In this episode, the Inflation Guy presents an introductory-level discussion of the concept of "delta," applying it to securities and explaining how the concept is used (in fairly plain English), but also applying it to exposures outside of the finance world. If you are someone who agreed with the tenor of a recent news article referring to the "arcane area of trading known as delta-hedging," you might find the Inflation Guy's perspective refreshing.

If you like this podcast, please be sure to 'like' us, forward the links to your friends, and talk about us often. And return next week for more!

In this episode, the Inflation Guy discusses how volatility is a feature, not a bug - and how the Silicon Valley Bank debacle is not likely to lead to lower inflation at all. He also tells an interesting story about how deposit interest rates used to be capped, and how uncapped deposits have often been associated with bad outcomes at poorly-managed banks (and lots of them).

Some sources for this podcast:

Rolnick, Arthur J., “The Benefits of Bank Deposit Rate Ceilings: New Evidence on Bank Rates and Risk in the 1920s,” Federal Reserve Bank of Minneapolis Quarterly Review, Summer 1987. https://citeseerx.ist.psu.edu/document?repid=rep1&type=pdf&doi=148ae4d7a7bd36d2a3e851fb543d6350cdfa20d4

“Deposit Deregulation,” Federal Reserve Bank of San Francisco, Weekly Letter, April 10, 1981. https://www.frbsf.org/economic-research/wp-content/uploads/sites/4/el81-15.pdf

Banking Strategist website: history of US Bank Failures. https://www.bankingstrategist.com/history-of-us-bank-failures

On Friday, the Inflation Guy thought no one would care about this month's CPI given the bank failures starting with Silicon Valley Bank. But actually, this number turns out to be quite important - the Fed needed a soft report, so that there would be no conflict between the rate trajectory needed to calm markets and support banks (lower) and that needed to quell inflation and inflation fears (higher). Whoops. Median CPI is still rising, putting the Federal Reserve...really, for the first time since the tightening began...in something of a box. Also, has anyone noticed that nearly 500bps of tightening hasn't slowed inflation? Maybe rate hikes are the wrong focus? Nah.

It has been a long time coming, but in this episode of the Inflation Guy Podcast, the IG talks about a new way to trade inflation - and it's a way that's available to the individual, and not just the hedge funds and large institutions! Inflation futures, although not fully mature, are here!

Go ahead, click. You know you want to hear about "Models Gone Bad."

You might also hear about how some recent work the Inflation Guy has done is persuading him that he is also being too optimistic about the speed at which inflation will decelerate. And no one, at least recently, has accused the Inflation Guy of being optimistic about inflation.

The question that Inflation Guy addresses is causal: does the productivity enhancement promised by AI mean that future inflation will be lower, or not?

But in order to boost productivity, we asked ChatGPT to write the synopsis. After trimming most of the 538-word answer, the only relevant bit was this:

"In this episode, we explore the potential role of artificial intelligence (AI), a rapidly advancing technology that enables machines to learn from data and make predictions or decisions, in shaping the future of inflation. Can AI help us manage inflation more efficiently and effectively, or could it exacerbate the risks of inflation in unexpected ways? What are some examples of AI applications that have already influenced inflation dynamics, and what are some challenges and opportunities for further research and development?"

That isn't at all what this episode is about. Although admittedly it sounds interesting.

In this month's CPI Report from the Inflation Guy, he points out that a report that is broadly strong, with some negative outliers, does not have the same implications as one that is broadly weak, with some negative outliers. The market was expecting the latter, but got the former. That inflation target of 2% is not looking any closer today.

The Inflation Guy delivers the State of Inflation Address with accuracy, brevity, clarity, and euphony. Well, two out of four isn't bad. If you listen to only one State of the Union Address this year, listen to this one...also!

Be sure to tune in on Tuesday for the monthly CPI Report summary, which will be longer, and with less background music.

In this episode, the Inflation Guy explains why the Bureau of Labor Statistics is re-weighting CPI beginning with the report on February 14th, and what it means for you. He also points out that the prior re-weighting really did dampen inflation measurements a little bit...is the government trying to hold down the inflation report??

With today's report of Q4 GDP, money velocity jumped the most in a quarter since 1981 (with the exception of the bounce in late 2020), and the most in a year since 1982. Velocity, it seems, is not 'permanently impaired'! It acts more like a car trailer attached to the car by a spring, and it's starting to catch up. This has large implications for inflation going forward, and for investors.