The Dow has dropped four times in a row for the last weeks and the VIX is close to 32, signs of recession are appearing and the conflict in Europe is causing a sour mood.
Ed What do you have to write about this morning’s Ukrainians? Ukraine and the fresh Iron Curtain. You’re definitely right. In many ways, this is another Cold War. The first concluded in 1989. It was 1989 when the Berlin Wall came tumbling down and there was a great deal of concern back then would result in increased inflation and more interest rates. The idea was that the people who suddenly had access to commodities, and thus need to take out loans. Instead, we saw a huge quantity of global competition which has actually decreased the rate of inflation, bond yields and interest rates came down nicely. But the flip side of that the question is whether it is the case of a Cold War too I don’t believe that the term “cold war” is relevant here since it is a cold war with globalization, which is certainly at risk. This implies that the forces of inflation that we’ve witnessed here are receiving a second boost from the complicated geopolitical situation. This is evident through soft and hard sanctions. Also, the concept of limiting the flow of funds that hurt Russian and Russian balance accounts. Do you see evidence to support this strategy? be successful. I do actually. I believe there are sanctions that I think serious enough to have an effect immediately. You have to watch the currency very closely. Tom I’m sure of it. The depreciation of the ruble is a crucial indication of the extent of trouble is the Russia economies are suffering. We’ve also witnessed interest rates increase. Inflation will continue to climb. They’ve been effectively separated from the world. Russia is now an outcast for imports and exports. Perhaps with the exception of oil, but this isn’t scenario as we witness by the rising oil prices. Therefore, clearly Russia’s to other countries have been cut off in a significant way. That’s the other part of the globe I am interested in discussing. There’s a consensus that’s emerging in the market for commodities and the best way to beat oil is via demand destruction. If that’s what’s happening on the market for oil, what is your opinion on in the market for equity if you believe that demand destruction is the only way to go. What does this mean regarding earnings estimates for GDP estimates for the coming year. It’s because difficult to manage this crisis in the geopolitical sphere and integrate any type of theory or model of where this all is going. It seems that the majority view of the markets for equity is that this will also come to pass, and the pain on both sides is amazing that they will reach some kind of deal that can be negotiated. In addition, as you mentioned, they’re scheduled to meet today for the second time. But I believe it’s far too early to say that there will have a negotiation. However, I believe there is going to be. I believe that the market’s consensus is on this. However, that doesn’t mean that all these sanctions will go away. They aren’t going to disappear. Therefore, I believe for the stock market , this is probably the ideal scenario currently based on the information I have gathered. It takes us from what appeared to be an inflationary surge over the past two months to something that is more like Stagflation. This means slow growth and higher inflation. In addition, there is the same pattern that was seen in the 1970s. As we’ve seen from all the Fed’s talks about the tools they use to reduce inflation. The only tool I am aware of is the possibility of raising rates to that trigger the possibility of a recession. However, this Fed isn’t going to make that happen. Therefore, I believe we’ll have to have an increase in inflation and higher interest rates that aren’t likely to plunge the economy into recession anytime soon thanks to this Fed. I believe that the market will decide which side is winning and which loses in this kind of climate. This is why flash energy should be taken into consideration in this kind of environment. This is still subject to the possibility for some growth. Does the bond market , given this scenario seem reasonable to you, given its fact it will allow inflation over the long term to rise much more. The bonds market hasn’t made sense to me longer than a year. At the start of the year, I believed we’d reach 2 percent by the end of the year, and it appears that we’re be moving to the right path. We hit one-point seven percent mark in March, but then went down , and then hovered between one and five percent. With inflation at 5-6-7 percent, depending on the inflation rate you are looking at, the yield on bonds is extremely low. The yield should have to be minimum 2 percent, at the very least two and half percent. The old one was slightly higher, but something has changed in this case. Go ahead. You know, I was watching Jay Powell yesterday in his testimony and he stated that he thinks the possibility of a soft landing is likely and more frequent than a lot of people thought previously. Does that sound like a fact. It’s true that the 70s were a long time back. The only parallel I’ve found between the current situation and the past is the 70s. There are a lot of events are just a mix with bad luck as well as poor decision making. This certainly could be the case with the current climate of poor luck and bad policymaking. In addition, geopolitics. However, even in the 70s, geopolitics was a factor due to the two shocks to our energy that proved highly inflationary. They caused inflation in wages. I’m worried about a price increase for wages. There’s definitely evidence to suggest this. I hope that we can be able to get out of this terribly geopolitical mess and find this productivity that is the biggest positive aspect here that makes a massive return. While in the 70s productivity plummeted. I’m betting on that.