19 Nov 2021


Its always a comfort realising that I am not the fool I look. Everywhere I look I am reading about inflation so I decided to actually check if it is just me thinking everyone is talking inflation or is it actually a thing. According to Google Trends the term “inflation” is trending higher than at any other time since 2004. It appears I am not alone in thinking that it will probably only be transitory.

I read the paper at my local cafe overlooking Bondi Beach every morning. It is hard to beat the setting. Next to me sits a gorgeous girl, but for some annoying reason her crossed leg keeps bouncing under the table. Today I recognised her by her bouncy foot before I saw her face. I find this so unattractive. What I am saying is that people who appear confident on the outside but inside are a wreck I find annoying and unattractive. Liars are so unattractive.

People in elected positions such as politicians, bureaucrats, businessman and actually every person in society is “forced” to toe the party line to some extent. In these letters I want to be courageous and share things the way I truthfully see it without worrying about who might be disagreeing or getting upset with me. Either I will be left with no readers and a queue of people wanting to egg me or I will cut through the BS and connect with some level of useful insight.

The US federal debt limit is once again nearing its ceiling after narrowly avoiding a default last month. This is one can that keeps getting kicked down the road. I have been reading about it for decades and I don’t even take it seriously anymore. I suspect they are going to pass legislation that will do away with it. I don’t think they will do it in December as there are too many positive things happening in the economy and in the financial markets. I suspect this limit will be removed during the next major recession where bipartisan support will be easier to garner.

There was quite a bit of noise in the papers from various economists at the Australian Reserve Bank. The one that really got my undies in a bunch was getting lectured to by a central banker about taking risks and being innovative. In Dr Ellis’s words, “Dynamism – the drive to innovate, adapt and evolve – helps underpin a society’s living standards.”

β€œIn the dynamic realm of business, innovation and investment, though, it is more a case of nothing ventured, nothing gained.” Dr Ellis said risks needed to be balanced against opportunities.

Before the branch of knowledge became Economics it used to be called Political Economy without delving too deeply into the definition it meant that economics was rooted in moral philosophy. Writing today’s letter helped me get out of my system my irritation with many of the influential economists presenting their model predictions. You see we have lost a lot of the light and shade of life to mechanistic models that are divorced of the meaning behind behaviour. Moving on…..


Tears of Sadness or Joy ?

Vijay Shekhar Sharma is seen here wiping away tears as he recounts his great rise from commoner to the CEO of a digital payments giant and India’s biggest-ever IPO at $2.5 billion. However the tears of joy were short lived as the biggest Indian IPO tanked 27% on its first day of trading. Dry your eyes baby 😎.

Crypto is getting a smack as we speak Bitcoin is down almost 6% and ETH 7%. Gold is holding steady once again placing the correlation of these 2 “safe havens” under serious question. We will come back to this in the near future.

Evergrande should stick to property development actually maybe not. The troubled Chinese developer sold the rest of its stake in internet firm HengTen Networks for HK 2.13 billion, that is likely to be booked as a HK8.5 billion loss from the sale. That should plug one of the dykes in its debt portfolio.

Another headline speaking to things slowing down in China were the just released disappointing Alibaba results. The only thing that isn’t transitory is the slowdown of things in China. When things go up a lot over many years you are faced with the mathematical reality of the Rate of Change. By the way this is something the Crypto market still needs to confront.

If you want to see a currency that was a short traders Turkish Delight look no further than this chart of the Lira.

Ending with inflation in the UK surprising on the upside, yes it is higher than expected. However, remember what I am saying, rate of change is a force of nature. The moves have been very sharp and this will be hard to maintain so the YOY growth I think will moderate. I am also basing a lot of what I am saying on the underlying weakness in the Chinese economy. Also we should not be ignoring northern hemisphere Covid cases are forming a worrying 4th wave which is likely to place a lot of strain on economic growth.

In summary there is inflation however the trend is likely to moderate from current alarming rates.

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