukraine is what it will take for you to deploy cash - I understand. Going back to how this began - and I will conclude my part in it here - the war is not a major source of the inflation that is occurring and that we are feeling here, and discussing military strategies seems to have little relevance and belongs in another thread. Thanks. I'm getting the feeling that you're also "skimming" our posts, as I never said that ending the war is directly linked to deploying cash. I and others did argue that a peace deal would likely have an impact on the markets and therefore represent an opportunity. Also, there was no discussion of "military strategies"; R48 was simply arguing that Uh might be wrong with his timing and explained why. (Those posts were made on 8 July in case you'd like to reacquaint yourself with their substance.) A discussion of inflation is surely important for helping with investment decision making. Certain posts may therefore not deal purely with inflation in an academic sense, but drift into investment issues. That seems normal and healthy to me. Inflated commodity prices are having a significant effect in many parts of the world and are affecting consumer sentiment and behavior. I'm not grasping why you want to sweep this under the carpet. This has been an excellent thread offering much insight into various inflation-related issues. Please let's not adopt a Draconian attitude towards well-intentioned posters. It's not like we're going off about "risk-adjusted returns" or something ... Norbert - sorry. This from your post sounded like a peace deal was linked to deploying cash - "With all due respect, I can think of little more important than predicting the endgame in Ukraine. The impact on commodity prices is self evident, in my opinion. I'm looking for viable theories like those expressed by Uh and R48; if the technicals then support a persuasive narrative, I'll be using a good piece of my large cash allocation." Won't be the first time I misinterpreted. Draconian? Asking to get a thread back on topic? Sorry again.
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Post by Deleted on Jul 14, 2022 12:02:02 GMT
Recent comments by Larry Summers - "I think it is unlikely — very unlikely — that we will see inflation come down to target range without a significant economic downturn," Summers said on Wednesday during a panel discussion hosted by the Economic Club of New York. "If you want to have inflation come out of the system, you have to get below capacity, where supply exceeds demand. My best guess would be that we're not out of this without a significant interval, 6% unemployment." "I think the proposition here is when inflation starts to come down, and when there's evident weakness, does that mean that monetary policy has moved enough to achieve a durable victory again inflation, or only a remission? Those are going to be very difficult judgments for our central bank." A snippet from a chart at The Balance - and they had this also "It may seem counterintuitive to think unemployment can get too low, but it can" Year Unempl GDP Growth Inflation YOY1967 3.8% 2.7% 3.0% 1968 3.4% 4.9% 4.7% 1969 3.5% 3.1% 6.2% 1970 6.1% 0.2% 5.6% (Recession)2018 3.9% 2.9% 1.9% 2019 3.6% 2.3% 2.3% (I removed 2020 due to the short-lived pandemic effect on unemployment) 2021 3.9% 5.7% 7.0% 2022 3.6% -1.4%(1st qtr) 9.1% The DJIA essentially traded flat from 1966 to 1982. Besides a recession what is 2023 going to bring as far as markets if the FED is truly going to continue to raise rates and reduce the balance sheet? Are some of you prepared to stay in cash for 16 years? Interesting. I am not a fan of Summers. He covers all his bases. Very smart man though. What I like about your chart are the inflation rates YOY which indicate the last number of them were abnormally low. I just think it is premature to talk about inflation not being controlled without 6% unemployment. Point taken there isn't any idea how long a slowdown could go on.
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Post by Deleted on Jul 14, 2022 12:14:18 GMT
"The DJIA essentially traded flat from 1966 to 1982. Besides a recession what is 2023 going to bring as far as markets if the FED is truly going to continue to raise rates and reduce the balance sheet? Are some of you prepared to stay in cash for 16 years?"
Do you really believe posters here have 16 more years? I suppose those who think they do, will continue to buy at elevated stock prices.
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Post by Chahta on Jul 14, 2022 12:21:45 GMT
"The DJIA essentially traded flat from 1966 to 1982. Besides a recession what is 2023 going to bring as far as markets if the FED is truly going to continue to raise rates and reduce the balance sheet? Are some of you prepared to stay in cash for 16 years?" Do you really believe posters here have 16 more years? I suppose those who think they do, will continue to buy at elevated stock prices. Well the good times got us to this point. Everyone should have made good money up until this year. Not knowing the future, we may have a flat market for 16 years. But I am prepared to spend down to live if need be. That is what saved/invested money is for. Growth cannot be a major concern until you die.
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Post by mozart522 on Jul 14, 2022 12:36:55 GMT
@haven,
BONDS. On January 1966 the 10-year rate was 4.6%. On January 1982, the 10-year rate was 14.48%. There are always choices and periods where both stocks and bonds go down together are rare and short-lived. In 1982, bonds began their 40-year fall, and stocks began their 40-year rise.
BTW, how is sitting in a flat market for 16 years such a great recommendation for stocks?
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Post by mnfish on Jul 14, 2022 12:38:57 GMT
@haven, "Do you really believe posters here have 16 more years? I suppose those who think they do, will continue to buy at elevated stock prices."
I'm 63 so maybe. I'm quite sure there are others. Any consideration for your heirs?
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Post by Deleted on Jul 14, 2022 13:07:20 GMT
@haven , "Do you really believe posters here have 16 more years? I suppose those who think they do, will continue to buy at elevated stock prices." I'm 63 so maybe. I'm quite sure there are others. Any consideration for your heirs? The time to help heirs begins in their infancy, 529 plans, pay for their education, down payment on their first home, generous gifts over the years. Buy whole life insurance to provide future benefits for your spouse. Create spendthrift trusts for heirs unable to manage finances. These are a few suggestions, there are many others. Our first obligation is not to be a financial burden to our heirs, by decisions we make in investing and spending. They will receive whatever is left at the end.
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Inflation
Jul 14, 2022 13:45:29 GMT
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Post by Norbert on Jul 14, 2022 13:45:29 GMT
I'm getting the feeling that you're also "skimming" our posts, as I never said that ending the war is directly linked to deploying cash. I and others did argue that a peace deal would likely have an impact on the markets and therefore represent an opportunity. Also, there was no discussion of "military strategies"; R48 was simply arguing that Uh might be wrong with his timing and explained why. (Those posts were made on 8 July in case you'd like to reacquaint yourself with their substance.) A discussion of inflation is surely important for helping with investment decision making. Certain posts may therefore not deal purely with inflation in an academic sense, but drift into investment issues. That seems normal and healthy to me. Inflated commodity prices are having a significant effect in many parts of the world and are affecting consumer sentiment and behavior. I'm not grasping why you want to sweep this under the carpet. This has been an excellent thread offering much insight into various inflation-related issues. Please let's not adopt a Draconian attitude towards well-intentioned posters. It's not like we're going off about "risk-adjusted returns" or something ... Norbert - sorry. This from your post sounded like a peace deal was linked to deploying cash - "With all due respect, I can think of little more important than predicting the endgame in Ukraine. The impact on commodity prices is self evident, in my opinion. I'm looking for viable theories like those expressed by Uh and R48; if the technicals then support a persuasive narrative, I'll be using a good piece of my large cash allocation." Won't be the first time I misinterpreted. Draconian? Asking to get a thread back on topic? Sorry again. Well, the thread wasn't off topic. In fact, I think it's the most interesting active thread here. Hence my reaction. No worries. I know you might be feeling a little stressed.
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Post by archer on Jul 14, 2022 16:07:25 GMT
It is interesting how the economy has changed over time. Currently the Fed is dealing with inflation the only way they can, by raising interest rates, and selling rather than buying bonds. The idea is to make it harder on consumers to consume by making loans less attractive, and also bringing down wage growth. The interesting part is the relationship between wages and prices now compared to the 70's. In the 70's journeyman construction workers were earning between 8 and 10 $/hr. Now the average is only 3 times that amount. This applies to many non construction jobs as well. Since that time my first home has increased 15X, cup of coffee at Peet's 7X, bridge tolls 10X, gas over 10X (not even including 2022), cars close to 10X, I could go on. The Fed is attempting to remedy high prices by creating a reduction of money in the hands of the consumer. The end result is the same as measured by the difficulty of buying goods. Increased wages and low cost loans do not account for the disparity between prices and consumer wages or overall wealth. I don't know what the correct target is, but I do know it is being missed.
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Post by Mustang on Jul 14, 2022 16:40:50 GMT
"The DJIA essentially traded flat from 1966 to 1982. Besides a recession what is 2023 going to bring as far as markets if the FED is truly going to continue to raise rates and reduce the balance sheet? Are some of you prepared to stay in cash for 16 years?" Do you really believe posters here have 16 more years? I suppose those who think they do, will continue to buy at elevated stock prices. The DJIA may have been flat but some of my funds were often posting double digit returns during that time period. But, Wellington '73 and '74 had double digit losses and '74, '79 and '80 had double digit inflation. An initial withdrawal in 1971 of $20,000 had to be $47,200 in 1982 to have the same purchasing power. Starting with a value of $500,000 and taking out inflation adjusted withdrawals Wellington ended with a balance of $543,000 in 1982 and Wellesley ended with a balance of $756,000. They both made enough to cover total withdrawals of over $363,000. Note. Bengen said that the worst time to retire in history was 1968. A 30-year retirement starting then became the basis for the 4% Rule.
Wellington Wellesley 1971 +15.0 1972 +10.88 1975 +25.18 +18.51 1976 +23.36 +23.36 1979 +13.54 1980 +22.58 +11.88 1982 +24.55 +23.30
P.S. I didn't get into Wellington until 1975 and Wellesley until 1981. I did the calculations to see how both funds held up during the stagflation years.
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Post by Deleted on Jul 16, 2022 0:40:51 GMT
Siegel update - Friday morning real data on Empire NY Manufacturing (regional), import/export prices, and U of M preliminary sentiment survey led market higher after CPI report. CPI and PPI very backward looking. June will be the peak inflation number. Forward indicators are showing a decline. Retail sales were so-so, but not falling off a cliff. Thinks raise will be 75 bps, but that or 100 bps doesn't really matter. What matter is the rhetoric - will the Fed say we see the light at the end of the tunnel. Tell us that the decrease in the money supply, increased mortgage rates, rising dollar are working. Then we get a big rally.
Some date points - U of M sentiment on inflation down for 1 year and 5-10 year. 5-10 has moved from 3.1% to 2.8%.
Not sure what this means - but something about the spread in TIPS decling from 3%+ to 2.35% in a couple of months. Gist is forward indicators show a decline.
Also - market is most worried Fed will overreact to past data (might be Siegel projecting - but choking the economy accidentally sure is a topic now)
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Post by FD1000 on Jul 16, 2022 3:57:28 GMT
Let's say the obvious. So, if stocks ALWAYS go down/up based on this and that, then next time it's a guarantee to happen again and why stocks should continue up/down for several days because of the same news. BTW, if stocks were up based on the news, how come I heard in the last several days, prior to Friday, the "experts" debating and splitting on what is considered good/bad news.
Why stocks REALLY went up today? Because there were more buyers than sellers. What will happen on Monday? The markets can be up or down.
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Post by bf22 on Jul 16, 2022 20:13:45 GMT
Siegel update - Friday morning real data on Empire NY Manufacturing (regional), import/export prices, and U of M preliminary sentiment survey led market higher after CPI report. CPI and PPI very backward looking. June will be the peak inflation number. Forward indicators are showing a decline. Retail sales were so-so, but not falling off a cliff. Thinks raise will be 75 bps, but that or 100 bps doesn't really matter. What matter is the rhetoric - will the Fed say we see the light at the end of the tunnel. Tell us that the decrease in the money supply, increased mortgage rates, rising dollar are working. Then we get a big rally. Some date points - U of M sentiment on inflation down for 1 year and 5-10 year. 5-10 has moved from 3.1% to 2.8%. Not sure what this means - but something about the spread in TIPS decling from 3%+ to 2.35% in a couple of months. Gist is forward indicators show a decline. Also - market is most worried Fed will overreact to past data (might be Siegel projecting - but choking the economy accidentally sure is a topic now) Thanks for the update. Just one (educated) opinion, but more insightful than others..
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Post by roi2020 on Jul 17, 2022 4:23:30 GMT
There was a short Barron's article this week with Professor Siegel's view on inflation. He blamed U.S. inflation on the response to the pandemic. “The money-supply growth in 2020 was the greatest in the 150-year history of data that we have,” he says. “Instead of spending programs under Trump and Biden,” the Fed should have said, “‘If you want those programs, go to the bond market.’ That’s not inflationary.” Today, there’s a lot of “pipeline inflation that has already passed but won’t get into the statistics for some time.” Professor Siegel believes today's valuations are attractive. He's not predicting the market has bottomed but thinks investors in this market may be well rewarded.
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Post by FD1000 on Jul 17, 2022 23:43:11 GMT
There was a short Barron's article this week with Professor Siegel's view on inflation. He blamed U.S. inflation on the response to the pandemic. “The money-supply growth in 2020 was the greatest in the 150-year history of data that we have,” he says. “Instead of spending programs under Trump and Biden,” the Fed should have said, “‘If you want those programs, go to the bond market.’ That’s not inflationary.” Today, there’s a lot of “pipeline inflation that has already passed but won’t get into the statistics for some time.” Professor Siegel believes today's valuations are attractive. He's not predicting the market has bottomed but thinks investors in this market may be well rewarded. I could be wrong. I have listened to Siegel for many years. I never heard him say "sell stocks" that include the period of 2000-2009 when stocks fell twice over 50% for several years. That also includes the last 3 times since 2018 when the SP500 fell about 20%, 33% and 24%. Siegel is a perma bull.
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Post by Deleted on Jul 18, 2022 0:16:30 GMT
He is never going to recommend selling stocks. He did say ditch bonds when he reported the gigantic increase in the money supply was going to lead to the inflation the US has experienced. That was good advice.
He did state tech was a sucker's bet in 2000. That was good advice.
He is a huge advocate of stocks for the long run as providing the best - risk adjusted returns - over the long run. No, he will not advocate not holding stocks as that represents the antithesis of his research. He's not going to say not hold bonds either. He advocated a 75-25 over a 60-40 portfolio prior to the M2 explosion.
He has very much said get the heck out of high p/es as multiple compression was coming. That was good advice.
Stocks might fall 50% again in the future. Allocate according to time horizon and risk tolerance and know that in the long run, a permanent portfolio of stocks will do what they have and continue to do. Earn inflation beating returns over the long run.
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Post by johntaylor on Jul 18, 2022 14:04:19 GMT
Yes, Siegel wrote "Why Big Cap Tech Stocks are a Sucker's Bet" in March 2000 (Wall Street Journal) and helped let air out of the tech bubble.
This may be a propitious moment to flip through Stocks for the Long Run again.
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Post by FD1000 on Jul 18, 2022 19:05:18 GMT
Yes, Siegel wrote "Why Big Cap Tech Stocks are a Sucker's Bet" in March 2000 ( Wall Street Journal) and helped let air out of the tech bubble. This may be a propitious moment to flip through Stocks for the Long Run again. Did he say to get out of stocks, AKA SP500? A perma-bull can be very wrong. Siegel has no clue what performance stocks will have each year. He just follows the history. SP500 was up over 80% per years since 1980, easy choice. 1) 03/2001 ( link): about stocks "they are probably a better bet now than they were a year ago. You can buy them at cheaper prices.” FD: from 03/2001 to 09/2002, which is about 1.5 years, the SP500 lost over 22%, see ( link) 2) 2008 ( link) " I think the stock market will have another winning year in 2008." FD: That was one of his worse predictions and proves my point. The SP500 fell more than 50% and finish 2008 at -37%. ============= Sara: He advocated a 75-25 over a 60-40 portfolio prior to the M2 explosion. FD: maybe OK for Prof Siegel with a nice pension. What should a retiree, with only SS, but a nice portfolio do when she wants to be in only 40% stocks?
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Post by Deleted on Jul 19, 2022 1:31:58 GMT
Timely given the recent discussion here. A very informative interview with the Professor in what looks like the last week of June. it was on the podcast Retire with Purpose. I am not doing what he recommends by the way as I hold mainly individual stocks. He does recommend value/dividends of course. Ideal equity portion of portfolio is 30% US market 20% Non-Us and 50% - strategies that will enhance return which translates to fundamentally weighted indexes over cap indexes. There are ads you have to go through, but you can exit quickly. It is an hour. www.youtube.com/watch?v=n2yf51Ej1FY
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Post by alvinthechipmunk on Jul 19, 2022 4:09:39 GMT
The thing that has happened recently is called the acceleration of money. Simply put, A supply of money, large or small, has very little effect on the economy until it is spent. When money is spent or circulated in the economy it has a multiplying effect. Joe spends $10 at Sams store and Sams profit just increased, enabling Sam to borrow money to expand the store. Etc, Etc. That is why money supply leads inflation. That is why I am skeptical about the idea that we are near a peak in inflation or interest rates. IMHO, you ain't seen nuthin yet.+1 - Unprecedented amount of "new" money created and spent. Fed balance sheet increased 136% in the last 3 years and 314% from 2008 to 2019. Maybe the recipients didn't spend it all but even so that's a lot of new money. Right you are!
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Post by FD1000 on Jul 19, 2022 12:40:39 GMT
+1 - Unprecedented amount of "new" money created and spent. Fed balance sheet increased 136% in the last 3 years and 314% from 2008 to 2019. Maybe the recipients didn't spend it all but even so that's a lot of new money. Right you are! If inflation is based on Fed balanced sheet and it increased 314% from 2008 to 2019, how come we didn't have high inflation from 2009 to 2019?
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Post by Chahta on Jul 19, 2022 12:52:12 GMT
Inflation is not tied to what the FED owns (balance sheet). I'm not sure the FED buying assets "creates" new money. It's a purchase. However when the government puts extra money in the hands of businesses and citizens (Covid relief) to spend, that creates a surge of new spending and is inflationry IMHO.
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Post by mnfish on Jul 20, 2022 11:30:34 GMT
The "new money" I was referring to was indeed the Covid cash that was created. The balance sheet increase over time was the Fed buying increased MBS rather than treasuries because MBS buying assisted the economy more. If you recall, housing prices took a real hit in 2008-09 so how much have home prices (and stock prices) increased since the 2009 bottom? According to Freddie Mac housing prices increased every year from 2012-2021 so a $100k house in 2011 would now be $211k.
The inflation "coup de grace" was (Investopedia) "The Fed's MBS purchases starting in 2020 helped to drive down mortgage rates, boosting housing demand, even as materials shortages and other market inefficiencies constrained supply"
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Post by uncleharley on Jul 20, 2022 16:44:49 GMT
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Post by Chahta on Jul 21, 2022 2:06:56 GMT
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Post by Deleted on Jul 25, 2022 13:14:05 GMT
Per Siegel -
Money supply growth is looking level to decreasing - suggested by weekly deposits. Future real inflation, vice reported, has flattened. This might mean less pressure on wages.
No surprise - indicators of economic growth are worsening. Jobless claims, manufacturing indexes, National Homebuilders index all weakening.
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Post by fishingrod on Jul 25, 2022 13:26:15 GMT
Here is a new episode from John Oliver the Comic, on Inflation. It is for the ones that don't understand inflation in the most basic ways. But he does a good job explaining it, I think. www.youtube.com/watch?v=MBo4GViDxzc
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