Inflation no longer labeled as “transitory”

Greetings WSB Holders,

I wanted to discuss some notes with the community that I think are worth sharing.

In testimony before the Senate last week, Federal Reserve chair Jay Powell said he no longer sees inflation as “transitory”, and expressed support for the central bank’s large bond-buying programme being reduced sooner rather than later.

What will be interesting to see here is whether this is taken into account for November’s consumer price index data, which is due to be published on Friday.

The U.S. consumer price index (CPI) rose at its fastest pace in more than 30 years in October (+6.2% y/y). The main CPI, which excludes the volatile food and energy prices, was up 4.6% y/y last month.

Although the CPI is not the greatest measure for inflation I have charted this below in comparison to the Macro Hedge ETP, among the Harmonised Index of Consumer Prices and the Euro Area Inflation Rate.

The Harmonised Index of Consumer Prices (HICP) is used to measure consumer price inflation in the eurozone. This refers to the change in the pricing of consumer goods and services consumed by households in the eurozone over time.

The Euro Area Inflation Rate is calculated using the weighted average of the Harmonised Index of Consumer Price (HICP) aggregates.

I will update these charts and run this analysis monthly as and when the public data is available. I think it would be a good addition for the community to monitor.

Inflation is not always well understood, as some think it is the CPI. The CPI is the rate at which a market basket of consumer goods is going up but the government gets to pick the basket.

In that regard, inflation could be seen as a vector. So perhaps you could set the rate to the desired outcome of purchasing power or wealth? I think it could be good to discuss what other inflation vectors could be included in the Macro Hedge ETP as liquidity and future tokenized products increase in the market.

I think the Macro Hedge ETP could benefit from further diversification with the likes of NZDs, XSGD and similar fiat stables but I’ll write up a standalone post and analysis on this next week.

For now, I will leave this second chart I recently made while exploring these new ETPs offered by WSBdApp. The chart shows daily returns of the Macro Hedge ETP in comparison with the S&P 500 and Gold, year to date 2021.

If anyone has any requests to create some other comparisons please comment below.

Cheers

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This is great stuff @HardDrive - thanks for the detailed and thorough work!

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As I’m sure you saw with Michael Saylor on Tucker Carlson; Saylor describes inflation exactly as you do. Inflation depends on the market you are studying, basically. There are many metrics. Thank you for this analysis, Hard Drive.

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I’ve realized after reading your post and letting this project sink in that we need to advertise our product makers and their analytic abilities as early as possible.

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Hey @ChaseX Chase, thanks for the reply. I have not seen the Tucker and Saylor interview yet but will endeavour to watch it , and perhaps add to this post with further insights afterwards.

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