Cents and Sensibility: the Inflation Guy Podcast

Ep. 27: Reflections on this Century’s First 50bp Rate Hike

Today the Federal Reserve raised the overnight Fed Funds rate 50bps - the largest such increase since May 2000 (and the Inflation Guy is sticking by the title of this episode since technically the 20th century didn't end until 12/31/2000!), and Chairman Powell strode confidently to the microphone in the post-meeting presser. How does this action, and what Powell said, impact the inflation outlook and why did the markets behave the way they did? (The answers are: not much, and for unhealthy reasons, but listen to the podcast anyway.)

Ep. 26: I-Bonds - Smart Money with Small Money

It has taken too long to get to this episode! Today (after spending approximately 8 minutes ranting) the Inflation Guy talks about I-Series Savings Bonds, affectionately known as I-Bonds, which should be the first investment that goes into a saver's "Emergency Fund." You can't do this with big money, but that doesn't mean you can't be the smart money even with small amounts. In this podcast, the IG refers to the "I Bond Manifesto," which is a good summary of the salient characteristics of I-Bonds. It can be found at https://tipswatch.com/i-bond-manifesto/ (among other places).

Ep. 25:This Month’s CPI Report - Peak CPI? Yay?

The Inflation Guy covers this month's CPI report. It is widely expected to be the peak CPI for the cycle, or at least for this year, and the IG agrees with that. But how excited should we be? How far down this peak will inflation tumble? It surely depends somewhat on the Fed - and the Inflation Guy is skeptical that they have the will to do what it takes when 'what it takes' is going to do bad things to other markets.

Ep. 24: Home is Where the Hedge Is

How should we think about property - investment property as well as the home you live in or want to buy rather than renting? In this episode, the Inflation Guy breaks down how he thinks about the drivers of value of real estate. This isn't a real estate sales pitch and the IG won't tell you how to choose the best location or how to evaluate the schools. He doesn't know that kind of stuff. What he does know is how real estate functions as a hedge, and what the big macro drivers are that you should pay attention to - especially now.

Ep. 23: Grumpy Old Man Edition

The Inflation Guy gives in to his internal grumpy old man, and talks about a few inflation-related items that are sticking in his 'craw.' Are stocks really an inflation hedge? What does it mean when the Fed says they will do 'whatever it takes'? And why are these kids on my lawn?

Ep. 22: This Month’s CPI Report - Balls in the Air

Another month, another 40+-year high in inflation. 7.9% y/y for headline, 6.4% on core, and we're not yet at the peak. Moreover, the peak is likely to be broader and not sharp, because inflation has infected the whole basket and changed the equilibrium that we are going to recede to. It's as if a juggler has moved from juggling two balls to juggling five; that is a stable equilibrium and will resist moving back. And the Fed is probably going to be careful before upsetting the juggler too much (the Inflation Guy really had to work hard to resist a balls pun).

Ep. 21: Recording for Posterity the Absurdity of Negative Interest Rates

After some brief comments on how the Ukraine-Russia conflict fits into the narrative about rising inflation pressures going forward, the Inflation Guy turns to a phenomenon that will soon be one for the history books, probably never to be seen again: negative nominal interest rates. A theoretical absurdity, this lengthy episode demonstrates that sometimes truth is stranger than fiction - and in the kind of world where money tomorrow is worth more than money today, a lot of our notions about how things should work are turned on their heads. Let's reflect on this now, and appreciate just how bizarre the last five years have been.

Ep. 20: This Month’s CPI Report - The Ongoing Inflation Debate (?)

Core CPI above 6%; headline at 7.5%. 40-year high after 40-year high. What is the 'ongoing inflation debate'? The answers here are pretty simple. If you want fewer birds in your backyard, quit throwing birdseed out there.

Ep. 19: Dual Duration - Why TIPS Are Exactly Half the Story

The Inflation Guy breaks down the topic of "duration," and explains how there is a more thorough and useful way to think about bond risk as consisting of two parts (originally described in a paper by Waring and Siegel in 2004). Inflation Guy illustrates where TIPS live in this framework through the device of a "pastry bond," and explains why this concept is very important for individual and institutional investors alike.

Ep. 18: Cash is an Option Whose Cost is Inflation

Why do we hold cash? For anticipated needs, precautionary requirements, and sometimes because there are no better alternatives. In this episode, the Inflation Guy suggests that the role of cash in a portfolio is also to serve as an option on future opportunity, and the cost of the option is inflation. This has some interesting implications for asset prices and monetary policy effects today.