![]() ![]() ![]() But it is important to note that he gave his advice not because GDP growth, inflation and interest rates do not matter for your stock returns, but because he does not believe it is possible to predict it. Warren Buffett has taught us not to focus too much on macro indicators and look at individual businesses instead. And this is not the forecast made by Paul Volcker in his book. It is, of course, not a forecast that I would like to make. Falling confidence and rising expectations of a continued rise in prices (regardless of a particular reason, which could be a fiscal stimulus, supply bottlenecks, labour shortage, logistics etc.) are the key ingredients for higher inflation in the future. The train, probably, has already left the station. ![]() ![]() I think that a period of falling interest rates over the past 30+ years has been accompanied by a strong belief in the general soundness of the financial system in key markets, particularly the US.īut things are likely to be changing now. That trust takes time to build, and once it is lost, it is challenging to restore it. The health of any financial system is based on the trust of its participants in that system and its regulator. My biggest takeaway from the book is that inflation is driven not so much by macroeconomic factors (labour, demand, commodity prices etc.), but rather is a psychological phenomenon. ![]()
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