Tom’s Predictions about Predicted Inflation Timeframe
Transcript:
Easan Arulanantham:
How long do you see like this higher inflation continuing for?
Tom Vaughan:
Well, what happens, of course, is that you’ve got this shockingly fast delivery of a vaccine, really, historically, very, very fast. I read an article once and said, the fastest vaccine development in history was four and three quarters years, the average was 10 and a quarter. And we were actually giving people shots of this new vaccine within nine months after, you know, started the development. So that’s, that’s a modern day miracle. And then it’s been rolled out fairly quickly. And so here in the US, especially, we’re seeing their reopening come very quickly. And you’ve got companies that really couldn’t keep up there. And they shouldn’t, right. I mean, why would you have millions of rental cars if your rental car company if nobody was going to use them. And then all of a sudden, you need millions of rental cars, and now you’re running around the rental car companies are actually buying cars on the used car market, because they’re running out of cars.
And so what normally happens, though, is that there’s just so much profit. So if the if you were renting a car for $60. And now you can get 500, you know, all of a sudden you find new cars you go out. And so once a supply starts to kind of match the demand, but the demand in my opinion is going to exponentially grow here, I think this summer is going to be really hot. But you have to take a look at the whole world, not just the US when you really want to see a situation that gets super tight, you need to look at the whole world. Because what we’ve seen is every time you know we have this inflationary fear that comes in the yields on the bonds come up the market struggles in that environment. But then we see a lot of buying coming into those us bonds. So when the US Treasury 10 years at 1.7%. And the German equivalent of that is that, you know, negative point, one, two, and the Japanese equivalent to that is at point one, you know, people are gonna buy us bonds.
But eventually, as all of these countries start to experience more reopening, that will continue. So we’re going to see kind of phases here in the US. And then other countries as they start to roll through this vaccine. I wouldn’t be surprised if this doesn’t last a year, some things will be different, like we’re already seeing some pullback in lumber prices, it went up four times, you know, the value in total. And so you know, if you can get four times more money for lumber, you’re going to desperately if you sell lumber, you’re going to desperately try to find more. And eventually you will.
Because, you know, just so profitable. And then of course that supply starts to come online, and starts to drop those prices down. And so we’ve seen lumber come down. I don’t know where it ended up today yet, but it was down today, when I looked earlier, you know, four days in a row, the price of lumber has come back down some so and that’s true of all of these things, you know, when there’s this huge price, all of a sudden companies find, you know, some supply, and they really push hard because it’s just massive profits. potential. So yeah, I suspect that this will go on for a while. Having said that, I think that there’s a chance here that inflation fits sort of in this Goldilocks window where it’s not too high, and it’s not too low. And we might be able to see a stock market that does okay, because inflation means higher profits and higher revenues.
I mean, it’s a growing economy. And the weirdest part about inflationary problems is that you can have an economy that’s too good, which makes the market you know struggle, mainly because they’re worried that the Fed is going to come in earlier than expected and start to ease off on their bond purchases and start to raise their interest rates. So yeah, it really kind of depends on the you know, situation, but I suspect the 12 months wouldn’t surprise me at all.