Inflation Consensus?

Barron's Mike Santoli writes:

"It's fashionable on Wall Street to strike a maverick's pose and carp that "nobody" recognizes the real threat of inflation that's being papered-over by the supposed deceit of government data pushers. Yet the just-released Merrill Lynch fund-manager survey for June shows a net 47% of respondents saying core inflation will be higher in the next year, up from a net 11% in March.

So, looking for more inflation is anything but a contrarian stance. And if there's a buildup of inflationary danger, it's in the process of being absorbed by the market."

Mike raises an interesting point here about the crowd's view of inflation:

What once was the subversive contrary stance -- Inflation is stronger than reported, and the BLS data is "uninformative" -- has gained traction amongst a lot of the crowd.

As he notes above, most of Wall St. economists think inflation is low and going higher. 

My view is the precise opposite of that: Inflation HAS been high, and it's likely to go lower as the economy decelerates.

I'm not sure why that cadre of economists thinks core inflation is going up -- unless they are convinced the 2H acceleration is on schedule (despite the recent CFO survey saying they are cutting back on Cap Ex and hiring).

Perhaps it's due to China, the supposed exporter of Deflation, is now exporting Inflation. 

The very obvious slowing of GDP should certainly shave off some CPi/PPi inflation pressures -- but that doesn't change the reality that inflation is higher than has been reported. And if the crowd has finally discovered that, well, it's about time.

I never attempt to be contrarian for its own sake -- but I do like to know how "built in" my views are. And Mike raises a valid issue . . .

>

Source:
Liquid Courage?
MICHAEL SANTOLI
Barron's, June 18, 2007
STREETWISE 
http://online.barrons.com/article/SB118137051073830193.html   

 China's Inflation Accelerates,  Adding Rate Pressure
By Nipa Piboontanasawat,
Bloomberg, March 13 2007
http://www.bloomberg.com/apps/news?pid=email_en&refer=&sid=aAN9tDEhA9Mk

Comments

[brynaw]

It's really quite simple, Barry:

Price increases of goods and services ordinary people need in order to live = invisible to Wall Street.
Increase in rank-n-file worker salaries = INFLATION CRISIS --CALL OUT THE MARINES!!!

2007 Jun 21 12:55 AM

[Johnny Bitchdog]

Barry - It would seem that in your own (possibly delusional) mind, you are always right and a contrarian.

Santoli's comments would seem directed at you. It's easy to be a maverick when you describe a false world - the false world you've been describing (carping and striking a maverick's pose) for a few years is that people don't recognize inflationary pressure. I've found this to be a dubious belief, at best, and downright silly at worst. The silliest part of your arguments has been related to core vs. headline inflation, where you seem to have the completely ridiculous belief that the market only responds to the core number. I've always believed that you make these arguments to make yourself sound smart, while actually not practicing the art of being smart.

And now, above, we have your latest delusional arguments intended to make yourself sound smart rather than being smart (and honest).

Let's take your most current ridiculous and phony world constructions:

"As he notes above, most of Wall St. economists think inflation is low and going higher.

My view is the precise opposite of that: Inflation HAS been high, and it's likely to go lower as the economy decelerates. "

Your first comment is simply phony, as a simple examination of Santoli's comments yield no statement whatsoever about Wall St. Economists thinking inflation is low. If you read the comments, it says that economists believe inflation is going higher.......not a shred of information suggesting they think inflation is low as you claim.

Unfortunately, when an argument (like yours) starts out with a lie (or perhaps you don't read the English language well and you simply don't understand), it's usually enough to simply disregard the entire argument.

However, it's so fun to dissect your delusional arguments that I must continue. Now, let's take the second part of your argument, ignoring the phony setup for a moment:

My view is the precise opposite, bla, bla, bla, bla......

Barry, you are a bonehead and this supposed precise opposite is nothing more than a phony statement to make yourself sound smart. As far as I can tell the view you are comparing to and claiming to be the "precise opposite" of is "inflation low, inflation rising" (disregarding that the only economist suggestion that inflation is low comes from you - a dubious source to describe reality).

Now, not satisfied with starting your argument with a phony claim, you go on to claim to make a precise opposite claim. However, there is nothing precise about your statement, and statements with qualifiers like "as the economy decelerates" cannot be considered the opposite of statements that make no claims whatsoever about the overall economy.

And then you go on to make another phony suggestion that Wall St. economists are just now coming around to your view. Of course Santoli made no such claim that the economist views represent a change or a coming around. You are just suggesting it as a way to make yourself sound smart and right all along, bla, bla, bla.......

Anyway, the bottom line is that your arguments are phony and have little basis in reality as far as I can tell. If you are actually taking investment actions based on your own delusions and need to paint yourself as contrarian, you may have an ethical obligation to tell your clients about the risks associated with trusting your money to the mentally unfit.

Warmly, John.

2007 Jun 21 11:36 AM

[thomasfinch]

Barry,
Do you suppose the continued growth of money supply is a reason to expect rising
inflation expectations?
Best Regards,
California Crumudgeon

2007 Jun 21 03:42 PM

[Sonia Mirza]

"Inflation HAS been high, and it's likely to go lower as the economy decelerates"

Ok, Newton's 1st law of motion (yes, not exactly related but serves to illustrate the point):
a body at rest will remain at rest, or a body in motion will remain in motion unless ...

if inflation has been high and rising - why is it likely to go lower outta nowhere? Due to a decelerating economy? Is this the logical progression from your previous housing "overvalued houses will become a little less overvalued"...extended to...'and this will cause the whole entire economy to decelerate?'

Inflation itself wouldn't cause the economy to decelerate. What impetus are you NOT referring to, that would lead to a lower inflation rate?

Do you mean you also expect interest rates to increase in an attempt to counter the growth of M2, which would eventually lead to a deceleration?

I suppose if you're vague enough to throw such a non-linear, opinion, it's like hitting a dart board the size of an olympic pool with your eyes closed. Eventually you will be right - but "in the long run we are all dead".

*shakes head*

How the hell does someone like this get hired??? Is it a case of "not What you know but WHO you know?".


Dégueulasse!!!

2007 Jun 21 09:49 PM