Alhambra Investments' Chief Investment Strategist- Jeff Snider- Part 1

Alhambra Investments' Chief Investment Strategist- Jeff Snider- Part 1

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Narrator: This is The Norris Group's real estate investor radio show, the award-winning show dedicated to thought leaders shaping the real estate industry and local experts revealing their insider tips to succeed in an ever-changing real estate market hosted by author, investor and hard money lender, Bruce Norris. Bruce Norris: Hi thanks for joining us. My name is Bruce Norris and today our special guest is Jeffrey Snider. Jeff is

the Chief Investment Strategist, Strategist at Alhambra Investment Partners. Jeff directs the day-to-day investment processes and spearheads the investment research efforts while providing close contact to Alhambra's client base. Jeff joined Atlanta Capital Management Inc in Buffalo, New York as an intern, as an intern while competing studies, completing studies at Canisius college. After

graduating in 1996, with a Bachelor's degree in Finance, Jeff took over the operations of that firm while adding to the portfolio Management and Stock Research Process. In 2000, Jeff moved to West Palm Beach to join Tom Nolan with Atlantic Capital Management of Florida Inc. During the early part of 2000's he began developed research capability that ACM is known for. As part of the portfolio management team Jeff was an integral part in growing ACM and building the comprehensive research, management services and then turning that investment research into outstanding investment performance. As part of the research effort, Jeff authored and published numerous in depth reports that ran contrary to established opinion. In nearly, in the nearly year and a half run up to the pandemic,a panic in 2008. Jeff analyzed and reported on the

deteriorating state of the economy and markets in early 2009. While conventional wisdom focused on near perpetual gloom. His next series of reports were providing insight into formative ending process of the economic contraction and a comprehensive view of factors that were leading to the markets resurrection. In 2012, after the merger between ACM and Alhambra Investment Partners Jeff came on board, Alhambra as Chief Investment Strategist, and currently, you can read what Jeff writes in RealClearMarkets, ZeroHedge, many, Minyanville and Yahoo!Finance. Jeff, welcome to our show. I appreciate you

taking the time to do this. Jeff Snider: Oh, my pleasure, Bruce, thanks for having me on and inviting me. Bruce Norris: You know, what's really interesting is that you have really intelligent people well intentioned on both sides of the inflation and deflation answer, and so it's going to be interesting and have a have a great talk with you today. I'm always interested in timelines when people get into things. So, I mean, you're, you're not that old but you've seen a lot. You

know, you get into the stock market game, basically. And a couple years later, you run into 2000, and then run into 2008. And if you're in charge of other people's money, that, that's not a fun period. Jeff Snider: Yeah, it would have been better to start earlier in the early 80s, then you can have the full bull mark and then retire somewhere around 99 or so right? Because that was as exciting as it was to watch stocks go up. That was boring, right? There was nothing really going on, everything was great. You're right. It's almost like the curse the you know, the

parable may you may live in interesting times. I don't think, you know, many people in this business, for several generations have passed since we've had such interesting times. And it's one thing after another after another, it seems as we can't seem to get out of this mess or get out of the situation.

Bruce Norris: Yeah, and not, not little things, especially when you're, when you're in charge of other people's money. If you're, if you do that, right, it weighs heavier than your own. And yet... Jeff Snider: Yes it's almost ironic, right? Because back in the 90s, when everything you know, asset, bubbles of stocks, everything going up, people really didn't worry all that much. It's only since they've seen the downside, kind of repeat itself, all of a sudden, like, wait a minute, we need to be a little more cautious here. You know, when I was first starting out clients were just, you know, hey, whatever you guys do, we're great. You know, it's all good. But now, you know,

clients and people who are investing their own money, even if they have a professional aside, they're, they're asking more questions, they want more answers. They want more direct answers about, you know, what is really going on here? And what is, you know, is it really what we kind of feel and what we see or is there more to the story? Bruce Norris: What, what's the one consistent investment since you've been around? That's been profitable? Jeff Snider: I don't think there is one and I don't you know, for us, it's, you know, we live in a dynamic world, things are always changing. I'm always talking about the eurodollar monetary system, and that even that has changed radically over the last 10 years or so. So, you know, a consistent, you know, where do you, where do you go, what's the one place you can go to, I think it's, you know, it might be different under different, different time periods or different particular conditions. Bruce Norris: In this, in the era that you've been involved in, I was thinking you'd probably say bonds. Jeff Snider: Oh yeah, since, since around 2011 and 12. Yeah,

that's really, that's been a consistent, it's consistent maybe is there could have been, but even that there's some volatility involved, you get to 2017, 2018, when rates started to rise, I mean, that was not a pleasant time to be saying, 'Hey, hold on here, bonds or bonds are probably going to be a good investment over the longer run.' So, even even the bond market over the last decade, which has, has, has had a really good run, it's not a, it's not a straight line, it's not, you know, perfectly awesome all the time. There's, there's volatility in that too. Bruce Norris: That's the hardest thing about being in charge of other people's money, we have a pretty boring setup where we are lenders, hard money lenders that lend to investors and flip houses. And, and like you, I try to look forward and say, 'Okay, wow, this is gonna get bad.' So, you know, we basically pulled

out of lending for a couple years, say, starting 2006. And we're sitting on the sidelines and avoided a lot of that damage. So, our client base generally doesn't enjoy volatility. And, and I'm along with that, you know, it's interesting about investing, most of my investments are real estate. And what I realized I tried stocks one time, perfect timing, as far as being terrible, it was, my father was investing in penny stocks, I knew he didn't know anything about them. So, kind of to protect him, I got into studying

penny stocks for a little while. And I invested about a quarter million dollars at the end of 2019. And that turned into 800 grand in about 40 days. And I just thought, 'Man, I'm good at

this too. That's great.' And a month later turned into 100 grand. Now what I understood about myself, though, what was interesting is I didn't like seeing value of even a go up every day. Because you know, they don't have an appraisal on your property every day, you just you own it. But when you have stocks and all that stuff, you can see what it's worth every day and you know, you're in charge your clients that may be, you know, not geared to look at, you know, bad news and probably call you up a lot and go oh, my God, what's going on? Jeff Snider: Yeah, there is that sort of, you know, it's almost like short termism, right. Because you get caught up in the trend, and you see all that's going up, and going up, and going up, and you don't realize the implications or the potential implications of it. But you may not be thinking too

far ahead. Plus, you know, for I think for you, as well, as is me, when you see something like that short term price rises, you know, yeah, that's, that's, that's, that's a good thing. You don't want the opposite, obviously. But you know, if it

goes up far and fast, and it's probably not real, you're looking at something very different. Whereas, you know, the average person on the street may not think that way, they might think, well, it goes up and it stays up forever. But when you see, you know, asset classes and asset prices go up and just fly ahead, you kind of have that nagging feeling that there's something going on here that we need to pay attention to, because that's not how it's supposed to work. And I, you know, I use that term loosely, because supposed to work as you know, can be many different things. But, you know, your sustainable investment trends are not those that are going to shoot way up and then burn themselves out. Sustainable investment trends, you, you're looking more for incremental, solid, fundamental value based kind of factors and fundamentals.

Bruce Norris: What's the concern about having high inflation....? Jeff Snider: There is a number of concerns there. Well, inflation, I think, for the average person, it's the most painful thing because you know, you got to eat, you got to put gas in your car, and you see prices of those go up. And no, usually in an inflationary period, your wages are not in your pay is not keeping up with the cost of living. So, every day, you're reminded that you're falling further and further behind. So, for the general public, in the vast majority of

the economic population, inflation is sort of a, a visible visceral reminder, things are going the wrong way. And that can play out in any number of ways, especially if it continues over time, it leads to political social instability and things like that. Whereas the deflationary case, in many ways in economics is much worse. But most people don't realize it.

And so, there's there's sort of that disconnect, where's inflation, and you really can't get away from it. And I think we have to be careful when we talk about inflation, what are we really talking about? Because when you use that term inflation, it's different to different people. And what standard economics the textbook says is that inflation is a sustained increase in consumer prices. So, it's not consumer price in a broad base consumer price is not just a narrow set of consumer price, prices that go up for a short period of time and then sort of normalize. It's where almost everything the

price of everything that a consumer uses or buys goes up and they stay in it continues to go up month after month after month, year after year. That's really what inflation is. Bruce Norris: Who benefits from inflation? Jeff Snider: Well, if you're a, if you're someone who owes debt, obviously, you want to pay that debt back in a deflated currency. So, if, if you can borrow money ahead of an inflationary curve, knowing that the prices are going to be devalued, or your prices are going to go up over the future, and the currency that you're going to pay back is the veiled in the future, you're pretty much the only beneficiary. So, you're making everybody else suffer for I mean, it's not like you're doing it, but you're taking advantage of inflict what the system inflicting a lot of pain on pretty much everyone else.

Bruce Norris: My experience with inflation, you know, when I was a young adult, got married very young, and I owned a home from let's say, first time '73. And all of a sudden prices of real estate in California, took off paid 41 grand for the house, I sold it. And I had a $10,000 check at the end of that escrow made out to my name, which just was very impressive to me. And I thought, wow, what if I own three of these things, right? That's what I did. I divided that up, and I put down three

down payments and bought. So, inflation for the asset that I held, was actually a very big deal. Because at the end of that little cycle on 28 years old, sell to the houses and pay off a free and clear house. Now, you know, you had a 30-year

mortgage, and it was gone in five years. And so, you know, I was looking at that out, I was on the right side of inflation as far as the assets that I held. So, if you hold, if you hold some asset, so what benefit what assets benefit when inflation occurs? Jeff Snider: Well, real estate and commodities, things that are tied to the nominal economy, those are obviously two of the main ones. Gold under certain situations, gold is obviously a good, good hedge during the 1970s, once it was allowed to float got away from the two tier prices in the late 60s. So, that was another good inflation hedge. And, you know, you could

get more sophisticated inflation strategies where you're playing the yield curve, steepening and things like that. There are various numbers, a number of ways in which you can invest in an inflationary environment, and not come out too bad. And maybe even come out ahead. Bruce Norris: Okay. In when I, when I wrote a report, the first

time, I got access to a lot of information that was done for contractors, Cal Poly Pomona had a construction report and during the inflation years of the 70s, they actually took apart what it took to build a home constantly, you know, for the next decade, parts, and labor. And what was really interesting after being able to look at all that information, I realized as a real estate owner, basically what I own is a basket of commodities, right? So, when prices of all that stuff go up, if I have a rental, like my lumber goes up, my concrete goes up. So, I thought, okay, that's a pretty good inflation hedge. Jeff Snider: Absolutely. Bruce Norris: Yeah. Jeff Snider: And it's also the, you know, got to factor in the cost of labor that puts all those commodities together. So,

you want to be hedged against that as well, but yeah, by and large commodities are do very well during inflationary periods, as you would expect, because some people correctly define, I, identify an inflationary period with sort of a devaluation of the currency, US dollar in this case, which is a little bit tricky in the 21st century, but still, you know, what you're looking at is if the value of the dollar, you know, more generally speaking the Kleins, you would expect commodity prices to rise to offset that. So, either way you look at it, there's there's definitely a historical as well as intuitive correlation between those two things, rising inflation, rising commodity prices. Bruce Norris: So, short term is they're concerned about inflation that's, that's realistic? Jeff Snider: As far as you mean, I mean, obviously, people are talking about nothing else. You know, the CPI is is the highest

they've been in 30 years and some components the highest in 40 years. So obviously, you know, inflation, inflation discussions and conversations, it's the primary topic everyone's talking about. The question is whether or not it's actual inflation, or are we seeing something else? And we'll get back to the definition of inflation, you know, broad sustained increases in consumer prices. Well, what's behind that? What is it that's causing this textbook form of inflation and it's always an ever everywhere a monetary phenomenon. So, if you don't see the monetary phenomenon behind

it, then you would see this consumer price or whatever you want to call it. I call it a price deviation, transitory if you want to Jay Paul's language, what's going on in the CPI doesn't have the monetary flavor behind it. So, you start to be a little bit skeptical about whether or not it actually continues beyond the short term factors that are driving it and balances essentially a supply shock. This is nothing more than a historical supply shock. Bruce Norris: When you look at the bond yield. Is the bond

world concerned about inflation? Jeff Snider: Not at all. That's, and that's that's one that should be ringing alarm bells because the bond market has been a very good predictor of inflation. We need to go in and go back a couple years. Let's go back to 2018. When Jay Powell comes into office, what did he say? He wasn't talking about transitory back then except he was talking about transitory deflation. He said inflation's coming, the Fed is going to have

to be hawkish, we're gonna have to raise rates more aggressively in 2019, or the bond market, the bond yield curve started to flatten out, really flatten out that inverted, which was calling his bluff, which was the bond market basically saying, there is no inflation coming. And by and large, you're going to end up cutting rates, because deflationary pressures are becoming too big to ignore, which is exactly what happened. And that's just to repeat the cycle. We went through this in 2014 and 2015, when Janet Yellen came into office in 2014, so best jobs market and decade look at the unemployment rate drop, we're going to have to start raising rates and bond yields are falling and saying no, you're not going to have to start raising rate because there is no inflationary pressures building up. And in fact, that's what happened too, the Fed did

one rate increase in December 2015. They had to wait an entire year to do the second one, because the bond market got that one right to go back to 2011, same thing. In fact, 2011 reminds me a lot of what's going on today, because in 2011, you had sat high CPI rates, that everybody talking about inflation, commodity prices, oil, all that stuff was in the general conversation. And the bond market said, Nope, not

happening here. Either transitory it's not there isn't the economics or isn't the money supply money flow throughout the global economy that would sustain what we're seeing in the short run. And of course, that's exactly what happened as well. So, if the bond market is saying, I'm not really worried about inflation, I'm far more worried about this inflation or deflation, that's something you got to pay attention to. Bruce Norris: Yeah, that's, that is really interesting. In 2017,

we wrote a report that had this title '2% interest rates, and 40 trillion in debt' and at the time, I wrote that, you know, I'm a real estate investors to saying we're going to have to present mortgage rates, mortgage rates start with a two. And of course, at that time, that was, okay, you're out of your brain. But I, and this is one of the questions that I wanted to ask you, it seems like all of these efforts, rather than trying to prevent inflation are really trying to prevent deflation. Jeff Snider: Absolutely, yeah. And from the feds perspective,

and from modern economic perspective, the worst case scenario is deflation. And this goes back to John Maynard Keynes, there's all sorts of the great the Great Depression was obviously a good example of that, where it's, it's pretty well known that deflation is the worst case. So, you can't blame the Fed for at least attempting to fight against deflation, because first of all, number one, the deflationary case or the deflation underlying, underlying baseline has been the case or the underlying baseline, going back to August of 2007.

So, the reason they're trying to fight against deflation, because that's what's going on. So, you can understand why they're doing that. Now, the problem is, the techniques and the tactics, they use quantitative easing, and all these other things are totally misunderstood. And they're ineffective, they don't create the kind of inflationary environment that would be conducive to a broad base sustained increase in consumer prices. It's a bunch of smoke and mirrors that people have bought into because, you know, some quite sympathetically, they've been told to buy into this stuff for generations, for decades now, we've always hear about is don't fight the Fed, the Fed has the printing press, and if they unleash it, God forbid, there's going to be a tidal wave of inflation. Except there, there hasn't been, you know, the Fed is gonna destroy the dollar with quantitative easing, the dollar is higher, not lower. And so, you know, a decade after we've hearing all

of these things, you have to start asking yourself, what is really going on here, the bond market continues to picture in price more and more deflation. While the Fed continues to repeat these quantitative easing, which everybody says is money printing, it's a tidal wave of money, yet we never get the inflationary burst aside from, from temporary transitory impacts in the CPI, whatnot, you know, by 2011. And I think what we're seeing now, so there's this tremendous guess disconnect between what we're taught and led to believe the Fed does and what it actually does, which is something completely different. Bruce Norris: Okay. Well, let's talk about the 70s that we did

had, we did have inflation so there's, there was simultaneous things going on. In 44, we had the Bretton Woods system set up. In 71. I think it was Nixon ended that officially and... Jeff Snider: But it's important to know, you know, where did the great inflation come from, it was a monetary phenomenon. In

large part, it came from a Fed and ineffective central banking scheme, but also an unleashing of monetary and banking evolution that they actually under undercut the Bretton Woods system long before August 1971. So, you have, you know the formation of the London gold pool in the November of 1961, which was, you know, 10 years before that, basically the system had already broken down. And one of the reasons why was triffids paradox, which was the fact that, you know, the way the Bretton Woods scheme was set up was that we had a national currency backed by national reserves as a global reserve currency, and a global reserve currency, you have to have enough currency flowing around the rest of the world in order to make a global reserve system work. But that created this tension between if you have too much if you have all this currency floating around outside the United States, but it's tied to a limited supply of national reserves, it's never going to work. Because eventually, those national reserves are going to be converted by all these dollars floating around the world that the world needs floating around the world. So, that's what's triffids paradox, which is essentially, you can't have a national currency backed by national reserves as a global reserve. And eventually that, that ended up failing in eisah,

you know, of November 1961. But what actually replaced it, it wasn't $1 system. It was this global euro dollar system, which was a bank centered system that arose in the 1950s and began absorbing the roles of the global reserve currency that couldn't be provided by Bretton Woods Gold Exchange. So, by the time Nixon closed the gold window in August 1971, the liquidity, the adjustment, even the confidence functions as a global reserve currency had already been overtaken by this basically unregulated unlimited reserve the shadow money system. And you wonder where this you know, the great inflation of the late 60s and 70s came from it came from an unregulated reserve list, essentially limited monetary system that grew outside the United States, outside the Federal Reserve's purview that just created vast amounts of not money, we're not talking about physical currency here, we're talking about virtual ledger type money, I'm unit of money of account, it's called. So, you had this wave of monetary evolution just washing

over all parts of the global economy, which created the inflationary background that became the great inflation of the 70s. So again, consumer inflation, the monetary environment for it. Bruce Norris: Is it, is it in the history of being a reserve currency? Is the reserve currency, usually backed by gold? Or was that unusual? Jeff Snider: No, it can't, there is no one way to do it. It

really there hasn't been a global, single global reserve currency. Usually there's currency blocks. For example, in the late 19th century, there was a most a lot of the biggest currency block was the English English pound sterling. Bruce Norris: Right. Jeff Snider: And it was obviously backed by gold at certain times. I mean, obviously, the English went off

the gold standard, typically when they needed to fight a war or something like that. But yeah, there was, there was a historic tie between currency and gold for very obvious reasons. Because once you go off of some kind of external or exogamous, standard, governments and the powers that be have a tendency to want to push the boundaries as far as they possibly can. And in some cases, you think Weimar Germany, they

go way, way, way too far and end up breaking the system. Bruce Norris: Okay. What are the benefits of being the country that's viewed as the reserve currency of the world? Jeff Snider: Well, I'm sure there are any. That's, that's a common misconception, too. When you talk about the dollar denomination being the global reserve standard with the functions undertaken by euro dollar, euro dollar system, it's kind of sounds like we have an enormous privilege. That's something we don't want to give up. You know, for example, the,

the world prices, oil, mostly in US dollars, that's the common, the common term you hear thrown around is Petro dollar, which is kind of a misnomer and kind of a misunderstood process too, by and large, it is kind of a burden. It's, it's really when you get back to Triffin Paradox, and, and what he was really saying is that no heavy global reserve currency linked to a national system is going to be, it's going to cause natural tensions and problems. And then one way, that's why the eurodollar is bank centered private offshore system was sort of an elegant solution to it, because it essentially allowed the national authorities in the US to wash their hands of it.

You know, they say, we just focus on the domestic system and the domestic banking system, all the stuff that goes on outside the US, we don't care, leaving chemical the term for it's called benign neglect. But they said, you know, this dollar stuff that's around the rest of the world, not our job, we just going to focus on the US if there's, it doesn't matter that these are you, these are called US dollars all around, all around the world, not our problem. So, it's solved for US authorities that national issue where they can just wash their hands of all these dollars outside the United States because not really dollars are just bank liabilities. So, the banking system solve Triffin's paradox for national authorities. The problem comes in, and they were warned

repeatedly by very prominent officials and experts during the time we're talking about during the 1970s that you have a monetary system operating outside the purview of any sense, not just the Federal Reserve any central bank, if that starts to go wrong, there is no way to fix it. And that's essentially what happened in August of 2007. And we haven't been able to get out of that, that kind of a position. That's where the deflation comes from. You have this global monetary

system that broke down in August 2007, and has never been fixed. So, the stark warnings that the Federal Reserve officials were given decades ago, actually came to fruition. And now we're kind of stuck because the monetary powers that be the Federal Reserve doesn't have any idea how to plug back into that system, because it didn't stand still, as evolved as it was in the 60s and 70s, it evolved enormously in the 80s and 90s. I'm talking with things like derivatives, currency swaps, interest rate swaps, collateral and repo. I mean, all sorts of really esoteric and complicated monetary forms that, you know, you go back to the 1990s, Alan Greenspan was shrugging his shoulders saying we can't define money here. What would we do if

things go wrong? And the answers, there's nothing you can do. And that's really kind of what defines the structural secular background since August 2000. Where's this this deflationary sort of vortex coming from? It's coming from this monetary system outside the United States, the shadow eurodollar system. That, you know, the Federal Reserve just cannot fix. Bruce Norris: Ultimately... Jeff Snider: Yeah, there's there's a lot.

Bruce Norris: And I asked this, this is why I'm interviewing because I am not an expert on this at all. So. But I'm glad you are. And I'm glad you take the time to look forward and say, 'Okay, this is, this is what's coming. Here's some solutions.' So, it's common that countries lose reserve status. Jeff Snider: Yes, exactly. Almost inevitable, right, Bruce?

Bruce Norris: Yeah, it looks like it. Jeff Snider: I mean, there's no, there's no single reserve. I mean, by law, as I said before, by and large through history, it's not a single reserve currency, there's usually currency blocks. And so, I don't think anybody would be totally surprised if you know, 10 years down the road, there isn't a single reserve currency, either there's currency blocks and things like that. It wouldn't be totally out of the question. In

fact, it would be more reverting to the mean. Bruce Norris: And, yeah, that's kind of what I Why just asked that, because it seems like we already have a blended system. That's not official. Jeff Snider: Oh, yeah, that's, I think that's the most misunderstood part is that the global reserve currency? First of all, I don't think many people, most people, especially Americans, think too much about global reserve currency, maybe that's the only privilege of the US dollar denomination is, we really don't have to think about the nuts and bolts of it, because we don't see its impact, you know, it's the dollar is our own national currency. So, if it moves, it really doesn't, you know, it doesn't impact our daily lives, at least we don't know, we don't notice that it really does. When the dollar

goes up in value, that's bad for everybody, including, including Americans. But by and large, I think, you know, outside the United States is much more awareness of what the dollar is and what the dollar does, even if there's not specifically, you know, a good handle on what exactly do we need a global reserve currency to do? And how does it actually get done? There's, there's, you know, the details are the plumbing is people off a call, often call it, there's not a lot of literacy, about what actually takes place in the global reserve. So, it's kind of hard for the public to make sense of all this stuff. And think what we're what is really going on

here, money, inflation, deflation, Federal Reserve, quantitative well, all of these things are sort of, you know, up in the clouds, and not really not something that people can really get their hands around, or even even their common sense, grasp and get some kind of intuitive sense for it. Bruce Norris: So you, if the, if the US was not the sole recognized global currency, you don't feel that that would be devastating, and in a way, because it's almost already in place. Jeff Snider: Yeah. What I tell people is that look, though, the Euro dollar system broke in August 2007, levels of 14 years ago. So we've had a deflationary drag and economic growth is bad for everybody. So, if the if the euro dollar US dollar system is

replaced tomorrow, it's replaced by something that actually works. Then no, we were not lament, losing the reserve status one bit, because we're being harmed by it right now. That's, you know, you it's hard to connect those dots. But once you do you see that the reserve currency system that's in place now is not working. So, getting rid of it, we're not losing anything. And if we are losing something, the benefits from replacing it with something that works would far exceed any cost.

That's I mean, it's not just a strictly monetary, economic smartly, economic issues. There's, you know, political considerations as well, because authorities like having the idea of the US dollar being reserved, so all sorts of complications. But in an ideal world, we should be able to say, look, we fixed the reserve currency regime with some other type of currency, that's not the US dollar, that could be a very, very good thing.

Bruce Norris: Okay. So, going forward, you're not as concerned about inflation, but you are concerned about deflation or is that a concern? Jeff Snider: Yes. To me it's, you know, has anything changed? So, we've been in this prolonged period of monetary dysfunction is it you know, it's like bond yields moving up and down. It's

not a straight line things that we've been in deflationary environment consistently. We go through these cycles where we have a couple years of you know that this inflation-deflation kind of working around the world, and then it backs off when we get reflation, you know, 2010, 2011 for example, we talked about 2014, 2017 prior to 2018 we have these reflationairy cycles where it looks like, 'Oh, things are getting better. Maybe we've gotten out of it', where the bond market during those deflationary period tells, you 'No, things haven't really changed.' Some of those deflationary pressures have backed off a little bit, that creates enough sufficient monetary space that it looks like things are getting better. But it really nothing has changed underlying the eurodollar system that continues to be broken. And so, we look at 2020, 2021 what we're really we're the question we're really asking is, is this kind of like 2017? Are we seeing nothing more than modest reflation that gets boosted into the, you know, CPI is at our highest in many, many years, through other factors that are not monetary. But by and large, what we're really,

what we really want to ask ourselves is, has the monetary system broken out of its deflationary router the last 14 years? And that's where we look to these clues, not just in the bond market, but in all sorts of other, other markets around the world. And they're telling us no, yes, we see CPI is going through the roof. We see modest deflationary pressures and a lot of places around the world. However, we haven't seen anything change in the underlying monetary condition.

In fact, there's quite a lot that suggests that maybe it's a little bit worse than it was before 2020. We may have actually system, I mean, this is kind of common sense but the world economy may have sustained more damage from last year's 2020 recession than we're, then we're kind of realizing right now. And if that's the case, that would be even more deflationary or disinflationary than it had been up until that point. That's where you look at low yields that never really got that high earlier this year in the sell off. When yields were backing up in January and February across the world. They really didn't go that far and now they've reversed again. So,

that's you know, lower and lower yields never, not really much in terms of the reflation airy trade. It's, it's, it's a really solid signal that nothing has changed in the monetary background and we're simply cycling through this, this period where we go through temporary reflation, and the reflation is simply it's not quite inflation, but it's not deflation or disinflation either side, it's kind of where prices can go up, you know, oil prices, commodity prices rise, but that doesn't lead to the sort of economic and monetary condition where it's, we're out of, we're out of the bubble, and we're into an actual legitimate economic expansion and growth. We never quite get there. Reflation is always one step short of that. Narrator: For more information on hard money, loans and upcoming events with The Norris Group, check out For information on passive investing

with trust deeds, visit Aaron Norris: The Norris Group originates and services loans in California and Florida under California DRE License 01219911, Florida Mortgage Lender License 1577, and NMLS License 1623669. For more information on hard money lending, go and click the Hard Money tab.

2021-08-29 05:03

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