Mr. Roach was the longtime chairman of Morgan Stanley Asia and, although we've sometimes disagreed on specifics, he is always worth reading. Over the last month or so he has said he is less worried about inflation than he is about a dollar collapse—which of course would lead to some inflation in the price of imported goods.
Our current scenario has the dollar spanking the shorts before resuming the downtrend in the DXY from last year's 102.99 to the current 91.87. For what it's worth we were able to get on board the bullish love train from the 89.21 low at 89.70 back in January. However the day we pointed this out, March 8, the upmove stopped cold. Key takeaway: kids don't try this at home and especially don't do it out in public where everyone can see.
From CNBC, March 8:
‘Significant long-term scarring’ in services will limit pent-up consumer demand and suppress inflation, economist Stephen Roach predicts
Economist Stephen Roach said Monday he believes Wall Street is overestimating a consumer comeback.
According to the Yale University senior fellow, demand will snap back like a rubber band later this year as the V-shaped recovery loses momentum.
“With vaccines rushing out together with a lot of stimulus, you can just sense this instant gratification of a long-deferred pent-up demand,” Roach told CNBC’s “Trading Nation.” “But as I look at the numbers, you know, most of that surge has probably already occurred.”
He’s building part of his case on the consumer durables share of GDP data.
“We’re back to levels of consumer durables that we haven’t been at in about 13, 14 years,” said Roach. “We’ve done the pent-up demand to a large extent, and it looks like it’s borrowing from growth that might have otherwise occurred in the second half of this year or early 2022.”
Roach said he does not believe that as more people get vaccinated, they’ll go from spending wildly on furniture and cars to spending wildly on restaurants and theaters.
“These face-to-face activities are still lagging in terms of employment and demand,” he said. “Even as we get vaccines, I think there is going to be some significant long-term scarring here. ... I fear for quarters if not years to come.”....
....MORE, including a couple videos
One of the pieces of the academic literature that informs our thinking:
St. Louis Fed: Food Prices As An Indicator Of Future Inflation
