The Opposite of 2008
The comments below are an edited and abridged synopsis of an article by Ben Hunt
Here’s what Hunt thinks the opposite of 2008 means for markets and the real world: Home price appreciation will not show up in official inflation states; cash-out mortgage refis and HELOCs are going to explode; middle class (home-owning) blue collar labour mobility is dead; and markets—it is impossible for the Fed not to fall way behind the curve.
Bottom line: Hunt thinks that both the Covid recovery world and a perma-Covid world are inflationary, the former from a demand shock and the latter from a supply shock to the biggest and most important single asset market in the world—the US housing market.
It’s just like 2008, except… the opposite.
In 2008, the US housing market—together with a Fed that thought the subprime crisis was contained—delivered the mother of all deflationary shocks to the global economy.
In 2021, the US housing market—together with a Fed that thinks inflationary pressures are transitory—risks delivering the mother of all inflationary shocks.
It’s the only question that long-term investors must get right. They don’t have to get it right immediately. They don’t have to track and turn with every small movement of its path. But they must get this question roughly right: Am I in an inflationary world or a deflationary world?
Hunt discusses preparing your portfolio for an intrinsically inflationary world.