For The First Time In Years, Why People Are Suddenly Talking About Inflation Again

Joe Weisenthal (0:07)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal. And sadly, Tracy Alloway is out today. She is traveling. But I think I could sort of imagine the conversation that we would have prior to bringing in our guest. If she were here, we would probably talk about how, for the first time in a while, we've been seeing market volatility lately, how a lot of the stories that we've been discussing since the financial crisis seem to be mutating.

And at the heart of these big changes that we're seeing is a very important debate about the economy. And that is whether we're really seeing a pickup in inflation for the first time in a long time. And so if you weren't aware, basically since the crisis, we've been seeing this incredibly mellow inflationary environment around the world. Not much pricing power, not much acceleration in wages or anything else like that.

And of course, that's made central banks' job very easy because they're tasked with maintaining stable prices or in the US, stable prices and full employment. But if prices are just really stable, then that makes it easy. They don't really have to do anything for the most part. And so if we're starting to see a turn, if we're starting to see inflation really gain some teeth and accelerating prices and so forth, then that raises the question of whether central banks are going to really have to change their approach since the crisis. And if central banks change their approach since the crisis, that could have potentially big ramifications for all sorts of markets, risky assets, bonds and so forth. So this question of whether the Goldilocks era of inflation, not too hot, not too cold, is going to persist is top of mind for a lot of people these days.

And so answering this question is crucial. And so that is what we're going to try to do on today's episode.

So without further ado, I would like to bring in our guest. His name is Michael Ashton of Enduring Investments. And he is on Twitter at the inflation guy. And he tweets very knowledgably about inflation. Every time new data comes out, he breaks it down. And there's probably nobody there's probably nobody better to help us answer the question of what the heck is going on and what's about to happen.

Michael, thank you very much for joining us.

Michael Ashton (2:40)

Thank you very much, Joe. It's good to be here. And I'm sure I speak for Tracy and saying that I'm really sorry that I'm missing this.

Joe Weisenthal (2:48)

I feel very sorry for Tracy that she's missing this huge issue will be devastated.

But I'm very excited.

Let's talk first about your background. So as I mentioned, you're the inflation guy. That's literally your Twitter handle. You write every time there's a new economic data release that has the latest inflation data. You really dive in and break it down and look, what are the components? Why did it move higher? Why did it move lower? What's your background? How did you get to be the inflation guy?

Michael Ashton (3:20)

Well, let's see, I've been in financial markets since the early 1990s, I guess since 1990 And I've spent a long time as a strategist, fixed income strategist, for a lot of the big shops out there, Bankers Trust, JP Morgan, that sort of thing. And then got into trading around 2000 for Barclays.

And I was trading options for Barclays when Barclays, which at the time viewed themselves as, actually they styled themselves as the inflation house.

You know, at that time, inflation derivatives were just getting started in Europe, and they were just getting started in the US. And Barclays said, you know, we really need to get the US inflation derivatives market going because that's good for Barclays. And I was, you know, I had a good strategist background, a good trading background. I spent a lot of time writing as I do now and explaining things, teaching training and so on. And so I had a very good, well-rounded background to go and be made the inflation guy.

Joe Weisenthal (4:33)

So you come to it from both a theoretical with a theoretical background, but also the trading world background.

Michael Ashton (4:40)

That's right.

Joe Weisenthal (4:41)

Inflation derivatives. So inflation is a an economic measure, but derivatives are essentially instruments that people can use to bet or hedge on specific outcomes in the economy. So theoretically, you could construct a instrument that will pay off X if, say, the CPI rises to 2.5 percent next year or something like that.

Michael Ashton (5:05)