Cents and Sensibility: the Inflation Guy Podcast

In this wide-ranging, and yet somehow too-short, episode, the Inflation Guy unpacks what it means to "invest in commodities" - sources of risk and return, and common misconceptions that tend to lead investors astray when thinking about this crucial asset class. Where does the long-run return in a commodity index, and the correlation with inflation, come from? Perhaps you will be surprised at the answer!

The Inflation Guy welcomes his first guest ever to the Cents and Sensibility Podcast: Nobel Laureate and the OG of monetarism, Dr. Milton Friedman, to talk about the inflation problem. As we wrestle with headline inflation of 7% and core inflation of 5%, it is worth listening to the man whose prescription helped squash the inflation of the 1970s - but whose words today fall on the deaf ears of (supposed) economic sophisticates.

The Inflation Guy walks through this month's inflation number, which reaches levels we could scarcely have imagined just two years ago...and it isn't done yet. It's broader, and faster, and it's 100% policy error. Moreover, it's a policy error that will be very hard to undo - and maybe can't be completely undone at this point.

Can a 27-minute podcast be a substitute for a thoughtful conversation with an inflation-aware adviser? Probably not, but it is a decent first step for an investor who wants to be inflation aware (and wants to be able to discern and avoid advisers who aren't!) In this podcast, the Inflation Guy talks about the current environment and some general implications for navigating an investment environment which will be markedly different over the next ten years compared to what it was for the last quarter-century.

One swallow does not make a spring, it is said. But eventually, enough swallows would seem to indicate a higher probability of spring. In this podcast, the Inflation Guy connects the transitory swallow to transitory price increases and asks, "is it spring yet?"

This month's CPI report was upsetting to the Inflation Guy. The inflation news is getting worse, and there is no longer any mystery that this is not a temporary, one-off problem. Moreover, the cause is clear and we have seen this coming for a while. It's enough to turn one's stomach. The Inflation Guy walks through the number, explains the significance of the pieces and describes what it is about this report that bothers him most.

In this episode of Cents & Sensibility, the Inflation Guy conducts a quick tour of the concept of monetary velocity. Velocity, which is the "V" in the "MV=PQ" equation that is at the heart of monetarism, is oft-maligned and oft-misunderstood. The Inflation Guy explains what velocity is, describes the main drivers of velocity, and suggests why the current setup is potentially concerning for inflation over the next few years.

The Inflation Guy talks about a couple of the salient points from yesterday's CPI report - indications that "Team Transitory" has been routed and sent off the field in disgrace.

Isaac Asimov's character (from the Foundation series, now an Apple TV series) Hari Seldon is a psychohistorian, which basically means he is a macro-behavioral economist. But he has a much better forecasting rate and a much longer horizon than today's economists. Why? What can we learn from Asimov's invention of 'psychohistory,' and are there any hints that group behavior may be more predictable than it seems to be in practice? Yup!

The biggest weight in most inflation baskets is the cost of shelter. Its weight also implies its importance, since measuring shelter wrong means you're measuring inflation wrong! In this episode of Sense and Sensibility, the Inflation Guy explains why "Primary Rents" doesn't rise as rapidly as the change in asking rents, and why "Owner's Equivalent Rent" is a concept that makes sense - and is a very necessary concept for measuring shelter inflation of owner-occupied housing.