17 Huge Reasons for Optimism; Inflation Here to Stay; Rates Won’t Fall! Boy, Was I WRONG!

I have been blogging over and over about the likelihood of a disinflation, deflation and/or a bad recession for over a year now. 

My blogs are based on the opinions of people I cite often such as Jeff Snider, Hugh Hendry, Barry Habib, George Gammon, and Alf Peccatiello.

What About the Other Side of the Argument?

But, last week, economist Dr. Ed Yardeni was on this Wealthion podcast, making a very strong case for optimism and the avoidance of a bad recession altogether.

In addition, many other market analysts who tend to lean a bit to the left, like Scott Galloway (whose commentary I love and never miss), think the Fed and the Treasury are pretty much nailing it, reigning in inflation and avoiding a recession.

So, in today’s blog I am going to illuminate many of the reasons for optimism as well as many of the reasons so many analysts expect inflation to persist.

The purpose is to make sure readers know that I don’t just wallow in Jeff-Snider-Doom-and-Gloom-Land, as I truly enjoy drinking in perspectives from every angle.

17 Huge Reasons for Optimism!

Here are just a few reasons we have to be optimistic both in the near term and the long term, and I include many of Yardeni’s points (from the podcast I linked to above) as well.

1. Manufacturing is returning to the U.S., as spending on new factories hit almost $200 billion (a record) in April alone.
2. New windmill technologies are proving to be amazingly efficient, per Peter Zeihan.
3. Nuclear Power is regaining popularity, and promising unlimited zero-emission energy via either more efficient plants and/or new technologies altogether, e.g. fusion.
4. Battery technology is improving to the point where both solar energy and electric autos will become far more efficient.
5. Fresh water: New technologies are emerging everywhere that will make fresh water far cheaper and more abundant.
6. Some of the candidates for president are actually sentient, sane, literate and/or rational 😊.
7. Inflation is clearly waning.
8. The housing market is not crashing.
9. AI is here and it is likely going to foster a massive productivity boom – creating more jobs than it will ever eliminate (like the computer, internet, and smartphone did).
10. The stock market is on a tear, hitting record highs once again (October’s lows are now distant memories).
11. Biotech, pharmaceutical, and anti-aging tech in general will foster many revolutions on the health front.
12. The U.S. has avoided a recession and is still growing, despite non-stop predictions of a meltdown (a point Yardeni made).
13. The government’s infrastructure and semiconductor spending bills will stimulate the economy in healthy ways (Yardeni point).
14. The labor market is tight, strong, healthy, and growing still (per Yardeni).
15. Baby boomers are retiring and still spending like crazy, fostering surprisingly strong demand for goods, services, and labor (Yardeni).
16. Supply chain bottlenecks that fostered so much of our current inflation are no longer here (Yardeni).
17. Tech innovations like AI are going to keep the entire economy humming and lead us into the “roaring 2020s” (Yardeni’s final point).

No Reprieve From Inflation

And here are a few reasons why many think inflation is here to stay – and why rates won’t fall this year.

1. We still have 30% more liquidity in the economy than we did prior to COVID.
2. We have massively underinvested in energy over the years and will face huge shortages, pushing prices up.
3. The labor markets remain very tight and will only get tighter as baby boomers retire (keeping wages high).
4. China announced that they are going to start throwing stimulus everywhere in an effort to revive its economy (a point Chamath Palihapitiya made in the most recent All-In podcast).
5. The Treasury is going to be flooding the market with bonds now that the debt ceiling crisis is over, and that excess supply of bonds will push up yields and interest rates.
6. Massive government spending and deficits will foster continued inflation – no matter what the Fed says.

What Would Snider Say?

For years, whenever we were confused about anything, we would ask ourselves, “What Would Brian Boitano Do?”

BUT, not anymore, now that Jeff Snider has come to town.

NOW, we all wear bracelets that say: WWSS (What Would Snider Say?)

And Snider would probably say something like this: Holy 2008 all over again, Batman!

He might then point out that we heard similar claims for optimism all the way through August of 2008!

He would also point out that we have a severe liquidity shortage, a looming banking crisis and commercial real estate meltdown, very dangerous cracks in our entire monetary system, terrifying leading economic indicators, cracks in the labor market, inverted yield curves, no record of the Fed ever solving anything with rate increases or cuts, falling energy prices despite severe supply cuts, falling prices everywhere, and numerous signs of a globally synchronized recession (starting with China and Europe already).

Snider would also likely agree with many of the reasons for optimism, but he’d say that they will just not manifest in the short run.

So, the question is who to believe?

I still lean in the Snider camp, as he makes a very compelling case backed up by reams of data in his numerous podcasts.

So… I don’t actually think I was wrong, but again, I am never above clickbait. 😊

Jay Voorhees
Founder | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167