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Putting out a brief off-cycle note on inflation & bonds

I’d suggested YIGAF would be going to bi-weekly notes due to my schedule, but I have a few hours to kill, and everyone is asleep in the house. As you get older, sleep gets harder and little else does.

It’s been a while since I wrote on inflation, and you may be forgiven for thinking this is because I’d like to hide from the subject, as “obviously” inflation is about to go nuts. Just ask the wonderful people of Michigan!

While I find myself forced to poke fun at the nonsense we now call “data,” the reality is that we ARE facing a period of tremendous price uncertainty. Some parts of it are TRULY stupid. For example:

My readers know I am not MAGA. Please don’t bother trying to label me a “Trumpy,” either. I am a man without a party, but with a deep love for the truth. So let’s see what’s actually going on.

First, it’s NOT your imagination. People have indeed lost their minds on the tribalist inflation story — if you’re a Republican, inflation will fall as President Trump keeps laying eggs. Democrat? To the moon, Alice!

It’s stupidity of both parties at work — often to the benefit of corporations:

The key mechanism of the DEMAND-driven inflation shock in 2020-2022 was price uncertainty, which, as Robert Hall notes, leads to unanchored prices. Eggs $27/dozen? ¯\_(ツ)_/¯ “What are you gonna do? Prices are crazy!”

Here’s a suggestion — skip the eggs. Rents insane? Roommates. Auto prices too high? Bike… or carpool:

These suggestions are impractical for some under some circumstances at some points in time. It’s tough to bike to work when you live in a suburb 50 miles from your office (although your calves will be impressive if you try). When your lease is up… move closer to work. You can’t because your parents live nearby and provide childcare you couldn’t replace if you moved? Then economize somewhere else. Remember ALL prices are set at the MARGIN. If you decide not to accept higher prices, instead seeking substitutes or going without, you are fighting inflation:

By the way, if you don’t get the irony of “Whip Inflation Now” buttons on sale in our supposedly inflationary time, I cannot help you. But once again, it would be understandable if you came to a different conclusion. After all:

I see your market share shedding oligopoly and raise you the largest component of CPI: