>> WELCOME BACK.
WE ARE ALL FEELING THE PINCH OF
INFLATION RIGHT NOW.
PRICES ARE RISING FROM GASOLINE
PAYING AT THE PUMP TO CLOTHING,
GROCERIES, JUST ABOUT EVERYTHING
WE BUY HAS GONE UP A LITTLE BIT
BECAUSE OF THIS INFLATION.
AND NOW WE ARE SEEING THE
GOVERNMENT TRYING TO COMBAT THAT
BY RAISING INTEREST RATES.
WHAT DOES IT ALL MEAN?
WELL, JOIN ME TO TALK ABOUT THAT
IS PULICARE TO THE BUSINESS
EDITOR AT BRIDGE MICHIGAN.
MANUAL PENNYCOFF’S ECONOMIC
FORECASTER AT THE UNIVERSITY
MICHIGAN.
AND DIDN’T BROUHAHA IS PRESENT
AND PORTFOLIO MANAGER AT
SCHWARTZ & COMPANY INVESTMENT
ADVISORS.
GOOD MORNING, THANKS FOR JOINING
US ON GO I FEEL LIKE INFLATION
IS SOMETHING REALLY PEOPLE HAVE
HAD TO DEAL WITH FOR A WHILE,
MAYBE A COUPLE DATE -- MAYBE A
COUPLE DECADES.
SO I WANT TO START WITH HOW DID
WE GET HERE, AND I THINK YOU ARE
ALL QUALIFIED THE ANSWERS, AND
LET YOU JUMP IN.
BUT LET ME START WITH YOU, NEAL,
IS IT TOO SIMPLISTIC HERE TO
LOOK AT THIS AS A RESULT OF THIS
INFLATION IS A RESULT OF THE
GOVERNMENT KIND OF FLOODING THE
MARKET WITH ALL THAT MONEY THAT
CAME DURING COVERAGE?
IS THAT PART OF IT?
>> I MEAN, IT WAS DEFINITELY
PART OF BUT I THINK TO BRIEFLY
SUMMARIZE IT IS DUE -- DUE TO
THE PANDEMIC, AND THAT INCLUDES
THE PUBLIC HEALTH CRISIS ITSELF,
BUT ALSO MANY OF THE POLICIES
THAT WE IMPLEMENTED TO ANALYZE
THE CONSEQUENCE OF THE PANDEMIC.
SO, I MEAN, IT’S OBVIOUS THAT
THE MONEY THAT THE GOVERNMENT
GAVE THE PEOPLE HAVE SOME THE FUEL INFLATION BUT ALSO A LOT OF
FUEL INFLATION BUT ALSO A LOT OF
PEOPLE WHO DO NOT GET ANY HELP,
PEOPLE ON THE HIGHER END OF
INCOME DISSIPATION COULD NOT
SPEND THEIR INCOME FOR TWO YEARS
AND SAVED A LOT.
AND THAT OVERHANG OF SAVING ALSO
MAKES PEOPLE SORT OF TOLERATE
INFLATION A LITTLE BIT MORE THAN
THEY NORMALLY WOULD HAVE.
SO, I MEAN, INFLATION IS A
COMPLEX PHENOMENON.
THERE IS A COST PUSH, THINGS ARE
GETTING EXPENSIVE BECAUSE SUPPLY
CHAINS ARE BROKEN.
THERE IS AN INCOME EFFECT
BECAUSE PEOPLE HAD PLENTY OF
MONEY.
BUT THERE IS ALSO A SOCIAL
ASPECT.
PEOPLE ARE MORE ACCEPTING OF
CHRIST INCREASE BECAUSE IT IS
FOR A WHILE WE KNEW THE
SITUATION WAS UNPRECEDENTED, AND
THEY SORT OF WERE OPEN TO
BUSINESSES THAT HAD TO DEAL WITH
COVID AND SURVIVED COVID.
IF THEY WERE OPEN TO SEEING A
LITTLE BIT OF PRICE INCREASES.
BUT ONCE PRICES GET GOING THEY
CAN BE HARD TO EXTINGUISH.
AND MEETING INFLATION HAD ITS
OWN MOMENTUM.
>> YEAH, IT IS COMPLEX FOR SURE.
PAUL, LET ME ASK YOU.
WE SAW THE FED RAISE INTEREST
RATE THIS WEEK I BELIEVE FIVE TO
SIX MORE HEIGHTS ARE EXPECTED.
WHAT IS YOUR READ ON WHERE IT IS
HEADED AND ARE POLICY LAWMAKERS
IN THIS?
>>> WE WILL SEYMORE INTEREST
RATE INCREASES FOR THE REST OF
THE YEAR YOUNGER THAT IS EVERY
PREDICTION THAT I’VE SEEN, SOME
PEOPLE ARE SAYING THAT IT MIGHT
NOT EVEN END THIS YEAR, THAT IT
COULD KEEP GOING WRONG I’M NOT
SURE EXACTLY HOW HIGH IT WILL GO
GO.
AND DANIEL MAY BE THE BETTER
PERSON TO ASK ON THE FORECAST.
IT DOES SEEM THAT THE STATE IS
IS -- WHEN IT COMES TO ELECTED
OFFICIALS, WHAT KIND OF POWER
YOU HAVE OVER INFLATION?
THEY CAN -- I THINK POLITICALLY
EVERYONE TO HELP THE AVERAGE
CONSUMER SPEND LESS, BUT ON A
PRACTICAL LEVEL THIS IS A GLOBAL
PROBLEM.
WE’VE GOT GLOBAL INFLATION.
THERE’S A LOT OF VOLATILITY.
GAS PRICES IS ONE EXAMPLE.
YOU KNOW, THIS IS AN
INTERNATIONAL COMMODITY, AND NO
MATTER WHAT WE WANT, STATE OR
FEDERAL OFFICIAL TO DO ABOUT IT,
IS GOING TO DO ITS OWN THING.
>> I WILL COME BACK TO YOU WHEN
I GET TO DO YOU THINK SUSPENDING
THE GAS TANK HAPPEN OR COULD
HELP ALL THAT MUCH.
>>> BUT, DAVID, I WANT TO
BRING YOU IN REAL QUICK.
IS IT POSSIBLE TO RAISE THE
INTEREST RATE WITHOUT CRASHING
THE STOCK MARKET?
I KNOW WE’VE SEEN THIS IN 2018.
THIS, WE TRIED TO RAISE THE
RATES MUST ACT TO DIVE AND THEN
PRESIDENT TRUMP SAID NO, NO,
BRING IT BACK DOWN TO AVOID THAT
THAT.
WHAT DO YOU SEE HAPPENING HERE?
>>> THAT’S CORRECT.
OF WHAT MATTERS MORE THAN THE
CHANGE IS THE RATE OF CHANGE.
AND IF THE FEDERAL RESERVE,
ALTHOUGH IT IS ESSENTIAL HIS
BODY AND THEY ARE LOOKING
BACKWARD TRYING TO GUESS, RAISES
RATES AND TELEGRAPHS WHAT THEY
ARE GOING TO DO, AND THEY DO IT
IN A LOGICAL CALM MANNER, IT
WON’T AFFECT THE STOCK MARKET
THAT BED.
WHAT YOU DON’T WANT TO HAVE
HAPPEN IS WHAT OCCURRED IN THE
NIGHT TEAM 70s FOR THE END
WHEN THE CARTER ADMINISTRATION DID WAGE AND PRICE CONTROLS AND
DID WAGE AND PRICE CONTROLS AND
TRIED TO CLAMP DOWN ON IT.
THE CAPITALIST SYSTEM IS
WONDERFULLY DYNAMIC.
AND AS LONG AS YOU ALLOW
CONSUMERS AND BUSINESSES TO
ADJUST THE PRICE INCREASE,
BECOME MORE EFFICIENT, FIND
BETTER WAYS TO DO THINGS,
SUBSTITUTE GOODS AND SERVICES,
GLOBALIZATION HAS HAD A
WONDERFUL DOWNWARD PRESSURE ON
PRICES.
BECAUSE, AS WE USED TO SAY, IN A
GLOBAL ECONOMY YOU’RE ONLY AS
PROFITABLE AS YOUR LEAST SAME
COMPETITOR.
SO YOU CAN ONLY RAISE PRICES
UNTIL SOMEBODY OVERSEAS OR THE
UNITED STATES FIGURED OUT A
BETTER WAY TO DO THINGS AND
LOWER PRICES.
UNFORTUNATELY YOU HAVE A PERFECT
STORM AS DANIEL MENTIONED WITH
RESPECT TO FEDERAL POLICY AND
MUCH OF 2020.
THE FEDERAL RESERVE PLEDGED
$5 TRILLION TO PUT INTO THE
SYSTEM TO SAVE THE ECONOMY.
TWENTY-ONE, THE BY DEMONSTRATION
PAST TWO BIG SPENDING BILL,
$1.9 TRILLION EACH.
CONGRESS DISPATCHED ANOTHER
SPENDING BILL.
SO YOU ARE PUSHING $8 BILLION,
IT-NITRATE AS AN ECONOMY THAT IS
ONLY 220 TOTAL.
SO MILTON FRIEDMAN SAID IT BEST:
INFLATION IS, ABOVE ALL, A
MONETARY PHENOMENON.
AND WHEN YOU PUT A LOT OF MONEY
INTO THE SYSTEM, COMMODITIES GO
UP, SO YOU GET FEDERAL POLICY,
HE GOT SUPPLY CHAIN SHORTAGES.
ALSO YOU HAVE ALMOST A SUPER
CYCLE IN COMMODITIES BUT I CAN
REMEMBER BACK IN 2020 GUESSES
ABOUT $12 A BARREL FOR OIL
RATHER I GOT UP TO $125 AND HAS
COME BACK SINCE.
SO THERE’S A LOT OF DYNAMICS BUT
WE WILL BE FINE AS LONG AS A
TELEGRAPH THIS.
IS ALREADY PRESENT TO MUCH THE
BOND MARKET, AND WE STAY
COMPETITIVE.
>> YOU KNOW, YOU MENTIONED TO 70
70s, AND I THINK IT’S BEEN A
LONG TIME SINCE THINGS GOT
REALLY BAD WHEN YOU THINK ABOUT
GENEXERS AND MILLENNIALS, THEY
DON’T REMEMBER THAT BUT THEY DO
THIS ARE 80 -- ARE ABLE TO LOOK
AT THEIR FOUR O ONE K OR THEIR
INVESTMENTS, AND SEE THAT THEY
HAVE TAKEN A DIP RECENTLY.
REAL QUICK, DAVID, A REAL QUICK
ANSWER, IS THE ADVICE THERE IS
ALWAYS IS TO NOT PANIC, STANDPAT
WHEN IT COMES TO THAT SORT OF
THING?
>>> WELL, FOR MY INVESTORS, MOST
OF THEM ARE RETIREMENT PLANS OR
LONG-TERM FIVE YEARS OR MORE.
THIS IS PART OF WHAT STOCKS AND
BONDS DO.
THEY GO UP AND DOWN.
HUMAN SAVING FOR A CAR OR HOUSE
AND YOU GET MONEY INVESTED AT
TWO OR THREE YEARS THAT YOU’RE
GOING TO NEED TO HE MAY WANT TO
REEVALUATE THAT, BECAUSE RIGHT
NOW YOU GET HEADLINE RISK WITH
RUSSIA.
YOU REALLY DON’T KNOW WHAT
VLADIMIR PUTIN IS GOING TO DO.
>> RIGHT.
>> AND UNTIL THIS SOMETIMES,
AGAIN, THERE’S A BIT OF HEADLINE
RISK IS GOING TO IMPACT YOUR
PORTFOLIO.
DANIEL HOLLIS YOU THINK IT WILL
LAST BEFORE WE ARE ABLE TO
DEFLATE THE ECONOMY A LITTLE BIT
BIT, IF YOU WILL.
>> RIGHT, THE HARDEST QUESTION.
I THINK THE RANGE OF PROJECTIONS
IS VERY WIDE.
I THINK OUR CENTER POINT
EXPECTATION IS THAT MAYBE IT
GETS A LITTLE WORSE MAYBE UNTIL
EARLY SUMMER BEFORE INFLATION
STARTS TO SUBSIDE.
BUT, AS I SAID, THERE ARE LOTS
OF RISKS RIGHT NOW.
SO COVERT IS NOT DOWN GLOBALLY,
SO THERE ARE WAVES IN ASIA AND
CHINA AND MAYBE WAS SETTING IN
EUROPE THAT MIGHT COME HERE TO
ITS MATE INTRODUCE MORE
DISRUPTIONS TO SUPPLY CHAINS.
GEOPOLITICS CAN PLAY A HUGE ROLE
ROLE, SO THE BIG UNKNOWN IS
WHAT’S GOING TO HAPPEN WHETHER
CHINA BASICALLY JOINED THE REST
OF THE WORLD IN TERMS OF
ENFORCING SANCTIONS ON RUSSIA OR
NOT.
AND IF THEY DON’T, WHAT KIND OF
RESPONSE THAT WE SEE FROM THE
WHITE HOUSE.
SO THERE MAY BE MORE
GEOPOLITICAL RISK TO THE GLOBAL
SUPPLY CHAINS DOWN THE ROAD
LATER IN THE YEAR TO COVER OUR
CENTER POINT PROJECTION IS
BASICALLY -- RELIES ON WHAT
HAPPENED ALREADY, SO A SPIKE IN
OIL PRICES, BUT ALSO THE WAY THE
GOVERNMENT MEASURES RENTS.
AND I LOVE THAT IS ALREADY BAKED
IN.
SO WE ARE HOPING THAT INFLATION,
YEAR-OVER-YEAR INFLATION, MOBILE
PEAK BY SOMETIME THIS SUMMER AND
THEN SUBSIDING BY THE END OF THE
YEAR.
>> GOOD.
LIKE YOU SAID, A LOT OF
EXTRACTORS.
WHERE THE GOVERNOR TALK ABOUT
POSSIBLY BE DOING THE --
DEPENDING ON THE GAS TAX THAT IS
PAID BY THE REPUBLICAN-LED
LEGISLATURE.
WHAT IS YOUR READ ON THAT?
DO YOU FEEL LIKE THAT’S GOING TO
HAPPEN, OR IS SHE GOING TO KEEP
PUSHING FOR FEDERAL GAS TAX
SUSPENSION.
>> DEPENDING ON WHO YOU TALK TO
THEY’RE GOING TO BE A BENEFIT OR
THERE WON’T BE.
YOU KNOW, THIS IS JUST LIKE ONE
AREA WHERE SOMEBODY HAS -- WE
KIND OF LATCHED ONTO THIS
POTENTIAL SOLUTION.
WHAT OTHER PEOPLE ARE SUGGESTING
OTHER THINGS.
I THINK ULTIMATELY WHAT WE HAVE
TO RECOGNIZE IS ANY KIND OF A
GAS TAX HOLIDAY OR WHATEVER, YOU
KNOW, HOWEVER THIS SUMS UP, IT
IS NOT A LOT OF MONEY, AND WE’VE
GOT THAT ON THE OTHER HAND WE
HAVE A LOT OF PEOPLE WHO CANNOT
AFFORD THE GAS TANK AND
SOMETHING GETS A LITTLE MORE
PARTICULAR TO WHO IS INFECTED
AND ACTUALLY YIELDS SOME SORT OF
SIGNIFICANT LEADS TO THEM I
THINK WILL BE THE END SOLUTION,
OR AT LEAST THE MOST DESIRABLE
SOLUTION.
>>> BUT IN THE MEANTIME THERE
ARE SO MANY BUSINESSES WHO ARE
LOOKING AT THESE PRICES AND NOT
BEING ABLE TO MAKE A DECISION
ABOUT HOW TO OPERATE OVER THE
COMING MONTHS, BECAUSE THEY DO
NOT WANT TO CAUSE ARE GOING TO
BE, FOR TRANSPORTATION, FOR
PRODUCT OFFER SO MANY THINGS.
EVEN EMPLOYEES WAGES.
SO I THINK IT’S NATURAL IN
MICHIGAN TO TALK ABOUT WHAT HAS
BEEN PROPOSED AND LOOK AT WHAT
EACH PARTY IS DOING.
>>> HOWEVER, IN A BIGGER
PICTURE WHAT WE ARE TALKING
ABOUT IS FAIRLY MINIMAL AND, IN
MY OPINION FROM SOME OF THE
PEOPLE I TALKED TO.
>> MARKET AND WILL SOLICIT WITH
THE GOVERNMENT DOES IN THAT
REGARD.
BUT OBVIOUSLY SO MANY FACTORS AT
PLAY HERE.
AND IT IS CERTAINLY A COMPLEX
ISSUE, AND THAT’S WHY WE BROUGHT
IN THE BEST.
SO I WANT TO THANK ALL OF YOU
FOR JOINING US THIS MORNING ON
FLASHPOINT TO TRY AND HELP
PEOPLE LEARN ABOUT IT A LITTLE