Why I think inflation – and the worries about it – have peaked; Interview about my market outlook, Tesla, meme stocks, and cryptocurrencies; Charlie Munger meeting on Wednesday; Charlie Kelly Slater is the GOAT among GOATs
1) Another month, another scary headline about inflation, like this one in yesterday's Wall Street Journal: U.S. Inflation Rate Accelerates to a 40-Year High of 7.5%. Excerpt:
A relentless surge in U.S. inflation reached another four-decade high last month, accelerating to a 7.5% annual rate as strong consumer demand collided with pandemic-related supply disruptions.
The Labor Department on Thursday said the consumer-price index – which measures what consumers pay for goods and services – in January reached its highest level since February 1982, when compared with the same month a year ago. That put inflation above December's 7% annual rate and well above the 1.8% annual rate for inflation in 2019 ahead of the pandemic.
As you can imagine, my colleagues and I have been having plenty of spirited debates about inflation. One of them sent out this update yesterday morning:
Inflation grew 7.5% versus the 7.3% expectation and December's 7% gain.
Core numbers were up 6% versus the 5.9% expectation and December's 5.5% increase.
Expectations are beginning to build on Wall Street for inflation to peak in the February to March window.
Brokerage firm Morgan Stanley (MS), which has been a bear on stocks, said it anticipates an inflation slowdown while growth surges once more, starting in the second quarter.
So, the "whisper" expectations were for today's CPI number to underwhelm.
That's quite a shift from just one week ago.
The question now is whether that level of conviction can hold for the next couple of months to see whether the numbers really do turn.
I replied:
Mark my words: this is the peak of inflation and associated worries about it.
U.S. COVID-19 deaths peaked in the last two weeks of January 2021 (source):
Not surprisingly, everyone was staying home and the economy was very weak.
So it's not at all surprising that year-over-year inflation was high last month, with a white-hot economy comping over that.
But look at how quickly deaths per day dropped – not coincidentally as vaccinations became widely available. This chart shows cumulative doses per 100 Americans over time, beginning in January 2021 (source):
As the pandemic retreated, the economy took off and has never looked back.
Therefore, the year-over-year inflation comps are going to change radically, starting almost immediately.
By itself – even before you factor in getting supply chains sorted out and other short-term factors – this will bring reported inflation down a lot.
2) A couple of weeks ago, I was a guest on the Money Life with Chuck Jaffe podcast. In our 28-minute conversation, which you can listen to here (starting at 30:55), we discussed my market outlook, Tesla (TSLA), meme stocks, and cryptocurrencies.
3) As the greatest investor of all time, Berkshire Hathaway (BRK-B) CEO Warren Buffett rightly gets a lot of attention.
But his partner for the last half century, Charlie Munger, is a deep thinker/philosopher and an investing legend in his own right. (One of the highest honors of my life was being a contributor to the definitive book about him, Poor Charlie's Almanack: The Wit and Wisdom of Charles T. Munger.)
Munger has never been as much of a public figure as Buffett, and that's especially true now that he's 98 years old, so there are only two times each year where you can count on hearing him speak. Everyone knows that he shares the stage with Buffett at the Berkshire Hathaway annual meeting in Omaha (which takes place this year on Saturday, April 30 – see my recent e-mail for insider tips), but Buffett does most of the talking there.
An even better – and lesser-known – opportunity to hear only from Munger for a couple of hours is at the Daily Journal (DJCO) annual meeting, when more than 1,000 hard-core Munger fans like me usually attend in Pasadena, California. But because of the pandemic, this year it will take place virtually this coming Wednesday, February 16 at 1 p.m. Eastern time.
Yahoo will be livestreaming the event worldwide, so to watch it simply go to www.yahoofinance.com.
If you want to ask Munger a question, you can send it in advance (no later than 8 p.m. Eastern time on Monday) to CNBC journalist Becky Quick at DailyJournalQuestions@cnbc.com.
4) Quarterback Tom Brady's retirement generated lots of well-deserved discussions about whether he wasn't just the greatest of all time ("GOAT") in football, but the GOAT in any sport.
Well, I'd make an argument for surfer Kelly Slater, who last weekend, just days before his 50th birthday (which is today), won his eighth Billabong Pipeline Masters, the most renowned surfing event in the world. Here's a picture from one of his rides (you can watch a video of the full competition here):
Slater defeated a rider less than half his age. Here's a picture of them:
Brady's rookie season was in 2000, while Slater joined the professional tour in 1990 and became the youngest world champion at age 20 (he was also the oldest at age 39).
Since then, Brady won seven rings, far more than his closest competitors, quarterbacks Terry Bradshaw and Joe Montana, with four.
But Slater is an 11-time world champion, with the next closest at only three!
Best regards,
Whitney
P.S. I welcome your feedback at WTDfeedback@empirefinancialresearch.com.