Inflations: The Media Screams, The Market Is Unfazed:
The market too.
The media experts are wrong. This will become evident in the coming months as things improve.
After all, there is a real danger here. If inflation is driven, at least in part, by an increase in public expectations about inflation (a rather strange idea that has become mainstream in monetary policy-making), these actions are certainly doing their best to move the process forward. together.
Symptoms of media attention are everywhere. Some journalists are so obsessed with this story that their analyzes calibrate the issue and disappear into statistical zones that have nothing to do with inflation itself. Others are so determined to express their opinion that they don’t exaggerate one bit. One analyst tortured the data to reach the misleading conclusion that inflation has now reached an impossibly high annual rate of 8.2%.
Links to the Wall Street Journal
This scream is the loudest and most incoherent in the most common sober financial media. The magazine’s editorial coverage is so phobic about inflation that it seems they struggle to understand what inflation is and what it isn’t.
In March, for example, in response to an increase in bond yields of about 4 tenths of a percentage point (still well below pre-pandemic levels – and it will end next week), an important article led to the conclusion.
• Inflation is already here…
And they call their first test:
• Bitcoin increases about 80%.
The effort pays off. Bitcoin? Seriously?
In a subsequent editorial, the Journal goes even further on the island that is not digital to express its case and lament the increase in the cost of non-fungible tokens. Whatever it is …
But we know what it is not. Bitcoin and NFT are not part of the market basket monitored by the Bureau of Labor Statistics. In fact, Bitcoin is not a commodity. If it’s anything (other than redemption), it’s a resource.
Like a treasure chest or a gold bar. Goods are never included in the calculation of consumer price inflation, for the simple reason that they can rise or fall but are not consumed. Do we expect inflation to adjust to the downside as Elon Musk’s comments trigger Bitcoin’s next big drop?
The main article of March derails:
• This year, emerging market bonds were issued at exceptionally low interest rates; the S&P 500 and Nasdaq set new records this month.
These are also asset classes, not components of the CPI basket. Either way, higher inventory values are usually welcome. Lower interest rates would be interpreted as deflationary (cheaper debt service).
All this has nothing to do with inflation. The fact that Tesla’s share rose 700% last year may be significant, but that does not mean consumer inflation.
By June, the Journal’s reality bias had increased. After publishing the Consumer Price Index data for May, they write:
• The Labor Price Consumer Price Index rose 5% in May, the largest increase since the oil price reached $ 140 a barrel. Let’s pray
Postponing $ 140 a barrel is not even a red flag. It’s a red herring. The oil price has returned to pre-pandemic levels and no one believes it will bring in $ 140.
The reaction of the market
The impact of real inflation – and the fear of inflation – on financial markets is viewed negatively in three ways:
• greater volatility
• sharp fall in the price of bonds and possibly also in the value of the dollar
• general weakening of inventory valuations
Count your article carefully this week. He yells at you.
• Inflation is already here – The Wall Street Journal
• Inflation rises to 12-year highs – The Wall Street Journal
• highest price since 2008 – The Financial Times
• We all know now that inflation is high. Investors increase inflation at their own risk.
• Little room for the Fed to fool itself with inflation: inflation may not last long
• the smoke is hot and inevitably gets hotter. This is likely to trigger another major recession in the US – The FT
• Inflation is back, putting families and businesses under the pandemic. … Acquisitions should be a concern.
Even temporary inflation will permanently worsen the situation for Americans.
• Inflation is putting the world’s economies on a time bomb. We may be on the verge of terrible economic pain. – a report by Deutsche Bank, reported by Barron’s
• The consequences could be devastating – Deutsche Bank
• Everything requires inflation – WSJ
How can you resist this pandemonium? After all, this is not a topic on Twitter, but one of experts and authorities. People who know more than you should.