38 minutes | May 24, 2021

4 Reasons Why Inflation is Transitory

"Inflation" is a generalized, sustained increase in consumer prices. A spike in consumer prices is just that - a transitory spike. Watch as Jeff gives four reasons and examples (2000, 2008, 2021 bond yields and auctions) why the probabilities favor a rise in CPI, not "inflation".

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Emil YouTube: https://bit.ly/310yisL


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----EPISODE #77 TOPICS----
00:00 What is the difference between a rise in consumer prices and inflation?
02:10 What are some examples of generalized "inflation" versus "consumer price increase"
04:09 Does generalized, sustained inflation mean real generalized, sustained economic activity?
06:30 The summer-autumn of 2000 delivered surging inflation - right on the cusp of a recession.
09:06 The bond market looked through the 2000 inflation surge to... the incoming recession.
13:06 The bond market looked through the 2008 inflation surge to... the incoming recession.
17:43 The April 2021 reading of US consumer price (including core) was nuclear explosion hot.
19:46 In 2000 we witnessed a similar inflation shock, that was not sustained (transitory?).
21:23 Since 2000 we have witnessed a number of inflation SURGES... that proved transitory.
23:18 What would change Jeff's mind about "transitory" inflation?
26:04 Producer prices were reported at the same time as CPI, strong but perhaps base effects?
28:30 The secondary bond market seems to be unbothered by both the CPI and PPI readings.
31:06 The primary bond market showed no perturbance; auctions went off swimmingly.
32:47 US Treasury 4-Week Bill auctions have been delivering "zeros" - demand is so high!
33:38 The balance of probabilities is that the market sees "transitory" inflation.


--------REFERENCES--------
How Can Anyone In Their Right Mind Say This Much Inflation Is Transitory?: https://bit.ly/3bO8k1w
What CPI (and PPI)?: https://bit.ly/34cONUn
Alhambra Investments Blog: https://bit.ly/2VIC2wW
RealClear Markets Essays: https://bit.ly/38tL5a7
 

---------WHO-----------
Jeff Snider, Head of Global Investment Research for Alhambra Investments and Emil Kalinowski. Art by David Parkins.

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