Okay Doomer

Yes, the title is supposed to say Doomer and not Boomer. Although you can frequently find me saying the latter. The reason is, I am somewhat of a Doomer. And for good freaking reason. Tell me the last good thing you have heard someone say? Inflation is Transitory? Except now people are saying we can officially drop the Transitory and now it’s just Inflation. Inflation is an absolute panic, fear mongering, type of virus that people are just not really talking about. Covid is in the headlines, but now all of a sudden that inflation is no longer labelled transitory, the news stops talking about it?

In my opinion, that should be even more reason to be discussing inflation. Put it in the news, let people have educated talks about it and really think it through. We have gone through 2 of the wildest years ever in the history of the dollar. We went from almost a recession while DJT was in office, to a Covid Flash, Crash, the biggest market stimulus since WWII, a global trade meltdown, and a boom in housing prices.

No wonder people are burnt out. Tired. Uncertain about the future. However, I guess that’s not everyone yet, because the market continues to grind higher out of the past few choppy months.

With inflation, I feel like the transitory could have been taken off a while ago. But that’s just me. Working in supply chain, I have seen the impacts of covid first hand. And I have also seen the wage increases for workers and the wage war between companies first hand. And that’s the part of the economy the fed does not want to see increase.

It is okay for assets to increase, and the money supply to increase because most of the money supply ends up in the banks and tied up on corporate balance sheets. However, the second the wage wars start and labor prices creep higher, you’re asking for full on inflation. And this will occur. I am in the camp that inflation will continue to run hot. Wages will continue to climb, and the CPI will rise with it. Inflation is too much money chasing too few goods. Well, we have supply chain shortages and a year full of stimmie checks, so yes, by definition we have inflation.

However, at some point and the fed has already made it clear, interest rates will begin to rise sometime mid 2022. I think however, after the first quarter CPI showings, and the corporate earnings, the Fed will have to jump in a bit earlier than the market is anticipating, and possibly a bit harsher than what it’s anticipating.

And once that shock of the Fed rate hikes hits, I think we go into a slow deflationary period, with potentially a stagflationary period thrown in there. High inflation with overdrawn corporate debt, and you mix in a higher rate hike than expected, and the chaos ensues.

Now this is me thinking out loud. I think we have another quarter of what appears to be positive growth in the market, that is just masked by inflation covering up the cost of wages and materials. But at a certain point that inflation and cost of labor will catch up, and the corporate profit margins will diminish.

Anyways, I’m 1 foot in and 1 foot out of the market because it has been some very unstable times since October. I have taken a different approach and I have longed the VXX, expecting volatility to continue during these unprecedented times.