State of Inflationary Confusion

No One Is Average
Hedonic Guesswork
Disinflation Fixation
Dallas, SIC, and San Diego

“Nobody knows anything.... Not one person in the entire motion picture field knows for a certainty what’s going to work. Every time out it’s a guess and, if you’re lucky, an educated one.”

– William Goldman, Oscar-winning screenwriter

On the surface, the film industry and central banking have little in common. Each does its own thing with little regard for the other. But in fact, they’re more alike than either cares to acknowledge.

Film executives must analyze the vast, constantly shifting data surrounding public preferences, make long-term financial commitments that aren’t easy to reverse, and then live with the consequences. Central bankers must do the same. Hollywood execs dress more fashionably, but otherwise they have a lot in common with Fed governors.

There’s one big difference, though: Hollywood’s financial mistakes hurt mainly Hollywood, but the Fed’s mistakes hurt almost everyone. Hollywood executives have their own skin in the game. They live with the financial consequences of their decisions. The members of the Federal Open Market Committee not only have no skin in the game; if something goes wrong, they will blame capitalism and free markets and thereby relieve themselves of the consequences of their own decisions and manipulations. And then they will go on manipulating the markets to far more applause than they deserve, in the attempt to clean up the consequences of their own mistakes.

Let’s be clear. The financial crisis of 2007–08 was the result of Federal Reserve errors and the regulatory failures of government agencies.

When William Goldman wrote, “Not one person in the entire motion picture field knows for a certainty what’s going to work,” he could just as easily have been talking about monetary policy. Nobody really knows what’s going to work, for the reasons we covered last week in “Data-Dependent on Imaginary Data.”

However, if we ask who makes more blockbusters while operating on flawed and limited information, Hollywood wins easily. It has the occasional Gigli or Heaven’s Gate, but the Fed remakes Ishtar every few years and thinks everything is fine.

Today we’ll extend last week’s discussion by considering how twisted inflation data leads to less-than-ideal policies. But first, let me again suggest that you get a Virtual Pass to my upcoming Strategic Investment Conference. We’ve added several new features this year.

• (New) 20+ hours of video recordings: Fine-tune your portfolio for 2018 and beyond with the help of 20+ hours of video recordings from the SIC. The video recordings of each session will be uploaded to the buyers-only website within 24 hours after the event.

• (New) Live video stream from SIC 2018: For the first time ever, you can watch the 20+ hours of presentations and panels LIVE from the conference.

• (New) Submit questions to the SIC speakers: This new function lets you ask the speakers questions in real time. At the end of each session, there is time for Q&A. With your Virtual Pass, you can submit your most pressing questions, and the top-rated questions will be put to the speakers.

• Hassle-free audio recordings: Your MP3 download means you can listen to SIC 2018 anytime, anywhere, and on almost any device.

• Information-packed slide presentations: The speakers’ sessions come with their slide presentations in easily accessible PDF format, so you can peruse key points and data at your leisure. The slides allow you to follow along with the speaker’s presentations and spot key trends of your own. They will be the source of many more investment insights and ideas.

• Transcripts: You will also get transcripts of all presentations and panels taking place. With the transcripts, you can quickly find the key points you are looking for in a presentation.

I wish you could all join us in San Diego March 6–9; but if you can’t, the Virtual Pass will give you some of the same valuable (and fun!) experience. Click here to learn more.

Twenty-five of the world’s top money managers and investment strategists are gathering to discuss how they are positioning their portfolios for the coming market turbulence.

You can watch and listen as they dig deep into the convergence of market-moving events about to hit your portfolio.

Get Access Now!