RE:Inflation and the Intelligent Investor
Great post as usual TLV. Could I ask you a few questions? Why do you think the 3 month vs. 10 year yield curve hasn't inverted yet? I believe every bear market has been predicted by that since the 1960s. Usually it inverts 9-12 months before. I was wondering if this sell off is mostly from retail investors and if institutions are not in panic mode privately. Much of the sell off has been in high flying retail favourites. What do you make of this incredibly tight labour market? It appears that workers have a lot of edge in negotiations that hasn't been seen in quite some time. The amount of jobs out there is insane. The government has been trying to fill it with immigration and I have personally seen a lot of shift to smaller markets like Northern Alberta and Interior BC instead of to the usual Toronto and Vancouver. The government has an over 2 million application backlog for immigration and is changing the rules in October to make occupations that have never qualified for job sponsorship such as personal support workers, nurses aides and truck drivers. I personally believe, that Canada may break 500k immigrants this year in combo of clearing the backlog, additional job sponsorships and unlimited Ukrainians being allowed. That's a lot of additional cash flow and should cushion any drops in housing. I think a lot of the reason for the labour shortage initially was due to government support programs funded by debt. A more long-term impact was a lot of older people who were close to retirement left early and created a lot of skills gaps. 1957-1965 had a combined 4.5 million people born in Canada and those people are going to be coming up for CPP and OAS soon (not including the hundreds of thousands of immigrants that moved here born in those years). 1959 was actually the year of the most births in Canada ever. Even past that, the population didn't dip below replacement rate in fertility until 1972 so there is going to be a greater share of the population that isn't working and will cause further labour pressure. I think wages will not stabilize for some time. Could this actually be good for the economy as workers make and spend more money? Seniors are still going to buying goods and services so it's not going to lower demand, only supply of labour. On a side note in maybe 20-25 years we might have the opposite problem as these people reach their life expectancy. How far do you think interest rates will go? They aren't particularly scary at the moment being around 2019 levels. That can't be too damaging at the moment. I am very excited about the possibility of eternally unprofitable businesses crashing out of principle but I am unsure if they will even remotely touch the 1980s level. Maybe not even the 1990s level.