A commentator I have followed for a long time, John Mauldin, calls physical gold "Central Bank Insurance."

If rates go even more negative, then yes, we will have hard asset deflation. That is the base case for continuing the pre-COVID deflationary regime.

What you are proposing is stagflation. It could certainly happen. I think a lot of it hinges on what the govt and Fed do. If they keep showering gobs of cash on people and businesses, as you say, that money has to go somewhere. Once people's psychology has shifted to inflation, they tend to trade currency for hard assets as quickly as they can. This would tend to raise the prices of hard assets.

If the govt and Fed are gridlocked and unable to pass a lot more stimulus, then I agree with you and stagflation is a likely outcome.

Lastly, we could have both, in order. A bout of deflation due to a recession, Fed taper/hike, etc. Asset prices fall. Service/consumable prices are sticky. People's purchasing power is diminished due to paying more for consumables, interest on debt, etc. They cry to the govt to fix it. When the cries get loud enough, the govt passes some major stimulus and we are off to the inflationary races.

Stagflation came to mind as well. But it may not be a traditional stagflation. Seems to be more of an acute version where the cause is easily identifiable and (hopefully) temporary: Covid.

My theory is that sellers are jacking up prices to make up for last year's lost profits. They know a lot of people this year are fed up with Covid and are ready to get back to normal with a vengeance.

Key example: our family did not travel at all last year due to Covid. Airline lost our money. This year we just had to get out and as we saved money last year by not vacationing, I was (almost) too happy to pay the ridiculous 50% increase in airfare. Airline probably knew it, too. Ditto for the Airbnb we used.

So I suspect that the inflation of the past few months may be to "fill in" the deflation of 2020.

Chart: year-on-year core US CPI.

This disconnect is the "fault line" that will ultimately lead to the massive economic earthquake that will shake us all.

this is a situation where somewhere between the two extremes is what serves humanity the best.

it is similar to either socialism or capitalism when taken to the extreme is really bad.

I really like my socialistic Medicare but fully controlled medical care for all will dramatically hinder me getting the help I need. so while not perfect the Medicare (with optional add ons) seems to work well.

Quote of the decade. This encapsulates almost everything that's going wrong with the US.

This is the Fed's story and they are sticking to it. However, this assumes that there is no change in consumer and business behavior and we will go right back to the way we behaved pre-COVID. I do not think the Fed has it right.

Businesses were caught out when China locked down. They will not want that to happen again. They are going to increase inventories and shorten supply chains. While this is good for US workers, it will increase costs that must be passed on.

Likewise, wages tend to be sticky. The recent wage increases will need to be passed on as well.

Further, consumers are seeing shortages for the first time in a long time. This will change their behavior and they will start to overbuy when things are in stock. This will also have inflationary consequences - shortages beget more shortages which reinforces the behavior in a vicious cycle.

But at the end of the day, we don't know what will happen. We are all just speculating. However, I believe that getting the inflation/deflation call correct is the only thing that matters when it comes to preserving your wealth over the next 10 years. So I am spending a great deal of time watching, reading, and learning.

Best way to conserve wealth, work more, work smarter, work harder. It’s really a good thing.

An acquaintance owns five fast food stores and two fine dining ops. He is convinced that his workers are not ever coming back, saying that ~2/3rds are now Amazon warehouse workers. The other 1/3rd prefer the extended vacation that unemployment payments enabled.

But why are aircraft inventory levels so critically low?





Jg

I am very actively into the market right now for a faster xc mount. Selling or not selling the 180 and 195 is simply not a consideration anymore as I have the permission, or should I say the acquiescence of "you know who".

I would love to know where this is going because in 49 years of aircraft buying and selling, this is the most **##@@ U# situation I have ever witnessed.

It is very difficult to make an orderly, intelligent, well-advised purchase because of numb nuts with a handful of money or financing rushing head long before you as if "buying" the airplane for too much money is an achievement. The brokers are loving it. Kiss their @@@ or take a walk.

But as an old, now deceased, friend of mine used to say, "The sun don't shine on the same dog's @@@ all the time".

Jg

Your friend was a poet.

I flew to Chicago the other day, flight was delayed an hour and a half then the Budget rental car line was two hours long (they had one person working). I got in the car at 2am.... (I usually go to bed at 9). To add insult to injury, the next night I got stuck (parked) on the freeway for 3 hours so my six hour drive turned into 9 - got to bed at 2AM again.

The good news is that I was on my way to purchase an airplane. What a treat. We did the acceptance flight, took the plane to a tax-acceptable state for closing, ate lunch while the title company did the paperwork and flew home on my schedule.

I quickly found myself in cruise celebrating the delays I had on the way out, so lucky to be able to rise above (pun intended) the crap that most folks have to endure if they wish to or have to travel. The market is up so compared to where we were a few years ago, I paid more the for airplane. I struggled with that but I quickly recovered.

Please do tell about the new plane.

Best,

Tom

Indeed - tell us about it! And Mazel Tov!

Straight CJ - partially because I wanted to upgrade the cockpit to this.