Posted on 02/15/2021 6:24:42 PM PST by blam
It's no secret that BofA's Chief Investment Officer has been warning that 2021 - the year of the vaccine - is one where real inflation (as opposed to financial) will run amok sooner or later, and in his latest Flow Show he repeats his two main contentions about how events will play out in the coming months, namely "the velocity of people will rise" and "the velocity of money will (also) rise".
Addressing the first, Hartnett writes that since the core 2021 trends will be "vaccine>virus", and "reopening>lockdown", this means that human mobility will rise & macro data will surge particularly in Q2 when investors should expect US GDP >10%, EPS >20% CPI 3-4% Y/Y, or an economy in fullblown overhating mode.
This taken in conjunction with secular trends of bigger government, economic nationalism, fiscal excess, dollar debasement, War on Inequality, there is little wonder inflation breakevens & lead indicators are surging...
... and that small US business price plans over next 3 months are at highest since Nov’18...
... although whether or not they can actually achieve this is a different matter.
Stepping into the realm of monetary policy, and specifically its velocity, BofA reminds us that in the past 12 months, the US has raked in a $3.5TN (17% GDP) budget deficit, coupled with the injection of $13.3TN in global central bank liquidity (15% GDP).
Then, unafraid anymore to step on anyone's toes, Hartnett admits that "as in pretty much every one of past 12 years, policy stimulus in 2020/21 continues to flow directly to Wall St not Main St, inciting historic wealth inequality via asset bubbles," and to think of the mockery we were subject to (by random idiots) back in 2009 in later years, when we said the Fed's actions would lead to precisely this.
Anyway, Back fo BofA, which expects the "rising velocity of people" (vaccine>virus) in 2021 to engender rise in velocity of money, with the "inflation mutating" from Wall Street to Main Street, resulting in a pop in the nihilistic bubble.
And here is the punchline: BofA reflects back on the post-WW1 Germany (whose armistice was on Nov 1918) as the "most epic, extreme analog of surging velocity and inflation following end of war psychology, pent-up savings, lost confidence in currency & authorities" and specifically the Reichsbank’s monetization of debt, similar of course to what is going on now.
There is, of course, another name for that period: Weimar Germany, and because we all know what happened then, it is understandable why BofA does not want to mention that particular name.
So what does all this mean for investing? Here is how Hartnett is positioned:
Real assets will outperform financial assets: we believe 2020 marked secular low for rates/inflation, and 2020s likely decade of inflation assets>deflation, and real assets>financial (i.e., buy commodity-linked exposure, sell duration, tech and growth).
And to that point, Hartnett notes that since 1950 real assets (e.g. commodities, real estate, collectibles) have a > 70% correlation with inflation vs. just 5% correlation with financial assets (stocks & bonds).
Translation: Stanley Druckenmiller, and his "thesis trio" of...
•short long-end Treasuries
•very long commodities
•"very very" short the dollar.
... is about to make another killing.
I bought a new house in 1980 with a mortgage of 13%, my neighbor's rate was 18%.
Combine Higher taxes with inflation and the economy is done.
Well ... that’s what they want
I have 100 Trillion dollar bill in my wallet.
I don’t remember how much i paid for it but it was around 12usd
Now they are about 100usd i wish i had gotten a few bundles
I remember those days.
L
Total dependence on Government is the goal here.
In 2007/8 the catalyst of $150 a barrel oil kicked the whole house of cards over. We are headed back for the good ole days.
Can we keep 30 cents on a dollar, even if we work hard? The people who don’t work are standing in line for their share.
You know it’s bad when Zimbabwe’s currency is becoming worth “more” relative to USD.
It was NOT fun.
Meanwhile the Dow futures are already up another 200 points tonight.
Yeah, because a ballooning Dow completely disproves this article. Got any other market tips? /s
It was sarcasm. We went into 1929 with our heads in the sand too
Biden=Carter 2.0
Yes
Where’s our $2,000 Joe?
Before it’s worth $20, that is
Bring it on. It may be my only hope of peaceable resolution of all this garbage, with a Reagan at the end.
From 6500 to 31500 in 12 years.
It is not coming. Haven’t you , over the tears learned not to believe a Democrat?
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