Dear valued client,
The Consumer Price Index for the month of January came in slightly lower (6.4%) than in December (6.5%) and markets reacted with less enthusiasm than expected.
Though only marginally lower than a month prior, this marks the 7th straight month of inflation declines. Some pundits are claiming it will be a long and winding road back to the 2% inflation target as a variety of goods and services actually ticked up over the past several weeks, including food and housing. Though interest rates will likely not increase much more in the coming months, there is a chance they remain high for a longer period of time. Lowering interest rates too quickly would cause inflation to rebound drastically as it did in the early ’80s. At the time, to compensate for their premature lowering of rates, the Fed was forced to jack rates up to over 22% in order to bring inflation back under control. We do not want history to repeat itself.
As we are still coming to terms with the long-lasting effects of Covid-19; here are some economic implications I came across this week in Manhattan. Bloomberg estimates the surge of remote work is depriving the densely populated island of roughly $12 billion per year. The average NYC worker is spending ~ $4700 less per year on meals, shopping, and other entertainment near their office buildings, not to mention the drastic reduction in rented office space. People’s additional disposable income is either going towards savings, higher cost of living, higher interest payments, or other industries such as travel.
We all go through difficult moments. It’s inevitable. Life is suffering, as the Buddhist maxim goes. I’d like to share a passage from the Daily Stoic blog that nicely illuminates this phenomenon:
“In 2021, the author Michael Lewis experienced just about the worse thing that can happen to a parent when his daughter was killed in a car accident. Asked about the grief of losing a child, Lewis said, ‘I can’t control that she died. I can’t do anything about that. All I can control is what it causes, and I’m determined that it causes good things, not bad things. That’s what I’m focused on, is what does this cause? Like, make sure it doesn’t cause more pain.’
When horrible things happen to us, our instinct is always to ask why me? Why this? Why now? It’s understandable, but it’s also irrelevant and unhelpful, because those questions have no answer. At least no answer that you can do anything about or take any comfort in. Besides, life has a better question. One it is constantly asking us, one that Michael Lewis to his credit has fully embraced: what will this cause? Will it put us out of commission or give us a new mission? Will cause good things or bad things?”
“We cannot change anything unless we accept it. Condemnation does not liberate, it oppresses.” – Carl Jung
Have a terrific weekend,
PW
