4 min read

6 / High on Inflation

6 / High on Inflation
Source: FiveThirtyEight

Today's notable reads:

#1. Doses of Finance 💰

How Bad Really is it?

US inflation hit a level I've not been around long enough to have seen before. The consumer price index increased 8.6% in May from a year earlier, driven largely by a surge in food and energy prices. But pressure was seen everywhere from shelter costs to airline fares. The Fed will have a tough time taming it without triggering a recession.

It was headline news on Friday that sent everyone into panic mode, again, sparking more fears that a recession is on the horizon. It probably woke Sleepy Joe from his nap as pressure will no doubt mount on the President especially as his approval ratings have sunk to new lows.

But is Elon Musk's "super bad feeling" about the economy and Jamie Dimon's impending "hurricane" really all that gloomy? Every man and his dog has an opinion on the economy and where it might be headed, and I won't pretend to have any better idea.

Nevertheless, many aspects of the US economy are generally in good shape at the moment. The unemployment rate is low; labour market is strong; new job openings are at near-record levels; household and corporate balance sheets are strong; consumers are still spending (even though sentiment is way down).

But psychologically, people can't seem to deal with inflation. Or mass shootings for that matter. Or Covid. Or political dysfunction. Or the war in Ukraine. Or just about anything going on right now. Which is fair enough.

For investors, it's important to understand that a recession is a normal part of the business cycle and nobody can pinpoint when it will come, but it will come. Of course, those with higher incomes and higher savings will be more adept at weathering a storm than low-income people without savings.

It's generally not useful to base an investment decision on the likelihood of a recession. Staying invested is the best course of action. A recession is generally short. For younger folk, it makes sense to keep buying all the way down to the bottom. For older folk nearing retirement, it's important to understand how your investments fit into your retirement income plan, so that when a recession comes, you are prepared to weather the storm.

You might be experiencing anchoring cognitive bias - MyMoneyBlog

I am seeing the “anyone else worried?” 😓 posts as most portfolios are down double-digits. For a retiree with a $1 million portfolio, seeing $100,000 or $200,000 of value evaporate is understandably stressful. However, much of this is because you are comparing to your portfolio’s all-time high, or high-water mark, which is a relatively arbitrary number. Just because at one moment in time, there were a few willing buyers of your assets for a given price doesn’t mean you should anchor yourself to that number.

More Doses of Finance:

  • Can you smell financial BS? - Moneyvator
  • We are not in a recession, nor is one inevitable - Stay-At-Home Macro
  • There’s a wealth gap in cryptocurrency ownership: Those who invest in crypto are better off than those who spend or send it - Quartz
  • How Xi Jinping is reshaping China's Capital Markets - FT

#2. In the World 🌎

Getting High in Thailand

While Washington DC lawmakers are looking to pass a bill that would ban firing employees for failed marijuana tests, pot Thai is now on the menu in Thailand. It becomes the first Asian country to legalise the growing of marijuana and its consumption in food and drinks. It's a move that could generate billions of dollars in income by boosting agriculture. Naturally, big business is already jumping in to get involved. There's even a government app called PlookGanja that growers have to register on, which has already snapped up nearly 100,000 sign-ups. Also, more than 3,000 inmates who had been convicted of cannabis-related crimes have been freed.

If you're thinking about your next holiday, and that Thailand is closer to where you live than Amsterdam, know that smoking joints in Thailand remains illegal.

Saudi Arabia Upends Genteel World of Pro Golf - New York Times

First, the Saudis signed up a handful of the best-known names in golf to headline their new global tour, tempting players like Phil Mickelson and a few other past champions with staggering paychecks. Then they lured even bigger stars, the kind whose talents could make the series a credible rival to pro golf’s existing gold standard, the PGA Tour.
On Thursday, the PGA Tour struck back. In a sudden escalation of an increasingly bitter fight for control of elite professional golf, the tour suspended 17 players who are participating in the first event of the new tour, the LIV Golf International Series, not long after they had hit their first tee shots. In a statement, the PGA Tour’s commissioner declared that the rebel pros — and any other player who joined them — were “no longer eligible to participate” in the events that for decades have been the highest level of pro golf in the world.
The LIV Golf Invitational Series represents not just another Gulf investment in a popular sport but a brazen and calculated attempt to supplant the elite level of that sport while casting some of golf’s best players as the prize in a billion-dollar tug of war.

More in the World:

  • Why Are Canadian Pension Funds Investing in Sanctioned Chinese Companies? - The Diplomat
  • Why hotel prices are only going up - CNBC
  • Soaring oil prices force Biden to beg the Saudi's he's spurned for more oil - Bloomberg
  • Microplastics found in fresh snow on Antarctica - NBC

#3. Sources of Interest 💡

  • Fleetwood Mac’s Christine McVie: ‘Cocaine and champagne made me perform better’ - The Guardian
  • Asteroid Samples May ‘Rewrite the Chemistry of the Solar System’ - New York Times
  • How to Hack Your Sleep - David Sinclair