Facebook Twitter Instagram
    • About
    • Subscribe
    • Contact
    • Report Library
    • Manager Login
    Facebook Twitter LinkedIn RSS
    HedgeNordic
    • Home
    • Allocator Angle
    • Report Library
    • Nordic Hedge Award
      • Nominations 2021 Nordic Hedge Award
      • Rookie of the Year
      • Jury Board
      • Historic Winners
      • Statistics
    • Nordic Hedge Index
    • Webinars & Podcasts
    HedgeNordic

    Fear Not Inflation

    Eugeniu GuzunBy Eugeniu Guzun21/04/2021No Comments
    Facebook Twitter LinkedIn Email

    Stockholm (HedgeNordic) – With investors and societies optimistic for a Covid-19 vaccine and a government spending-fueled economic recovery, inflation expectations and concerns are rising. Inflation has been dormant through the decade-long economic expansion that kicked off in 2009, but no economic question is being more frequently debated at the moment than whether countries around the world will see inflation getting out of hand.

    “I tend to think from a contrarian and unorthodox angle when I can.”

    Will Li, who founded Arete Macro Fund – one of the nine constituent hedge fund strategies within Brummer Multi-Strategy, believes consumer price inflation sometimes is taking up too much bandwidth in discussions about inflation. “I tend to think from a contrarian and unorthodox angle when I can,” says Li in a discussion with Brummer Multi-Strategy’s Head of Research, Kerim Celebi. “Policymakers tend to be singularly focused on consumer price inflation, which may not in fact be the only key driver of economic harmony and success in the world,” continues Li, who manages the Arete Macro Fund, a global macro strategy fund focusing on China and the rest of Asia, out of Hong Kong.

    “Policymakers tend to be singularly focused on consumer price inflation, which may not in fact be the only key driver of economic harmony and success in the world.”

    “It’s equally important to pay close attention to asset price inflation and its wealth effects,” argues Li. “The costs of housing, your equity portfolio, and other assets also affect spending,” he continues. Consumers tend to be more willing to spend when they observe their homes rise in value, and on the contrary, consumers tend to be much more frugal in the face of a more pessimistic outlook on the value of their assets.

    “It’s equally important to pay close attention to asset price inflation and its wealth effects. The costs of housing, your equity portfolio, and other assets also affect spending.”

    Li views the significance of equity valuations for entrepreneurial start-ups as further evidence of the importance of considering asset price inflation. The hiring plans, capital expenditures and options-based employee compensation schemes of up-and-coming businesses are all tied to start-up valuations. “Today, asset inflation has just as important an impact on the fundamentals and smooth functioning of the real economy as consumer inflation,” argues Li.

    “Today, asset inflation has just as important an impact on the fundamentals and smooth functioning of the real economy as consumer inflation.”

    However, Li warns of uncontrolled asset price growth, which can ultimately lead to a lot of “dislocation” in the global economy. As evidence, he cites the 2008 financial crisis precipitated by inflated US home prices, which were fueled by various schemes to make financing easier. Easy borrowing brought more participants into the market, resulting in artificially high prices, which eventually came crashing down, causing a deep recession. “We ended up seeing dramatic dislocation and a very deep impact on the global economy and on the lives of economic participants,” says Li.

    “We ended up seeing dramatic dislocation and a very deep impact on the global economy and on the lives of economic participants.”

    Despite recent hints of emerging consumer price inflation, Li believes the inflation in consumer prices remains largely in check, with prices for many components in the consumer price basket actually declining due to technological innovations. In the agriculture sector, for instance, advances in genetics continue to increase harvest and productivity, while artificial intelligence is helping streamline customer services in the retail and other consumer sectors. Costs for education and healthcare are not included in the consumer price basket, points out Li. “But even more importantly, asset prices are not included in the basket,” he adds. “And if you are a young person trying to buy a home, you are acutely aware of how asset price inflation impacts your livelihood. And this can, in turn, impact the social harmony that governments strive to foster in societies.”

    Share. Facebook Twitter LinkedIn Email
    Previous ArticleCalling it Quits
    Next Article Best Nordic Fund of Hedge Funds 2020
    Eugeniu Guzun

    Eugeniu Guzun serves as a data analyst responsible for maintaining and gatekeeping the Nordic Hedge Index, and as a journalist covering the Nordic hedge fund industry for HedgeNordic. Eugeniu completed his Master’s degree at the Stockholm School of Economics in 2018.

    Related Posts

    SRV Hires New Portfolio Manager

    Othania to Launch All-Weather Equity Fund

    AIM Capital Hires Portfolio Manager

    Add A Comment

    Leave A Reply Cancel Reply

    Time limit is exhausted. Please reload CAPTCHA.

    Most read today:
    • RPM Employee Joins Brummer & Partners
    • Nordic Hedge Award – Main
    • QQM to Manage Nowo Fund
    • Understanding the Differences Between Corporate and Sovereig...
    • Industry Reports
    • Blockification
    • In-Depth: Inflation Protection

    Ukraine, Supply-Chain Shortages and Soaring Prices – Accelerators of Sustainable Development

    18/05/2022

    New Theme: Real Income Destruction

    17/05/2022

    Blockification

    16/05/2022

    The Inflation Puzzle

    12/05/2022
    Promotion:
    Video: Manager Interviews
    https://www.youtube.com/watch?v=tni7dQvQrmo

    Subscribe to our newsletter

    HedgeNordic: Your Single Access Point to the Nordic Hedge Fund Industry!

    Check your inbox now to confirm your subscription.

    Most read articles this week:
    • SRV Hires New Portfolio Manager
    • Othania to Launch All-Weather Equity Fund
    • New Theme: Real Income Destruction
    • Nykredit Hires Head of Alts
    • AIM Capital Hires Portfolio Manager
    • Blockification
    • Recent
    • NHX
    • In Depth

    RPM Employee Joins Brummer & Partners

    23/05/2022

    SRV Hires New Portfolio Manager

    19/05/2022

    Othania to Launch All-Weather Equity Fund

    19/05/2022

    Ukraine, Supply-Chain Shortages and Soaring Prices – Accelerators of Sustainable Development

    18/05/2022

    Month in Review – April 2022

    12/05/2022

    Follow Your Favourite Hedge Fund

    11/05/2022

    Month in Review – March 2022

    13/04/2022

    Month in Review – February 2022

    10/03/2022

    Ukraine, Supply-Chain Shortages and Soaring Prices – Accelerators of Sustainable Development

    18/05/2022

    New Theme: Real Income Destruction

    17/05/2022

    Blockification

    16/05/2022

    The Inflation Puzzle

    12/05/2022
    Newsletter Subscription:
    Most Recent Posts:

    RPM Employee Joins Brummer & Partners

    23/05/2022

    SRV Hires New Portfolio Manager

    19/05/2022

    Othania to Launch All-Weather Equity Fund

    19/05/2022

    Ukraine, Supply-Chain Shortages and Soaring Prices – Accelerators of Sustainable Development

    18/05/2022

    Nykredit Hires Head of Alts

    17/05/2022
    Publisher

    Nordic Business Media AB
    Corporate No.: 556838-6170
    BOX 7285
    SE-103 89 Stockholm, Sweden

    VAT No.: SE-556838617001
    Tel.:+46 (0) 8 5333 8688
    Mob.: +46 (0) 7 06566688
    Email: info@hedgenordic.com

    STAY INFORMED

    HedgeNordic: Your Single Access Point to the Nordic Hedge Fund Industry!

    Subscribe to our newsletter:

    Check your inbox now to confirm your subscription.

    RSS Hedge Fund Job Digest
    • Fund Accountant 20/05/2022
    • Associate, Business Development 20/05/2022
    • Quantitative Analysis and Portfolio Construction - Analyst 20/05/2022
    • Fund Accountant 20/05/2022
    • Corporate Accounting Analyst 20/05/2022
    • Associate 20/05/2022
    • Quantitative Researcher Crypto 20/05/2022
    • Investor Relations Analyst 20/05/2022

    Copyright © 2022 Nordic Business Media AB

    © 2022 Nordic Business Media AB
    • About
    • Cookie Policy
    • Privacy Policy

    Type above and press Enter to search. Press Esc to cancel.

    We are using cookies to give you the best experience on our website.

    HedgeNordic
    Powered by  GDPR Cookie Compliance
    Privacy Overview

    This website uses cookies so that we can provide you with the best user experience possible. Cookie information is stored in your browser and performs functions such as recognising you when you return to our website and helping our team to understand which sections of the website you find most interesting and useful.

    Strictly Necessary Cookies

    Strictly Necessary Cookie should be enabled at all times so that we can save your preferences for cookie settings.

    If you disable this cookie, we will not be able to save your preferences. This means that every time you visit this website you will need to enable or disable cookies again.