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Re: Is rising inflation looming?

Posted: April 14th, 2020, 9:09 am
by TheMotorcycleBoy
Alaric wrote:
TheMotorcycleBoy wrote:I knew this would happen. Putting aside the "economics theorems" the reality for everyday folk, is "stuff costs more now".


If supermarkets can sell all that can be delivered to them, subject only to the low density of shoppers, they will presumably be holding back on special offers and deals of x% off when spending £ Y with a loyalty card.

Incidentally what is the explanation behind the egg shortage? I can understand a run on yeast and bread flour if people have taken to baking their own, but why eggs? You might even expect a glut as the catering trade won't be taking any.

Well you use eggs in lots of cake and biscuit recipes. My kids (what with being off school) and wife (what with being furloughed) have been doing a lot cookie and cake making. I think eggs get used there. Fortunately we have a free free range supply from mad father-in-law (which is good cos the eldest kid is now a crazy vegan who will only eat ethically sourced eggs). I personally eat boats of hard boiled eggs mainly cos I hate cooking and they are so easy and you can do a pan of 12 of them and have 1 or 2 a day for lunch (they are incredibly dense and therefore filling).

Anyway perhaps the shortage comes about cos packing the eggs is human labour intensive. But I'm just guessing here.

Matt

Re: Is rising inflation looming?

Posted: April 14th, 2020, 9:11 am
by TheMotorcycleBoy
Nimrod103 wrote:
Alaric wrote:
TheMotorcycleBoy wrote:I knew this would happen. Putting aside the "economics theorems" the reality for everyday folk, is "stuff costs more now".


If supermarkets can sell all that can be delivered to them, subject only to the low density of shoppers, they will presumably be holding back on special offers and deals of x% off when spending £ Y with a loyalty card.

Incidentally what is the explanation behind the egg shortage? I can understand a run on yeast and bread flour if people have taken to baking their own, but why eggs? You might even expect a glut as the catering trade won't be taking any.


I imagine it is a shortage of consumer sized packaging. The same reason has been mentioned for the shortage of flour. Giant factory sized sacks are plentiful apparently.

So what's your take on the factories that take bulk food materials (the big sacks you mention) and convert (i.e. process that) into bread, biscuits, pasta etc.?

Are those kind of factories currently closed?

Are we leaving off gradually emptying warehouses?

Matt

Re: Is rising inflation looming?

Posted: April 14th, 2020, 9:19 am
by TheMotorcycleBoy
Apologies - I'll stop posting in a minute!

Apparently welfare claims are up:
https://uk.reuters.com/article/uk-healt ... KKCN21W0KZ

Hence unemployment is. Presumably the self employed and those of very small businesses. Hmm.. the followers of Keynes' economics would say that's a deflationary phenomenon:
https://www.economicshelp.org/blog/571/ ... inflation/

Bye!

Re: Is rising inflation looming?

Posted: April 14th, 2020, 9:28 am
by colin
tjh290633 wrote:There has been no paracetemol of any sort in our Tesco for at least 3 weeks. Plenty of Ibuprofen, and Aspirin, of course.

TJH

I bet there is cough mixture available too, I don't think the panic buyers have been paying attention to Coronovirus symptoms.

Re: Is rising inflation looming?

Posted: April 14th, 2020, 12:34 pm
by ursaminortaur
The fact that a think-tank chooses this time to push for the abolition of the pensions triple-lock by removing the 2.5% minimum rise suggests that they expect inflation to be lower than that over the next few years.

https://www.theguardian.com/business/2020/apr/14/scrap-triple-lock-uk-pensions-coronavirus-crisis

The thinktank argues in its paper that the economic impact of lockdown policies – which it says have “have rightly been deployed to protect the lives and wellbeing of those most vulnerable to the virus” – is falling most heavily on working-age Britons, “many of whom face redundancy followed by years of higher taxes, reduced services, and slow economic growth”.

The paper proposes replacing the triple lock with a “double lock” that removed the 2.5% promise and would save an estimated £20bn over five years.

“In the context of an annual deficit that could reach £200bn as we emerge from the crisis, shaving £4bn a year from the growth of the £100bn pension bill is not too much to ask. It would also demonstrate reciprocity from a group whose wellbeing was, rightly, prioritised during the lockdown phase of the crisis,” the SMF said.

Re: Is rising inflation looming?

Posted: April 16th, 2020, 5:20 pm
by Alaric
A piece in the Guardian about rising prices.

https://www.theguardian.com/world/2020/ ... es-sharply

A basket of the products – including tinned beans, lavatory paper and cleaning materials – costs 4.4% more than just before lockdown measures began a month ago, according to the Office for National Statistics, which carried out the comparison.

Re: Is rising inflation looming?

Posted: April 16th, 2020, 5:51 pm
by Stonge
ursaminortaur wrote:The fact that a think-tank chooses this time to push for the abolition of the pensions triple-lock by removing the 2.5% minimum rise suggests that they expect inflation to be lower than that over the next few years.

https://www.theguardian.com/business/2020/apr/14/scrap-triple-lock-uk-pensions-coronavirus-crisis



Goodness me, that's naive.

Re: Is rising inflation looming?

Posted: April 16th, 2020, 7:32 pm
by scrumpyjack
'Guardian Think Tank'

That's an Oxymoron isn't it?

Re: Is rising inflation looming?

Posted: April 16th, 2020, 7:43 pm
by johnhemming
ursaminortaur wrote:The fact that a think-tank chooses this time to push for the abolition of the pensions triple-lock by removing the 2.5% minimum rise suggests that they expect inflation to be lower than that over the next few years.

Think tanks are rarely ahead of the curve outside their area of focus.

Re: Is rising inflation looming?

Posted: April 16th, 2020, 9:55 pm
by Nimrod103
Back on topic, I said I thought inflation would drop. Deflation may actually occur.
It seems a BoE policymaker agrees:
https://www.telegraph.co.uk/business/20 ... cut-costs/

Prices should stay low for shoppers as the coronavirus pushes families online and sparks a surge in home working, Bank of England policymaker Silvana Tenreyro has said. The pandemic is likely to trigger a jump in internet retail as customers who had previously preferred the high street now find they have no alternative during lockdown, Ms Tenreyro said.
"There may also be changes from the firms themselves that reduce commercial rental demand. Many sellers have been forced to develop virtual replacements for services previously offered in person, such as online lectures instead of classroom teaching.
“Employers may also be alive to the potential cost savings of encouraging or requiring greater working from home, especially if they have opted to invest in technologies to facilitate it. A reduction in office use could also weigh persistently on demand for rental space and rents, which may feed through into lower cost inflation and a period of weaker price inflation.”

Re: Is rising inflation looming?

Posted: April 17th, 2020, 1:47 pm
by Bubblesofearth
If I my borrow from THHGTTG...

The Global economy is complex. Really complex. You just won't believe how vastly, hugely, mind-bogglingly complex it is. I mean, you may think it's difficult to unpick the finances of a local business, but that's just peanuts to the Global economy.

The reason it's so complex is not just because it's big, and because so many different factors can influence it, but because there are so many feedback loops. In some ways a better analogy than space would be the human body. Despite what an army of nutritionists might tell us it is actually incredibly difficult to obtain statistically significant evidence for the benefits of any specific food type or supplement. You can't go from 'the body needs vitamin C' to 'vitamin C supplements are a good idea. Or 'fruit and veg contain lots of things the body needs so we should eat 5 portions a day'.

Much the same for the economy. You can't go from 'CB printing money' will lead to inflation just because, on the face of it, more money means inflation. Too many feedback loops to consider in the real economy. As well as increases in money supply from Governments/CB' other factors that will influence prices include;

Level of insolvencies/bankruptcies - deflationary as money is destroyed.

Level of demand post CV19. Will it pick up again and how quickly?

Oil - demand destruction or supply constriction? Oil is still an important driver of prices as it still underpins the Global economy.

Debt - this is still very high relative to GDP and acts as a downward pressure on further borrowing so is deflationary.

Politics - influence of Government on trade, taxation, spending etc. What, for example, are US/China relations going to be like once the dust settles?

The interplay between the different factors and the feedback loops in the economy make it almost like the weather (sorry, yet another analogy) in terms of forecasting prices. Probably good short term but hopelessly difficult longer term. Anyone willing to predict the upshot of all this for inflation/deflation is either very brave or has nothing to lose. For an investor IMO the best thing to do is not to try to be too clever and to remain as diversified as possible.

BoE

Re: Is rising inflation looming?

Posted: April 18th, 2020, 3:22 pm
by TheMotorcycleBoy
Glyphosate concentrate:

We last purchased this (about 2 yrs ago) in 5L quantities for about £50/5L. (via amzn)

Now amzn sellers are only selling in 2L quantity for £27/2L.

Re: Is rising inflation looming?

Posted: April 18th, 2020, 6:32 pm
by Nimrod103
TheMotorcycleBoy wrote:Glyphosate concentrate:

We last purchased this (about 2 yrs ago) in 5L quantities for about £50/5L. (via amzn)

Now amzn sellers are only selling in 2L quantity for £27/2L.


Sounds like an issue with Amazon. Straight from the dealer £27.72 for 5 litres:
https://www.agrigem.co.uk/clinic-up-5l- ... QoEALw_wcB

£25 if you buy 8.

Re: Is rising inflation looming?

Posted: April 19th, 2020, 8:21 am
by TheMotorcycleBoy
Nimrod103 wrote:
TheMotorcycleBoy wrote:Glyphosate concentrate:

We last purchased this (about 2 yrs ago) in 5L quantities for about £50/5L. (via amzn)

Now amzn sellers are only selling in 2L quantity for £27/2L.


Sounds like an issue with Amazon. Straight from the dealer £27.72 for 5 litres:
https://www.agrigem.co.uk/clinic-up-5l- ... QoEALw_wcB

£25 if you buy 8.

PM sent. :)

Re: Is rising inflation looming?

Posted: April 23rd, 2020, 7:37 pm
by colin
Inflation falls to 1.5% , economists say it may go to .5% this year as economy shrinks.

https://www.bbc.co.uk/news/business-52371062

Re: Is rising inflation looming?

Posted: April 24th, 2020, 10:02 am
by dealtn
colin wrote:Inflation falls to 1.5% , economists say it may go to .5% this year as economy shrinks.

https://www.bbc.co.uk/news/business-52371062


I think it is going to be genuinely difficult to even measure inflation, at least in a meaningful way, and it will be interesting to see how the ONS adjusts the basket. These are unprecedented times, but the basket is supposed to show a typical average spend.

Looking at the graphic on that link as an example shows the difficulty. Last month's biggest falls included Recreation and Culture, Restaurants and Hotels, Transport, and Clothing and Footwear. Now there are two difficulties, even a month into lockdown. The basket has to be representative of spend in its proportions, and also the prices need to be measured. What are we including in Recreation and Culture now that Theatres, Cinemas etc. are closed? The same is true for Restaurants and Hotels to a large extent. Transport expenditure is massively lower, with perhaps 90% of normal journeys not happening. Clothing and Footwear shops are in the main closed, but some online outlets remain in operation.

So across many categories the changes in both spend as a proportion of expenditure, and availability of prices are significantly different. Petrol is cheaper, but in much less use. Air tickets almost non-existent, but very expensive where it exists.

I doubt the ONS has the answers as to how it should properly report, and is no doubt hoping for a return to normality as soon as possible, else it faces some interesting dilemmas on how representative it needs to change. Do you replace Cinema Tickets with "free" virtual online pub quizzes?

Re: Is rising inflation looming?

Posted: April 24th, 2020, 10:15 am
by Alaric
dealtn wrote: but the basket is supposed to show a typical average spend.


Those doing the spending in a supermarket are likely to notice the average weekly amount creeping up.

There could be several reasons for this:
Loyalty schemes that give you a voucher of £ X off £ Y of spending are presumably suspended.
Two for the price of one and similar offers are possibly also being curtailed.
If there's an absence of your regular purchase, you may need to substitute a more expensive brand at a higher price or go without.

Supermarkets may have got their supply chains just about working again, my local Sainsbury's now has pasta and loo rolls, tinned tomatoes even. At the start of the crisis, almost all the meat had gone, reduced to almost just the posh sausages and duck. I haven't seen an egg there for weeks. A visit to a local Farm Shop is also necessary. That has a reliable supply of eggs, albeit at a higher price than supermarkets.

Re: Is rising inflation looming?

Posted: April 24th, 2020, 11:19 am
by richfool
PAT (Personal Assets Trust) recently sent me their latest Quarterly Report (April 2020), which includes their view on inflation. I note on page 5, reference as to how they feel US TIPS and gold will protect them against inflation being above real interest rates:
US Treasury Inflation-Protected Securities (TIPS) and gold will protect us from real interest rates moving more negatively, i.e. when the inflation rate stands above the rate of interest. With state forces pushing money into the economy, an inflationary outcome cannot be ruled out. Cash is likely to have its value eroded if real rates go more deeply negative, and if this happens our cash weighting is likely to fall in the years to come. For now it continues to provide essential dry powder for us to deploy.

It can be accessed through here:

https://www.patplc.co.uk/literature/quarterly-reports

Re: Is rising inflation looming?

Posted: April 25th, 2020, 1:37 pm
by 1nvest
richfool wrote:PAT (Personal Assets Trust) ...
... Cash is likely to have its value eroded if real rates go more deeply negative, and if this happens our cash weighting is likely to fall in the years to come. For now it continues to provide essential dry powder for us to deploy.

Given that we've seen cases since January of where cash was buying 50% more shares than at the start of 2020, would have thought they'd have already deployed at least some of that dry powder.

Re: Is rising inflation looming?

Posted: April 26th, 2020, 12:02 pm
by Bathonian
I’m not sure if Ruffer has been mentioned earlier this this thread, but an environment where we start to see rising inflation is also heavily built into their strategy with a large chunk of index linked bonds in the portfolio.

They publish the “Ruffer Review” each year with a series of articles from their staff, 2020 version can be found here https://www.ruffer.co.uk/-/media/Ruffer ... 8461B60B65

Page 62 gives their view on inflation, but there are some other good articles in there as well.

I hold some RICA which has been a drag on returns until this year where it protected from the falls pretty well indeed.

Anyway, thought I would flag in case others found it interesting to read.