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Real Talk

Q: The daily headline in the media is “Inflation, Inflation, Inflation.” Are there any signs of relief in sight?

1.) Inflation Trends

a. Supply Chain

i. PMI

ii. Los Angeles -# of ships waiting

iii. Discounting by Majors – TGT, WMT, Nike

b. Labor – Unemployment Rate

c. Rents and Housing - new multi-family starts (record)

Q: We hear the term “Stagflation” daily in the business media. What does it mean and is it a threat?

d. Stagflation- Inflation and Recession simultaneously

i. Inflation – as indicated, looks to have peaked

ii. Employment – still looks strong, but new layoff announcements are a concern

iii. Economy - likely entering a recession if not already in one

Q: In the Great Recession, there was a financial crisis – the banks didn’t have enough cash or capital. Is that a threat in today's world?

2.) Bank Liquidity

a. Money Center Banks

i. Reverse Repo usage – High and rising

ii. M2 Money – was high (enabled inflation) but now M2 growth is low and going down

b. Shadow Banks

i. Private Equity marketing – Haven’t seen pricing resets yet, nor have yields gone up with interest rates

Q: Most other central banks are hiking interest rates. The European Central Bank seems to be hesitating. Is this a problem?

3.) European Central Bank

a. Current Rates

i. Inflation - high

ii. Rate hikes – hesitant because some countries are quite weak (Italy, Spain) while others are strong (Germany) – they need different policies (strong argument to go back to a central bank for each country and separ