Friday Haymaker
LVG on Haircuts & Inflation
Hello, Readers!
For those of you not joining us for today’s Ask Haymaker Anything! webinar — and even if you are — we wanted to provide you with some thoughtful written commentary. For this Friday’s Haymaker, we are once again running an article from one of our most dedicated and talented allies, Louis Gave.
In our view, his piece provides an excellent perspective on inflation and what the more accurate rate might be for consumers in their everyday lives. As you will see, it’s a very simple measure. One could argue that it is the inflation equivalent of the Big Mac Index that evaluates the purchasing power of various leading currencies using McDonald’s iconic—and very internationalized--burger.
Maybe part of our affinity for this article is because, as you may know, we’re big fans of Vincent Deluard, whose work is heavily quoted in this note. But we also think Louis Gave’s contributed logic is spot-on.
Donald Trump’s proposed policies are almost certain to make the underlying inflationary impulses even stronger and more durable. However, should they trigger a global tariff war, that may lead to a serious recession and at least temporary deflation. That’s not the most probable outcome but it is a non-trivial risk.
Despite rampant Trumphoria, we’re sticking to our overarching thesis that the next four years are likely to be volatile and chaotic. If so, that could create some compelling investment opportunities when the present hyper-optimism collides with hard reality.
Warmly,
David “The Haymaker” Hay
The Drivers Of US Inflation
Louis-Vincent Gave
In 2018, Donald Trump decreed that no one would be allowed to sell high-end semiconductors to China any more. This came as an electroshock to the Chinese leadership, which had perhaps overlooked the country’s dependence on semiconductor imports. From that point on, China not only accelerated the development of its own semiconductor industry (clumsily at first, lately with more success), it also sought to ensure its self-sufficiency in pretty much every other important industrial input. If the US could ban semiconductor shipments today, tomorrow it could be chemicals, essential metrology equipment or jet engines.