Cents and Sensibility: the Inflation Guy Podcast

The economists were mostly on-target with today's CPI report, at least with the headline and core figures. But that doesn't mean that there was nothing going on underneath the surface. Below the big headlines, some things are getting better and some things...aren't. What does it all mean, and does the Fed have some cover to cut rates? Listen to this episode to hear the Inflation Guy's take on those questions! NOTES Blog for this month’s CPI: Inflation Guy’s CPI Summary (April 2024) Important article: “The Inflation Management Opportunities In The Insurance Industry Today” To Subscribe to Quarterly Inflation Outlook: https://inflationguy.blog/shop/ To Subscribe for free to the blog: https://inflationguy.blog/ Check out the website! https://www.EnduringInvestments.com/

"They couldn't hit an elephant at this distance!" - General John Sedgewick, Union, US Civil War, moments before he was struck by a bullet in the eye. The tradition of 'famous last words' is alive and well, especially at the Federal Reserve and Treasury. From Bernanke saying the subprime crisis would be contained, to Yellen and Powell describing inflation as 'transitory,' and far beyond - the track record of overly-confident predictions that ultimately turn out to be hilariously wrong is alive and well. In this episode, the Inflation Guy discusses the most-recent candidate, from last week... NOTES Blog Callback: “You Cannot Inflate the Debt Away” Important article: “The Inflation Management Opportunities In The Insurance Industry Today” Blog for last month’s CPI: Inflation Guy’s CPI Summary (March 2024) Interesting Interactive CPI Chart the IG Didn't Even Mention But is Worth Looking At To Subscribe to Quarterly Inflation Outlook: https://inflationguy.blog/shop/ To Subscribe for free to the blog: https://inflationguy.blog/ Check out the website! https://www.EnduringInvestments.com/

There are several pernicious myths about the velocity of money that seem to never die. "Friedman said velocity is stable." "Velocity is just a plug number, so it is random." "Velocity is permanently impaired and only declines over time." These drive the Inflation Guy bananas, and from time to time he feels the need to talk about velocity. In this episode, the IG describes the main inputs into his model of velocity, and what the model currently implies about the future path of velocity from here. And, to be fair, he also kvetches some, and that's unseemly. We apologize for him. NOTES Blog Callback: “Enough With Interest Rates Already” Podcast Callback: “Ep. 50: What the Money Velocity Comeback Means for Inflation, and Investors” Important article: “The Inflation Management Opportunities In The Insurance Industry Today” Blog for this month’s CPI: Inflation Guy’s CPI Summary (March 2024) To Subscribe to Quarterly Inflation Outlook: https://inflationguy.blog/shop/ To Subscribe for free to the blog: https://inflationguy.blog/ Check out the website! https://www.EnduringInvestments.com/

We don't know if the origin of the 'ten most dangerous words in the English language' was Ronald Reagan, or if the story predates him. But those words, "I'm from the government, and I'm here to help you," are the theme to today's podcast. The Inflation Guy interprets some recent news stories, but ties it all together with a crucial observation about what happens if the 'scarce resource' in a particular economy turns out to not be 'labor.' NOTES Dan Bongino Show from April 18 (https://megaphone.link/WWO9433765103 ). Listen from the 47 minute mark. Forbes “Medical Analysis by Milton Friedman” (2009) Washington Post “Biden administration to cap rent increases for some affordable housing units” Blog Callback: “Inflation and Insurance Companies, with Bill Poutsiaka” Important article: “The Inflation Management Opportunities In The Insurance Industry Today” Blog for this month’s CPI: Inflation Guy’s CPI Summary (March 2024) To Subscribe to Quarterly Inflation Outlook: https://inflationguy.blog/shop/ To Subscribe for free to the blog: https://inflationguy.blog/ Check out the website! https://www.EnduringInvestments.com/

On this month's CPI report, the Inflation Guy addresses yet another high-side surprise and discusses the details, along with how this fits into the continuing narrative. Curious about how this concerns ponies? You'll have to listen to the episode! NOTES Blog for this month’s CPI: Inflation Guy’s CPI Summary (March 2024) To Subscribe to Quarterly Inflation Outlook: https://inflationguy.blog/shop/ To Subscribe for free to the blog: https://inflationguy.blog/ Check out the website! https://www.EnduringInvestments.com/

Okay, buckle up because the Inflation Guy here is going to cover some big-time concepts. Wayyyy back in 2003, some guys named Jarrow and Yildirim explained how inflation acts just like foreign exchange, except not foreign and not on an exchange. No, no, stay with me here. Turns out they were right, and a lot of what is happening today - and the mistakes in interpretation that are being made - can be understood if you understand that the 'inflation FX market' has just changed in important ways. This is an important episode! NOTES Jarrow R, Yildirim Y (2003) Pricing treasury inflation protected securities and related derivatives using an HJM model. Journal of Financial and Quantitative Analysis 38(2):337–359. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=585828 Unidad de Fomento (Wikipedia entry): https://en.wikipedia.org/wiki/Unidad_de_Fomento Chart: Nominal and inflation-adjusted Case-Shiller 10-City index, normalized to end of 2019 Chart: Nominal and Real S&P 500 Earnings, normalized to end of 2019 To Subscribe to Quarterly Inflation Outlook: https://inflationguy.blog/shop/ To Subscribe for free to the blog: https://inflationguy.blog/ Check out the website! https://www.EnduringInvestments.com/

Every once in a while, it is a good rigor to take all of those sticky notes that festoon your desk and put them into one, organized, document. At least, that's what the Inflation Guy tells himself. On the other hand, they say 'a clean desk means someone else is in charge.' Still, it was getting to be a fire hazard. In this episode, the Inflation Guy tackles a few disparate stories and recent trends that seem to have an overarching theme: the general disinflationary trend we have been enjoying for the last year is starting to have some defectors. NOTES To Subscribe to Quarterly Inflation Outlook: https://inflationguy.blog/shop/ To Subscribe for free to the blog: https://inflationguy.blog/ Check out the website! https://www.EnduringInvestments.com/

Another month, another above-consensus CPI print. The Inflation Guy tears into the data like a feral cat, ripping away the fatty bits to get at the meaty part. Okay, maybe that was too graphic. Anyway, this cat points to several signs in this month's inflation report that inflation is starting to get 'sticky' at a higher level than we'd like it to, and the recent inflation deceleration is going to get more difficult going forward. What is the implication for Fed policy? NOTES To Subscribe to Quarterly Inflation Outlook: https://inflationguy.blog/shop/ To Subscribe for free to the blog: https://inflationguy.blog/ Check out the website! https://www.EnduringInvestments.com/

Both gold and crypto are occasionally put forth by promoters as having inflation-hedging qualities. Which of these has a better claim? Or are they both 'real assets' that can help you defend your money? Now that mutual funds and ETFs are launching seemingly weekly to hold BTC and other forms of crypto, 'democratizing access' to this 'asset class,' it is worth asking whether these funds are securities that should be included in every investor's toolkit. Listen to this episode before you take the plunge. In it, the Inflation Guy makes a very clear prediction about what is to come. NOTES Podcast callback: Ep. 86: If Gold is Like TIPS, Should I Buy it? To Subscribe to Quarterly Inflation Outlook: https://inflationguy.blog/shop/ To Subscribe for free to the blog: https://inflationguy.blog/ Check out the website! https://www.EnduringInvestments.com/

This somewhat longer episode has a little bit of potpourri at the beginning, as the Inflation Guy covers the OER-Primary Rents divergence, the decline of Reverse RP balances, and the effect of AI on inflation...but the meat of the podcast is a discussion about a product (which a listener sent to the Inflation Guy) that resembles an inflation-linked annuity but in a mutual fund form. There are pros and cons to the product, and the IG covers them all before giving it a cautious thumbs up. The Inflation Guy is pleased that we are starting to see more and more innovative products, even if there are still plenty of frontiers as yet unexplored. So he continues to boldly go where no inflation guy has gone before! NOTES Podcast callback: Ep. 54: Will Artificial Intelligence Kill Inflation? Blog Post: AI: Even a Big Deal is Smaller Than You Think Company reference: Stone Ridge Asset Management (Lifex Funds) Google Sheet with Speculative Subcomponent Inflation Swaps: https://docs.google.com/spreadsheets/d/118FRJVhjGTLoRr1ebqfZn7opTlavtmt8XuyAQHicx5I/edit#gid=0 Blog Post: Inflation Sherpa To Subscribe to Quarterly Inflation Outlook: https://inflationguy.blog/shop/ To Subscribe for free to the blog: https://inflationguy.blog/ Check out the website! https://www.EnduringInvestments.com/

When your grandpa turns 100, you're going to hear stories. It just goes with the territory. When a podcast has its 100th episode, same deal. Grandpa Inflation Guy actually manages to keep the stories to a minimum, while reporting on a recent conversation he has had about a development in the health care inflation space and giving some optimistic readings about the future to the gathered listeners. Now for some cake! NOTES Podcast callback: Ep. 98: Will You Be Able to Trade Medical Care Inflation Soon? Podcast callback: Ep. 97: Inflation and Reinsurance - a Better Way Google Sheet with Speculative Subcomponent Inflation Swaps: https://docs.google.com/spreadsheets/d/118FRJVhjGTLoRr1ebqfZn7opTlavtmt8XuyAQHicx5I/edit#gid=0 Blog Post: Inflation Sherpa To Subscribe to Quarterly Inflation Outlook: https://inflationguy.blog/shop/ To Subscribe for free to the blog: https://inflationguy.blog/ Check out the website! https://www.EnduringInvestments.com/

Welllll...so much for the idea that, since the 3-month average of CPI was down at 1.90%, the Fed could ease in March! This month's inflation print was, to use a technical term, broadly icky. The Inflation Guy tells you why. NOTES Podcast callback: Ep. 98: Will You Be Able to Trade Medical Care Inflation Soon? Blog Post: Inflation Guy’s CPI Summary (Jan 2024) Blog Post: Inflation Sherpa To Subscribe to Quarterly Inflation Outlook: https://inflationguy.blog/shop/ To Subscribe for free to the blog: https://inflationguy.blog/ Check out the website! https://www.EnduringInvestments.com/

The Inflation Guy for a long time has had a "bee in his bonnet" (seriously, who uses this phrase? Or owns a bonnet?) about the need for more tools to trade inflation and, especially, subcomponents of inflation like medical care. In this episode, after giving a quick preview of next week's CPI report he turns to a discussion of IMX, a new futures exchange that has expressed an intention to trade instruments related to medical care. At the end of January, the IMX announced its first futures contract. Does it get the ball rolling towards being able to trade medical care inflation? Listen to find out the Inflation Guy's take. NOTES Podcast callback: Ep. 32: The Remarkable Story of Inflation Futures Article: For ‘Inflation Guy’ (and Shiller), Medical TIPS Are ‘Holy Grail’ Exhibit: SEC Filing for MacroMarkets Medical Care security Website: IMX Health Exhibit: CFTC filing announcing listing of Healthcare Index Futures Blog Post: Inflation Sherpa To Subscribe to Quarterly Inflation Outlook: https://inflationguy.blog/shop/ To Subscribe for free to the blog: https://inflationguy.blog/ Check out the website! https://www.EnduringInvestments.com/

The Inflation Guy sometimes gets distracted by shiny things. Today, he was distracted by an article sent from a listener, detailing comments from the CFO of Travelers Insurance about the increased reinsurance the company is employing as a hedge against inflation risks to its property and casualty (P&C) businesses. This is an illuminating comment, showing both that (a) insurance costs are going up not just because insured property values are rising, but also because the cost of reinsuring is rising as inflation risks rise; and (b) major insurance companies are still not hedging inflation risk in P&C businesses with inflation hedges but rather through increasing reinsurance coverage. That's inefficient, and the Inflation Guy explains why. Insurance and inflation! What could be more interesting than combining those two exciting topics? NOTES Article: Inflation on insured values main reason for Travelers extra reinsurance protection, says CFO Blog Post: Inflation Sherpa To Subscribe to Quarterly Inflation Outlook: https://inflationguy.blog/shop/ To Subscribe for free to the blog: https://inflationguy.blog/ Check out the website!: https://www.EnduringInvestments.com/

"Money Illusion" sounds like the sort of thing your economics teacher droned on and on about, causing you to yearn for a nice nap during class. But is it a real thing? And if it is...why does it matter? In this episode, the Inflation Guy explains money illusion, presenting some of the evidence that it is (at least some of the time) a real phenomenon. He uses current observations where you can see money illusion at work, and then explains why it is very important that policymakers understand how important money illusion is, and over what time scales. NOTES Article: Fox News New Hampshire Voter Analysis Poll Article: AP Poll from October Blog Post: Shortages Are Unmeasured Inflation Blog Post: Inflation Sherpa To Subscribe to Quarterly Inflation Outlook: https://inflationguy.blog/shop/ To Subscribe for free to the blog: https://inflationguy.blog/ Check out the website!: https://www.EnduringInvestments.com/

In this (longer than normal) episode, the Inflation Guy talks about the outlook for inflation - which, admittedly, he did last week with the CPI Summary episode but in this case he delves into more of the drivers of his 2024 and 2025 expectations - and for several asset markets. He frames the question as a balance of the risks and makes concrete suggestions for how he would tilt portfolios today. Also, in response to listener requests, he lists several podcasts that he (very occasionally) listens to. "Recommend" is a strong word, but he likes these. NOTES Blog Post: 2024 Balance of Risks Blog Post: Inflation Sherpa Chart of Mortgage Origination vs Money Growth Podcasts Referred to: Orion's The Weighing Machine, InsuranceAUM podcast, We Study Billionaires, Grant Williams Podcast, Demetri Kofinas Hidden Forces, What the Truck?!?, The Memo by Howard Marks, Fill the Gap. To Subscribe to Quarterly Inflation Outlook: https://inflationguy.blog/shop/ To Subscribe for free to the blog: https://inflationguy.blog/ Check out the website!: https://www.EnduringInvestments.com/

It's 2024, a fresh start to what is surely going to prove to be a golden year and the end to history! The SEC has approved bitcoin ETFs, the Fed is dovish and achieved a perfect landing, rates have come down a ton, and everything is beautiful. At least, as long as inflation really does collapse immediately to 2%, as the consensus seems to suggest. Unfortunately, reality has a way of intruding in these sweet dreams and today's CPI report was frothy in some uncomfortable ways - not little one-offs, but big things like rents, and the stuff driven by wages. Listen to the Inflation Guy walk through the implications of today's number, and what it probably means for Fed policy and markets. NOTES Podcast Callback: Ep. 74: Inflation Folk Remedies To Subscribe to Quarterly Inflation Outlook: https://inflationguy.blog/shop/ To Subscribe for free to the blog: https://inflationguy.blog/ Check out the website!: https://www.EnduringInvestments.com/

It's the monthly CPI report! In this podcast, the Inflation Guy discusses today's economic data and highlights why the market's expectations for substantial easing in 2024 sets up a difficult path forward. He discusses several ways that inflation could get back to target, and then what needs to happen with policy to make that happen. Hint: it isn't what the market is pricing right now. NOTES Blog Callback: Beware the Price Controller Podcast Callback: Ep. 74: Inflation Folk Remediesv (discussing among other things the ‘new’ rental indices that supposedly imply rents deflation in the CPI) To Subscribe to Quarterly Inflation Outlook: https://inflationguy.blog/shop/ To Subscribe for free to the blog: https://inflationguy.blog/ Check out the new website!: https://www.EnduringInvestments.com/

The notion of a 'safe withdrawal rate,' being a real amount that can be taken out of savings in retirement each year without a significant risk of running out of money in some window of time, goes back to a 1994 paper by Bengen which enshrined the "4-percent rule." In this podcast, the Inflation Guy discusses improvements to that rule - including some that he popularized - especially when it comes to the need to add some inflation-proofing to an asset mix that needs to keep up with inflation! The IG still prefers personal liability-driven-investing, but investment do-it-yourselfers who like rules of thumb need to know that there are easy ways to improve on the 4% rule...and some not-so-obvious pitfalls in using it blindly! The Inflation Guy also responds to an excellent listener email about last week's episode. NOTES Podcast callback: Ep. 91: Quality Adjustment (?) in College Tuition Inflation The Inflation Guy's Society of Actuaries paper: Maximizing Personal Surplus: Liability-Driven Investment for Individuals To Subscribe to Quarterly Inflation Outlook: https://inflationguy.blog/shop/ To Subscribe for free to the blog: https://inflationguy.blog/ Check out the new website!: https://www.EnduringInvestments.com/

In this episode, the Inflation Guy considers the question of why college tuition inflation has consistently run drastically faster than headline inflation. Is it a productivity question, or a quality question? And what does 'quality' mean in the context of college education? There are a lot of complex issues to be considered here, which ordinarily would mean you shouldn't ask someone who does his best thinking in the shower, but because we are talking about inflation we are right in his wheelhouse. It's an interesting thought process, which brings up parallels to medical care, rides at Disney, and fins on automobiles! The Inflation Guy also editorializes on Germany's recent decision to stop further issuance of inflation-linked bonds. NOTES To Subscribe to Quarterly Inflation Outlook: https://inflationguy.blog/shop/ To Subscribe for free to the blog: https://inflationguy.blog/ Check out the new website!: https://www.EnduringInvestments.com/