Just watched another good Peter Boockvar video on the inflation debate. Was basically a re-hash of his RVDB interview the other week with Ed Harrison, with some interesting caveats and additional thoughts. Link here:
We currently have a ton going on in the inflation versus deflation debate, and yesterday's meltdown in the value/commodity & PM (and tech strength) space could either be a watershed moment for the next few months/weeks -- or it just could have been a small bump in the road for the commodity supercycle. Or something in between (more likely)?
I follow a lot of people on RV, Twitter and just on YouTube. On the inflationista side of the equation (i.e. inflation is NOT transitory, at least for the next 2-3 quarters) we've got guys like Peter Boockvar, Jared Dillian, Tony Greer, Keith McCullough, Jeff Gundlach & Julian Brigden (among others). Raoul and guys like Scott Minerd from Guggenheim are currently still in the 'it's transitory, yields going back down' camp. They have been right the last few weeks, but whatever side you're on, all of them make pretty good cases either "for" or "against" continuing inflation.
For me at least, Boockvar's overview really spells out the battle clearly and concisely and I think he's right that we're ultimately going to see more service industry inflation for in the coming months for sure.
- Rent portion of services inflation poised to really break out in the coming months (PCE undercounts it though)
- healthcare component also going up as we reopen (PCE doesn't catch this, PCI does)
- Energy prices (oil, one of the biggest components of inflation data) will continue to rise
- wage inflation (didn't specifically mention this, but I think it's there and will persist on through the summer)
I fully get the goods argument for inflation receding (technology, base effect receding, demographics etc.) , but PB's services inflation thesis sure seems logical and likely at least in the next few months as countries reopen. As does the energy price argument when we start to see places like the UK, EU and India get 'back to normal.' Think the US summer driving season writ large in terms of oil demand. And we all of course know the anecdotal stories about it being hard to find workers & service industry wages going up.
I realize this is an incredibly difficult topic to discuss and that there are a multitude of great viewpoints but just wanted to give a quick summary of the interview and see what everyone's views are post yesterday's very interesting market moves. But I have to ask - has anything changed really other than we're already through the first part of base effect inflation and just settling in for a bit before inflation re-ignites? Or are we now looking at USD strength and a plateauing of inflationary forces? I have a hard time believing the latter, but it could be true. Just don't see the Fed letting up on the throttle quite yet and we still have fiscal running up until September, and likely beyond. And midway through the video Boockvar doesn't mince words when he says its all about 'inflation, inflation, inflation' and we're potentially headed into a stagflationary environment in the coming years.