High up in their ivory towers, the pointy shoes just realized what most of us have known for some time — high inflation is not as transitory as they have spent months convincing us.
Quite a 180 from earlier this year:
Federal Reserve Chairman Jerome Powell said prices would rise this year as the pandemic recedes and Americans are able to go out and spend, but he played down the risk that this would spur unwanted inflation.
“We do expect that inflation will move up over the course of this year,” Powell told the House Financial Services Committee on Tuesday, citing pent-up demand, supply-chain bottlenecks and the comparison with very weak price pressures last year. “Our best view is that the effect on inflation will be neither particularly large nor persistent.”
As we said at the time in these missives:
As far as markets go, the “irony” of the prevailing belief that any inflation will be temporary is that the weighting to sectors which are the best inflation hedges (commodities) is the lowest in about 100 years. In other words, we are at the point in history in which investors are the least prepared for inflation.
And here we are today (h/t to @trader_ferg for the graphic)…
ALL THINGS TRANSITORY…
Whatever the pointy shoes say, we’re not just ready to retire our musings about inflation.
In February 2020, we started warning that lockdowns will bring about inflation and shortages. This pesky stuff is now part of our daily lives. We recently set up a dedicated inflation channel in our Insider private forum, where members can share their own experiences with all things “transitory”.
Over in Europe, exploding energy prices are proving to be anything but transitory.
European consumer prices are rising at their fastest pace since 1997.
Annual inflation across the 19 countries that use the euro, including Europe’s largest economies Germany, France, Italy and Spain, hit 4.9% in November, driven mainly by soaring energy prices, according to Eurostat, the EU statistics office.
That’s the highest rate since 1997, when the European Union started collecting data in preparation for the launch of the euro two years later, and up from 4.1% in October.
According to Eurostat’s flash estimate, energy prices rose by 27.4% in November. Services inflation was 2.7%.
“The surge in headline inflation continues to be mainly driven by higher energy prices, but core inflation also saw a surprisingly strong increase, likely linked to a surge in German package holiday prices,” Katharina Koenz, an economist at Oxford Economics, wrote in a research note.
Insider member Patrick shared this stunning piece of art that gives European impressionists a serious run for their money.
“UTILITIES BILL” – OIL CANVAS, UNKNOWN ARTIST, 2021 EUROPE
We bet it would fetch millions of dollars as an NFT.
IT’S A LAND RUSH
As value investors with time horizons that seem like forever in today’s instant gratification-driven world, the following conversation with billionaire ‘cable cowboy’ John Malone resonates with us:
Every investor has a different time horizon, a different perspective. To me, I’ve always been a long-term investor and so I’m much more interested in, in building this business brick by brick, making it solid and sticky, and how can you grow and how can you grow pricing power and how can you defend the franchises that you’re building. It’s that kind of, that kind of a thing. It’s too early. I really think it’s too early to assess. The market is obviously putting huge market valuations on Netflix and frankly, Netflix relative to Disney. And, you know, I mean, hell there’s a car company that I guess is just going public that has $130 billion market cap—
FABER: There is.
MALONE: And hasn’t built a car yet.
FABER: That’s true. Rivian.
MALONE: So really, there’s no question that the equity markets right now are so interested in growth above all other criteria, and this is like the bubble in the late 90s, up through 2000. It’s all about growth. This is a land rush.
With all this in mind, is it a coincidence that John Malone has been focused on the same investments as us here at Capitalist Exploits? We think not.
DIGITAL LAND GRAB
Oh, and speaking of land rush…
Got your attention, didn’t it? Here’s more:
A plot of virtual land in the online world known as Decentraland sold this week for a whopping $2.43 million, more than double the previous record set for the price of virtual real estate.
Decentraland is a popular online environment where users can exchange cryptocurrencies for land and buildings. Users can also walk around the digital world and meet other users through customizable avatars.
We saw firsthand some pretty bizarre behaviour during the dot-com mania of 1999 and 2000. And this “digital land grab” looks and feels very much like the dot-com bubble. Or perhaps we’re just old dinosaurs who don’t get this “age of exponential”.
NOT TOO LATE FOR CHRISTMAS…
Order by Dec. 8 for delivery in the US! See our holiday deadlines here.
Have a great weekend!