Sat, 11 Dec 2021 09:55:22 +0000
U.S. CPI year-over-year inflation, which was 6.8% for the latest reported month (November 2021), will soon reach approximately 7% on a year-over-year basis.
“then it went to 6.2. Now it's 6.8. Looks like it's headed to 7%.” View on YouTube
US CPI year-over-year inflation reached 7.0% in December 2021, matching the prediction made from the 6.8% November reading.
Around 5–6 years after late 2021 (i.e., by approximately 2026–2027), the increased housing leverage enabled by higher conforming mortgage limits and extracted home equity could lead to a severe economic or financial crisis reminiscent of 1929 in the United States.
“and then, you know, to your point, Friedberg they spend it or they invest it or they, you know, it could be a real disaster scenario, um, in 5 or 6 years... No, no, this is more like 1929. Kind of.” View on YouTube
The predicted 5-6 year window (roughly 2026-2027) hasn't fully elapsed and no 1929-style financial crisis has occurred as of this check.
If, in late 2021 or early 2022, Senator Joe Manchin kills the Build Back Better bill and further large-scale fiscal stimulus is halted, then in calendar year 2022 the U.S. economy will experience a "massive relief rally" (substantial positive move in risk asset prices) and strong economic performance, and the Federal Reserve will not need to raise interest rates as aggressively as otherwise projected, resulting in a relatively soft economic landing rather than a sharp downturn.
“Manchin would do Biden the biggest favor by just putting a bullet in this build back better plan, because I actually think there'd be a massive relief rally and the economy would take off like a rocket next year. If you just got government out of the way, they have printed enough. The best thing that could happen is they stop this pumping and stimulus, and then the fed doesn't have to raise rates as aggressively next year. And we could let things have more of a soft landing as opposed to the sudden austerity, which is whipsawing the economy.” View on YouTube
The opposite occurred: Manchin did effectively kill the original Build Back Better bill, but 2022 was a severe bear market (Nasdaq -33%) rather than a relief rally, and the Fed raised rates aggressively (multiple 75-basis-point hikes) rather than easing off, producing a hard landing, not a soft one.
Following the 30–40% correction in late-2021 public-market valuations for growth and SaaS stocks, private venture valuations will also decline in response to those public comps, with the effect beginning to appear in venture deal pricing in the subsequent period after this episode (late 2021 onward).
“We've already seen in the past five weeks, we've seen 30 to 40% correction in the public markets for growth stocks and SaaS companies. That is absolutely going to trickle down to venture valuations. I think it already has.” View on YouTube
Venture valuations did decline sharply following the 2021-2022 public-market correction, with down rounds becoming common through 2022-2023.