MB Fund Podcast – Inflation: Mirage or Oasis?

MB Fund’s Chief Strategist David Llewellyn Smith, Head of Investments Damien Klassen and Head of Advice Tim Fuller discuss if record low interest rates, pandemic level monetary and fiscal stimulus along with surging asset prices translate into long term inflationary pressures

On the agenda:

  • Inflation factors: commodity prices, supply disruptions, structural & cyclical factors
  • Deflation factors: wages. China & expectations
  • How to invest in inflation

View the presentation slides: https://nucleuswealth.com/wp-content/uploads/2021/02/inflation-oasis-or-mirage.pdf

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Tim Fuller is Head of Advice at the MacroBusiness Fund, which is powered by Nucleus Wealth.

The information on this blog contains general information and does not take into account your personal objectives, financial situation or needs. Past performance is not an indication of future performance. Tim Fuller is an authorised representative of Nucleus Wealth Management, a Corporate Authorised Representative of Nucleus Advice Pty Ltd – AFSL 515796.

Tim Fuller

Comments

    • Yes. But I’ve experienced the inflationary period in China from 95-17 and I know what that is like when you don’t get pay rises but your cost of living goes up exponentially. Absolutely brutal. A wonderful standard of living can be eroded away quite quickly. My experience with inflation and fear of inflation is the main reason why I’ve gone down the macro and financial self education rabbit hole, in combination with getting a set of health issues that mean I can’t work full time so therefore I don’t have a get out of jail card that many people have. I refuse to let ignorance turn me into a victim so I educate myself to give myself a fighting chance.

        • OMG so well it’s insane! I’m so so so so lucky. I’m heading off to western Vic and I could not be happier. Contract has been signed, deposit paid and received, got verbal go ahead from bank for the mortgage to go unconditional today and I don’t even need the mortgage, but it’s only 50K so I’ll be able to re-carpet and get panels and a battery and have a very decent emergency/further home improvements fund left over (I had to sell almost all my gold but I kept my silver and a significant chunk of my shares, though I took heaps of profits there, so I’m relieved from that perspective too, the stock market can crash and I don’t really care right now). It’s a double Mt Gambier stone 3 bedroom house on a decent sized block (but not a quarter acre) with heaps of tanks that has been immaculately maintained for it’s whole life (there are straight lines everywhere in this building it’s amazing). According to the building inspector I have ‘hit the jackpot’ for houses of this type and age. The old couple who I’m buying it off are happy to get 10K more than they paid for it a few years ago, and it is under 200K so this financially will save my bacon (you can not understand the existential relief I feel). I put in an offer within 5 hours of it being listed and within 50 minutes of me speaking to the agent (had to get the neighbour who teaches building at Tafe to run his eye over it first and he told me to go for it). I beat an ex Victorian up in QLD by 5 minutes. It’s in a small but not dying town about 30min from a large regional city so it ticks all the boxes I had. I just can’t believe my luck (and that I didn’t need to liquidate all my savings/investments). I had to retract my offer on a place in far east Gippsland because it had major structural problems the family wasn’t aware of (best $1200 I’ve ever spent on those building and pest inspection reports), and then I had an offer on a block of land in the western district but I hadn’t heard back from the REA after 2 business days so I started looking for a plan B and couldn’t believe my eyes when I saw it listed ‘3 hours ago’, I jumped on it and I was right to do so.

          I’ve also just bought a decent second hand car as I was using the olds’ and I can’t believe I have the luxury of looking for furniture and light fittings etc and that I can afford to spend money on a few quality items (like a leather sofa), and that not everything has to be second hand or from Ikea (though I’ve happily bought a fair bit of furniture and a lawn mower from the vendors for a steal though I paid what they asked for, I think they wanted the convenience factor of getting rid of some stuff without any effort). I was seriously getting towards the end of my tether with living with the olds as it has been 4 years. So it looks like all my sacrifice and not spending any money and obsessively educating myself about macroeconomics and finance and investing etc has all paid off because the money my investments made in the past 18 months has meant I could do this. I honestly can’t believe how everything has come together and how fortunate I am. I will personally deliver roses from the garden to the vendors for as long as they’re in the old folks home, I am that grateful.

    • Jumping jack flash

      Not worried at all if it means a return to the conditions of 2007. Prices may have been rising like crazy back then, but wages were too, and that meant that debt was expanding at the correct rate, and that meant that everyone was happy.

      In my opinion they got spooked around 2008 and shut it down right before their debt economy had a real chance to show everyone how it was meant to work. (The “dodgy” NINJA loans were completely natural in a debt economy, and had no risk, but s soon as interest rates rose, they crumbled. They were conveniently used as a scapegoat)

      And theres no losers except for those who dont have inflating wages, like pensioners and so on, but Howard showed us the way, just throw money at pensioners. It can be paid for by rising GST, or stamp duty and you’ll get their vote too.

  1. Don’t look like a mirage to me.
    [
    Australia Price Rise Notification

    Dear valued customer

    Despite a challenging year, Omron Electronics has honoured our promise to maintain current Trade Prices until the end of our financial year – March 31, 2021.

    However, due to added cost pressures we would like to advise that there will be an average price increase of 4% on most Omron products effective from April 1, 2021.

    This modest price rise is due mainly to rising inflation and surging local and global freight costs – two key factors beyond our control. The good news is, we have managed to absorb the bulk of these increasing costs and many new products will have less than the average 4% price rise.
    ]

  2. Steel prices are going up in the shed industry. Could be a sales tactic to get me to “buy now” but the seller really doesn’t seem that sophisticated.

  3. What I’m worried about was that for the last 5 of years I have watched the following:
    – Power bill go up by 4% year
    – Education for little one go up 3.5% year
    – Healthcare cost go up 5.5% year
    – Rent 2% year
    – Food: have not kept track of

    But they tell me inflation is running at about 1.5% over the last 5 years.
    That’s not my experience, but that’s fine – I am not into conspiracy theories.

    My concern now is that they are telling me its going to run a bit hot at 2-2.5% for the next couple of years.
    So if I thought the last 5 years were bad the next couple of years will be pretty horrible.

    • …and by talking openly about it, they’ve given every bugger the excuse they need to hike irrespective of actual need.

  4. alwaysanonMEMBER

    I swear that food/groceries have gone way up. Granted the wife and I used to eat lunches out most days and so going from two meals a day to three and being a bit bored with the WFH would have contributed but we used to spend ~$200 a fortnight at the big Coles/Woolies with maybe one or two $50 trips to the closer little one around the corner or no more than $300/fortnight. I’d say it has almost doubled that a few time lately which seems an insane amount to me for two people. Anybody have real numbers on this? I know it is hard with them messing with the quantities of things as well as the prices etc.

    • Like Cadbury changing the slogan for its ever-shrinking block from “A glass and a half in every one” to “A glass and a half in everyone”. Whatever that means.