$3.00 NTA, page-14

"I hope this so called correction... stays that. Remember what the experts said about "transitory" inflation."


First it was interest rates being locked in place until 2024. Then it was inflation being only transitory. The career bureaucrats who are in charge of the money supply act only after surveys and indices have been published at intervals that are too long to be of any real use and who are excluded by their charter from taking more than a subsection of the economy into their deliberations. These "experts" never seem to be on the ball and never seem to be held accountable for their hopelessness, but they get paid plenty for it.

Then there are the expert economists who are employed by banks, investment houses and media organisations. At the moment, most of them seem to be saying that inflation will soon taper off and that there won't be as many rate rises as markets are predicting.

Well, the reality is that current inflation is high because of:
- increase in the money supply - caused by quantitative easing and low interest rates.
- increase in the oil price - driven by underinvestment in production due to pressure from woke ideology, high demand (which will go higher when China lockdowns end), Russian war and resulting sanctions.
- supply chain disruptions - caused by China covid lockdowns and Russian war.

Although interest rates have started to rise, they are still several percent below what they need to be to bring inflation under control, so interest rates will have to go much higher. QE is set to end soon but will not be aggressively unwound, so the money supply will remain elevated. Wars, sanctions and covid lockdowns are increasing, not decreasing, so they will create more inflation. In Australia, it looks like there will soon be wage increases that will add further to demand-side inflation. Also, the federal election might result in new spending policies that fuel inflation.

Overall, high inflation is probably here to stay for a long time and might well go much higher. In my opinion, interest rates will be forced higher than most "experts" are currently predicting.

Rising interest rates are only one of the factors causing the current correction. Due to inflation, as well as all the above-mentioned factors that are also causing inflation, as well as many other factors, the current correction might last for a long time. If so, then most stocks will go lower. Probably LSF's NTA will also go lower until the correction is over.

Actually, what do I know? I wouldn't be at all surprised if the the correction is ending today, mainly because the market these days often does the opposite of what I am expecting. Anyway, here is another prediction - crypto will start to rise again when the correction bottoms. This is the usual pattern, so I am waiting for a signal from crypto before I will be convinced that the correction is really over. (btw, this is not a cross-promotion, I can't think of any good reason to buy crypto ever, even if it looks low.)