Inflation is coming, inflation is coming!

Last month I wrote about the distinction between long-term secular inflation and shorter-term cyclical inflation

It has been clear for several months that we are in the middle of a cyclical rise in

The full thread can be reviewed here:

https://t.co/0jBvHOWuHw

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Today's PPI report should have been expected to surprise to the upside as the leading indicators of inflation have been screaming to the upside for months!

Here is the ISM prices paid index, cumulated into a growth rate

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Industrial commodity prices have also seen a major acceleration for months.

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So today's PPI report was in line with the leads, suggesting that we have a cyclical upturn in inflation that is * primarily concentrated in the manufacturing sector *

This is a key point.

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Core PPI showed an increase in year over year terms to nearly 2.5%.

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To be very clear, this cyclical upturn in inflation will continue for the next several months and should not be expected to fall apart imminently

This does not mean the secular disinflationary trend is over. We have had 4-5 of these upturns since 2010. They happen. They fade

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Sticking with the trend of a general manufacturing-based upturn, what else surprised to the upside (shouldn't have been a surprise)...industrial production.

IP growth increased to -1.83% y/y

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Industrial production for manufacturing specifically is almost back to positive growth on a year over year basis.

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Should we expect the manufacturing-based growth and inflation upturn to continue?

Yes.

But remember to differentiate cyclical for secular.

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We're not changing this trend anytime soon.

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TLDR:

Play the cyclical trend. Don't lose sight of the long-term fundamentals.

12/12

More from Finance

I'm lucky to attain financial freedom before 30.

I credit Fintwit for my learnings.

Here's 10 key concepts every investor must know:

1. $$ needed to retire
2. Researching a business
3. Reading annual reports
4. Reading earnings calls
5. Criteria of a multi bagger

(Read on...)

6. Holding a multi bagger
7. Economic moats
8. When to buy a stock
9. Earnings vs cashflow
10. Traits of quality companies

Here's my 10 favourite threads on these concepts:

1. How much $$ do you need to retire

Before you start, you must know the end game.

To meet your retirement goals...

How much $$ do you need in your portfolio?

10-K Diver does a good job explaining what's a safe withdrawl rate.

Hint: It's NOT


2. Research a business

Your investment returns are a lagging indicator.

Instead, your research skills are the leading predictor of your results.

Conclusion?

To be a good investor, you must be a great business researcher.

Start with


3. Reading annual reports

This is the bread and butter of a good business analyst.

You cannot just listen to opinions from others.

You must learn to deep dive a business and make your own judgments.

Start with the 10k.

Ming Zhao explains it

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