Wednesday the Consumer Price Index (CPI) came out +4.2 percent over the past year. Thursday morning the Producer Price Index (PPI), which measures wholesale inflation, was announced to be 6.2 percent. More concerning is the reaction of Richard Clarida, the Federal Reserve vice-chair, who said he was, “surprised.”
Remembering David F. Swensen, the manager of Yale’s endowment and a legend in our industry. There are lots of great investors, most of whom prefer not to be in the spotlight, and Swensen was certainly one of those. I never met Swensen personally, but he influenced Iron Capital all the same.
Great expectations often lead to disappointment. We are in the midst of an economic recovery from the reaction to COVID-19, and expectations are indeed getting great. Today our great expectations could lead to disappointment coupled with inflation.
Right now there is a tug of war going on between people who believe that all this stimulus and the Fed keeping rates low will lead to wonderful economic growth, and those who believe that all this spending on top of easy money will lead to simultaneous high unemployment, high interest rates, and high inflation. What does this mean for the market? That is a good question. When things get uncertain and the market is not sure where to go, bottom-up investors tend to do best.
Lay investors buy the stock of really good companies and hold on to it. That is investing. GameStop is not such a company, and the people buying its stock have no intention of holding it and gifting it to their kids. This isn’t investing, it is trading, and there is a huge difference.
