Inflation is Coming. Are You Ready?

Published on
December 10th, 2020
Duration
57 minutes

Inflation is Coming. Are You Ready?

The Kiril Sokoloff Interviews ·
Featuring Michael Wilson

Published on: December 10th, 2020 • Duration: 57 minutes

The most important question in the world right now is whether the 40-year trend of disinflation is ending. Is inflation coming? Are you ready? In this interview, Kiril Sokoloff, Chairman and Founder of 13D Global Strategy & Research, talks with Mike Wilson, CIO and Chief U.S. Equity Strategist of Morgan Stanley. He also chairs Morgan Stanley's asset allocation committee of $3.5 trillion in assets. Wilson has had the hottest hand on Wall Street these past three years and nailed the bottom of the March lows to the very day. He believes a whole new investment paradigm has begun. The winners of the past decade of outperformance will fade and many new winners will dominate and outperform for the next several years. Filmed on December 2, 2020.

Comments

Transcript

  • AN
    Amanda N.
    16 January 2021 @ 00:51
    im not sure if I agree when he says ' computer dont have experience'. think about how 'alphago zero' self thought itself based on all the historical chess results. Then come out defeat chess champion not on one but few games.
  • KZ
    Konrad Z.
    10 January 2021 @ 19:26
    44:17 "a lot of projects will look very attractive". Yes, but only from the borrower's perspective. The lender will rather avoid risking his own assets for such returns. Isn't that the reason negative rates didn't stimulate the economy in Japan or EU? How is the government going to force banks to lend? Even if they do that, they will need first some kind of deflationary shock to justify such extreme measures. That's why I don't understand everyone betting on inflation already in Q1 of 2021
  • MF
    M F.
    14 December 2020 @ 05:21
    Very good interview...rather than watch it all again, could some kind soul tell me why Mike feels "this time its different" ..namely we have had printing and stimulus before without much bond yield back up nor inflation, so why will inflation and higher yields now become a feature when it hasn't before...if he is correct...any views on what types of companies do have the pricing power to pass on higher costs and do even better in an inflationary environment...I do take some issue with the narrative that we get an economic rebound from the vaccine...I just think the logistics and uptake rate--combined with the unwillingness of the public to take the vaccine--means the vaccine doesn't get taken up during the bulk of 2021 and social distancing restrictions will persist throughout 2021.
    • DN
      Douglas N.
      2 January 2021 @ 19:55
      The RV interview with Russel Napier attempts to answer the question why its different this time. I think he describes a seminal inflection point from monetary to fiscal controls, more government control of the economy including the banks which become like utilities, green and social justice spending, the general rise of labor over capital. In addition to this, at one point he claims that the money supply is already 17% up in the US alone, and just waiting for a Covid all clear to begin flowing. I didn't follow it all at the time and don't remember it all either...but you might want to check it out based on your comments. In general, it's a thesis that fits what we have been seeing politically in the US. Socialism seems to be the wave of the future and rather than rail against it (as I probably will continue to do after I re-balance my accounts) I intend to try and salute the new boss while looking for ways to profit from his regime.
  • AA
    Aaron A.
    20 December 2020 @ 15:04
    As smart as these guys are, it’s amazing they believe China’s covid numbers being nonexistent and totally in the clear. I’ve seen numerous reports that China’s cell phone users have declined by 21 million since the pandemic started. Obviously not all deaths, but it’s easy to believe at minimum 10% are deaths. China lies about everything, economy and otherwise.
    • DW
      Denton W.
      22 December 2020 @ 13:46
      I've got a lot of respect for Kiril, but he has the blinders on when it comes to China and other political issues.
  • DC
    Dana C.
    21 December 2020 @ 19:24
    You lost me when you started talking about controlling labor costs. Wage controls lead to many other issues.
  • TM
    Tommy M.
    20 December 2020 @ 08:11
    Can we get the chapters, please?
  • TJ
    Tim J.
    20 December 2020 @ 03:52
    This is one of the better economic real time interviews I’ve seen on real vis. These are big thinkers, not the little bleeding hearts that comment below. If inflation happens, asset prices go up, rates go up, taxes go up, wages go up, all boats go up. Acute big inflation isn’t good. He wasn’t saying higher taxes are good in the narrow sense.
  • JG
    James G.
    16 December 2020 @ 20:31
    There is another pressure keeping inflation down and that is a global shortage of dollars. Once the fiscals spend more than the shortage, then we will get real inflation. Be careful what you wish for.
  • JL
    Jonathan L.
    16 December 2020 @ 18:05
    Inflation disincentivizes 'productive' investment. Before my 'productive' investment yields me anything I must undergo a period of time of uncertainty. That uncertainty is enhanced greatly when I cannot trust the soundness of the currency.
  • GG
    Gary G.
    16 December 2020 @ 00:11
    Quality right here!
  • LB
    Lorenzo B.
    15 December 2020 @ 16:50
    I have a hard time trying to grasp what Michael means with "Real investments" Isn't 100Tn of Global Equity real investment? is it all just due to the fact that we're missing a centralized planner? why would the intervention of a centralized planner (Government) all of a sudden lift the level of productivity output compared to what's been going on in the last few decades? Ok, I dont' doubt we'll get inflation before or after, especially if the Treasury starts handing out free money to everyone (UBI) while the FED keeps on monetizing it. I tend to have difficulties picturing a nice smooth equilibrium as he's depicting of stead, widespread rising wages among all the population, as a result of sound and productive capital allocation through fiscal spending A positive rebalancing from capital value to labor value: that would be great, but I'm afraid that takes a lot more than just the willingness of the Treasury to spend money: it probably may require also a goldilocks of scholarization, fair leveling of the playfield among players, widespread entrepeneurships, compatibile demographics....and more I think we'll see inflation, but I am very very skeptical we'll be able to see the good kind...
  • MG
    Michael G.
    10 December 2020 @ 13:09
    I think Kiril is a great argument for Work From Home. He looks very relaxed and 'un-stressed' which probably allows much more time for reflection and deep thought. Both of which comes through in yet another fantastic interview.
    • OA
      Oliver A.
      10 December 2020 @ 18:21
      Not to mention he apparently owns one of the largest chairs I've ever seen
    • MZ
      Mark Z.
      15 December 2020 @ 07:57
      Reminds me of the financial mr rogers I this interview...
  • DD
    Daniel D.
    14 December 2020 @ 18:56
    High quality content. Thank you!
  • ND
    Nicole D.
    10 December 2020 @ 21:58
    In financial and political conversations, the Scandinavian countries are used as examples of more exemplary behavior however what is never considered in the same conversation is the high tax rates and multiple types of taxes Scandinavian's pay. For instance Fin's personal tax rate is over 53 percent. Denmark, Finland, Norway, Sweden also have taxes that would never be considered in North America such as car tax which makes vehicles unaffordable, entertainment tax etc. European's are taxed to death compared to North Americans which accounts for their higher salaries and their broader social programs in some countries.
    • LF
      Liam F.
      10 December 2020 @ 23:23
      It depends whether one wants to live in a more egalitarian society (European socialist model), or a disparately unequally one (USA capitalist model). The irony in the USA is that we DO have socialism. But it's only for the financial elite: 1) Monopoly is encouraged or at least overlooked. 2) Privatization of the profits when times are good, socializing the losses when times are bad. 3) Industrial-complexes galore Back when the USA had a booming middle class, taxes were much higher. Since Reagan the middle class has been on a downward spiral as tax rates grind down.
    • RB
      Robertas B.
      11 December 2020 @ 13:07
      Living in Sweden paid over 58% personal tax on yearly bonus ;(
    • LS
      Lemony S.
      11 December 2020 @ 15:55
      A greater problem is that the same egalitarianism that allowed for more functional socialism for the Europeans has led to many of the countries undoing. It allowed people dissimilar to come in and not care about the home country, for global and welfare/anti sovereign reasons - another part of the slow global plan. These countries are also not solvent, as they have done similar things on the micro scale, and produce fewer children. Note that the US became less productive, had a greater identity crisis, and more problems with "capitalism" after 1965. Anyone who knows our history realizes that this led directly to the degradation of the entire society, which is why you see the rich increasingly able to lobby the larger central government. European, advanced societies and economies, when Europeans no longer comprise them, will of course fail. Sorry to deliver the bad news to the dystopian, foolish egalitarians.
    • PP
      Patrick P.
      13 December 2020 @ 02:32
      This reply for LS.... 1965... go back and look at who was President ... look at all the programs he put into place that haunt our economy today. Medicare, Medicaid, HUD, Sect 8 housing, The water quality act (led to EPA), War on Poverty (destroyed the black family) Vietnam War, The Fair Housing Act, Immigration and Naturalization Act, Voting Rights Act, Economic Opportunity Act, Food Stamp Act, Head Start, National Endowment for the Arts, NPR and PBS, Urban Mass Transit Act .....and I could list them all but I do not have enough space .. here is a link.... keep in mind LBJ was our worst President .... https://en.wikipedia.org/wiki/Great_Society
    • LS
      Lemony S.
      14 December 2020 @ 18:42
      What's worse is that on top of it, with the immigration act, we lost our identity. And the people were lied to. By you know who, of course.
  • LS
    Lemony S.
    11 December 2020 @ 21:01
    Did anyone find the billionaire complaint about expensive carpenters odd? Especially for the bleeding heart labor wage angle they take? I actually laughed out loud.
    • MS
      Michael S.
      13 December 2020 @ 05:28
      How do you think he got to be a billionaire? He can just analyze carpenter wages better than you. What if his housekeeper wanted $1,000 per visit?
    • CG
      Christine G.
      14 December 2020 @ 01:41
      I don't think he did begrudge the increase in wages for labor.
    • LS
      Lemony S.
      14 December 2020 @ 18:40
      I just found it amusing that he is used to the lowballing and then when personally it comes down to it, he complains. But he supports public policy of deranging markets by forced wage increases. I'm not even sure I've ever heard him be against globalist disruption of the American worker. That's why I point these things out. They pick and choose all sorts of positions and mostly they turn out to be selfish or abusive to others, sadly.
  • NI
    Nate I.
    14 December 2020 @ 05:13
    Thanks to both of you!
  • JT
    Jayne T.
    12 December 2020 @ 13:37
    Great interview. I would like to know what Mike sees as a fat tail’ risk, and the probability of it occurring. Also, Kiril said that inflation is like being pregnant—it’s never just ‘a little bit’. This was glossed over and I believe Kiril thinks that if inflation comes, it comes big. Would love to get Mike’s thoughts on that as well. Thanks.
    • NL
      Nikola L.
      13 December 2020 @ 22:16
      In regards to inflation, my understanding is – inflation comes big but real interest rates stay flat or slightly negative.
  • SR
    Steve R.
    10 December 2020 @ 16:47
    Gentlemen, excellent interview. However, I disagree with one aspect of "conventional wisdom:" Teachers are not underpaid. My mother was a public school teacher and my wife is a retired public school teacher. There are several points of evidence that teachers are not underpaid: 1. Mr. Market says so - If a suburban school in a good district advertises open positions, there are many more applicants than positions. 2. Many suburban schools pay less than city school districts, but city district positions go unfilled - it must no be "the money." 3. Results. How are American public school graduates fairing against international competition? If public school teachers were underpaid, our graduates would be educated and our school districts in the "black" financially. 4. I agree that outstanding teachers are underpaid - someone who can impart knowledge (and keep control of the class) in an inner city school is worth their weight in gold. However, poor teachers who can not teach lower grade kids to read or middle school kids proper grammar or math are not worth anywhere near what they are paid (what is the going rate for baby sitters?). To say "teachers are underpaid" is the same as saying "investment advisors are overpaid." Some are overpaid and some are worth every penny and more.
    • LS
      Lemony S.
      10 December 2020 @ 18:29
      It's worse: teachers salaries and benefits are actually the biggest scam of the 20th century. There is not a single teacher, certainly in the blue states where union stuff is out of control (public sector), who wasn't grossly overpaid and overbenefited for the last 60 years. Period. I challenge anyone to name a more overpaid position in society. I'm waiting.
    • pt
      popejumpingjohnpaul t.
      10 December 2020 @ 19:13
      if Americans had better teachers there would be less idiots in the country and it wouldnt be on this ridiculous path to self-destruction., investment advisors are irrelevant to society (throw a dart), teachers are essential.
    • SA
      Sasha A.
      10 December 2020 @ 20:41
      Then why are math and science scores so much higher in places like Singapore, Taiwan, S Korea, Japan and Finland so much higher than in the US?? Those are all countries where teachers earn 2-3X what they earn in the US.
    • SR
      Steve R.
      10 December 2020 @ 20:58
      Sasha, you are implying that our current population of teachers is doing a poor job and that if we paid teachers more, we would get better people to teach. Does that mean you favor firing all current teachers due to poor performance and open applications at hirer salaries for better people?
    • tc
      thomas c.
      10 December 2020 @ 23:55
      Agreed. I know some teachers who put their heart and soul into educating kids and some who only want to punch the clock. But teachers unions are the rot of the education system to go along with dumbed down imposed curriculums. Every kid needs a chance to do his best regardless of where he is. US education needs a total overhaul and rethink to do that.
    • LF
      Liam F.
      11 December 2020 @ 01:21
      That's right. Let's beat up on teachers!! They add so little value and extract so much wealth compared to CEO's, hedgies, quants, and vulture capitalist. Plus they belong to those dirty, commie, unions. The horror, the horror!
    • LF
      Liam F.
      11 December 2020 @ 02:27
      According to Glassdoor, San Francisco Bay Area teachers are paid 30% over the national average and cluster between $41-58K annually. A few go as high as $71K. For those who know the Bay Area cost-of-living (super high), even the top end is not a particularly great salary. By comparison, in Boise ID, they're paid 10% below national average and cluster between $29-38K annually. Not sure how this translates in COLA terms.
    • LS
      Lemony S.
      11 December 2020 @ 16:10
      It's not beating up on teachers to realize that most people's (children or adolescent) success is based on family and genetics. Another red pill for the dystopian egalitarians, sadly - and these are the big government, public sector union (I have no problem with private sector unions) and anti family types. The harsh reality resource allocation is the most inefficient in "education." Twin, IQ and race studies show that you aren't going to have equal outcomes - again, the lying needs to stop. That doesn't mean don't teach kids solid basics. It just means Jamal isn't going to have the same type of job as Jeff. If you doubt that, just look at a nearly all of the RV headliners. Don't be a dolt, stop the lying, people.
    • ST
      Sam T.
      11 December 2020 @ 18:39
      I think comments in this thread are conflating two points here that can both be true. 1. Teachers are not underpaid according to what the free market is willing to pay for them. In fact, one could argue that they are overpaid since their salary is subsidized by the government. Without Government subsidy, teachers would be paid much less by the free market. 2. At the same time, teachers are underpaid when you consider the value they create for a society as a whole. I think it is fair to say that the free market grossly underprices education when you consider the long term value it created across the whole country.
    • LS
      Lemony S.
      11 December 2020 @ 20:59
      Value is only really created beyond secondary school (High School), and that's be the upper 10% of the population that should only really be going into high level stuff and have the talent for it. When you consider the utter propaganda, it would be far more efficient for mothers to just home school their kids through H.S. It would also be more healthy and better for communities in that they could still do the same with activities and sports, minus the ripoff union and property tax stuff we've seen. And the political propaganda and straight false information or anti science angle of it all - think of how damaging this is, they don't even pretend to care about the truth anymore, just political angles to keep the money flowing in. While it lasts.
    • MF
      M F.
      13 December 2020 @ 15:52
      jumping in hear...shasha says teachers in Singapore make 2-3x that of the US...i really don't think so...and the hidden benefits of US teachers is amazing...I know 5th grade teachers that while making perhaps lower basic wages at say 60-70k a year, (mind you for 2 months off a year), get to retire at like 60, and receive near full wages like 50k a year for the rest of their lives...investment bankers don't even get defined benefits for the next 25 years of their lives..if you do the math and include the defined pension, the teachers are making a lot for doing nothing in the final quarter of their life.
  • sl
    shane l.
    12 December 2020 @ 23:12
    AS a Morgan Stanley Client, great to see Mike W. view of the state of the markets.
  • JS
    Jon S.
    12 December 2020 @ 22:31
    Mr. Wilson, "Taxes going up is good..." at time stamp 21:29. Seriously? I'll give him the benefit of the doubt based on the wage discussion that these are corporate taxes. However, if he is alluding to personal income taxes going up as good...well then I vehemently disagree and propose congress starts with raising the income taxes of equity strategists of large financial institutions.
  • DR
    Derrick R.
    12 December 2020 @ 17:28
    Respectfully would have preferred to have Steven Van Metre or Jeff Snider run this interview so we can hear both sides
  • LS
    Lemony S.
    10 December 2020 @ 18:39
    Michael is off-base at 24 min on the productivity, because the real issue is a broken monetary and government system which the boomers and older have by the balls. The boomers want more welfare than anyone, more bailing out of the pensions or retirement devices, and still hold all the top position. They are the ones that "won't pay labor" or actively lobby congress so that foreigners can make money and not Americans. Productivity might be ok, but it will be dwarfed by the old generational/political wars that are pro selfish for all these boomers and oldies, which will on balance stifle any "investment." And that's if we even bother to find again our love for freedom that you oldies all hate for the same reasons.
    • DP
      Duane P.
      10 December 2020 @ 19:44
      Bingo!
    • LS
      Lemony S.
      11 December 2020 @ 16:04
      I usually get a lot of hate but I sense that the BS propaganda on many issues is starting finally to lose steam. Let's counteract the disinformation campaigns with honesty so that we can inform everyone, Duane, that we are all actually in this together - but with that we first MUST tell the truth, then cooperate. Easier said than done, of course, because so many people feel owed or entitled to XYZ at this point, regardless of age.
  • RG
    Razmig G.
    11 December 2020 @ 13:59
    tour du force!
  • MR
    Marco R.
    11 December 2020 @ 13:11
    What a great opportunity to listen as a „normal guy of the street“ to such financial experts. Only possible through RV. Great job!!!
  • LB
    Leslie B.
    11 December 2020 @ 03:24
    I don't think that kind of fiscal stimulas will be politically viable in the long term. Senate will block.
  • AR
    Alexander R.
    10 December 2020 @ 19:01
    I am very simpathetic to the inflation view I think ultimately we will have inflation and a bad one The epic bubble can ether deflate- not an option in the world of fiat money and unlimited money printing or go through currency collapse- probably the pass we will go through With that in mind : 1) why does Fed is buying TIPS 2) why do we have record short positions in treasury and dollar ? 3) why most of the commodity upside is currently in paper and not physical market, oil is an example 4) it all look the me as an attempt of manipulation in the short term with inflation narrative in deflationary world 5) till Fed prints money and gives it directly to people, till we get full MMT implemented we are in deflationary world And if they want to creat inflation they need a " bigger boat " a bigger printing press, it probably coming but is it really 2021 story ?????
    • Am
      Alex m.
      11 December 2020 @ 03:10
      Nice summary of the tactical risk moving to inflationary portfolio too early...
  • TS
    Theodoros S.
    10 December 2020 @ 20:45
    However we should mention that machines are getting more "experience" so that would be a problem...in the future
    • PS
      Patrick S.
      11 December 2020 @ 01:31
      Actually AI is all about learning. The AI machine program should be all about learning. review history, So, Mike’s study of history will be quickly eclipsed by machines that can review multiple similar historical scenarios extremely fast and then assess the probable outcomes of previous similar scenarios. Where it becomes interesting is if many machines are programmed similarly. The outcome then become “baked in the cake”. It becomes a truly efficient market where all information leads to a certain outcome!
  • DR
    David R.
    10 December 2020 @ 23:16
    Good video title. The ongoing slow-motion collapse of the US dollar will continue and possibly gather pace later, subject to the occasional dead cat bounce, which will ramp consumer price inflation in the US and drive the US standard of living down for average folks and the poor. Indeed this has already started in 2020.
    • DS
      David S.
      11 December 2020 @ 00:10
      David R. - Your understand of the FX market in much more in depth than mine. I will be happy when investors realize there will be no need for a reserve currency. It is only partially needed now until the Swift Payment System is replaced with direct multi-currency payment systems. It will be interesting to see what fiat currencies investors will choose for short-term excess funds until the next trade. (Long term there are many options.) I hope it happens soon enough for me to see how it will turn out. DLS
    • DR
      David R.
      11 December 2020 @ 00:55
      David S - Alas I understand little, especially where to best store cash or short-term excess funds held for trading. But I agree with you that central bank digital currencies are likely to undermine SWIFT and also the dollar. Along with other consequences but again, I understand little.
  • DS
    David S.
    10 December 2020 @ 23:08
    If Senator McConnell continues to believe that the best bet for his party to win in 2022 is a scorched earth policy, it will be very difficult to increase inflation by the printing press; i.e. an angry midterm voter will vote against the President's party. DLS
    • DR
      David R.
      10 December 2020 @ 23:22
      I don't know but does he have control over the Treasury-Fed? (same thing now). My understanding is he can only have an impact on spending. If Mr McConnell blocks (monetized) deficit spending or MMT, already in progress there, then maybe the new admin will then instead spend by executive order. I know little of how it works. But executive orders seem to have already become a common, standard operating procedure.
    • DS
      David S.
      11 December 2020 @ 00:20
      David R. - Congress officially controls the purse. They have given up some control for reelection plausible deniability. With executive orders the President can move some money around, but the big bucks need Congressional approval. There are many games played with hammer and tongs. DLS
  • PU
    Peter U.
    10 December 2020 @ 14:46
    Disappointed in the softball questions and the group think in this interview. No decent follow up questions. Lots of bromides sprinkled throughout. Very much like a CNBC interview. Again very disappointed.
    • RC
      RUBEN C.
      10 December 2020 @ 15:11
      I understand this has not been one of the best Kiril roles as an interviewer. He might not be feeling well that day.
    • JL
      J L.
      10 December 2020 @ 16:34
      Found the dollar bull. It was an informative and substantive conversation. Groupthink and CNBC? Really? On CNBC a train of thought doesn't last more than two minutes. Argue the flaws or lay out a counterview if you don't like the outlook.
    • tc
      thomas c.
      10 December 2020 @ 23:58
      Kiril is most knowledgeable but his interviews are always softies. This goes back for years. He always panders to the views of the interviewee
  • JD
    Jason D.
    10 December 2020 @ 22:17
    Simply one of the very best interviews yet on Real Vision. Well done Mike and Kiril!
  • JG
    Johan G.
    10 December 2020 @ 22:15
    Thanks Kiril and Michael, Great conversation, with deep understanding of the broader society and finance. I agree with the inflation view. Its coming; slowly at first and then will surprise on the upside. The swing from monetary to fiscal policy is the key, and will put money in spending hands. Couple that with a stepening yield curve and you get bank lending again. Repression here we go!
  • DK
    David K.
    10 December 2020 @ 22:09
    I printed the transcript and read it twice so far. The greats embrace and almost revel in their misadventures.
  • TS
    Theodoros S.
    10 December 2020 @ 20:06
    Japan and metals is certainly a buy!
  • TS
    Thomas S.
    10 December 2020 @ 16:13
    Great discussion. Thank you. Lots of food for thought and ideas for further personal research.
  • RC
    RUBEN C.
    10 December 2020 @ 15:09
    Thank you for giving us the opportunity to listen to such great minds. The world would be a far better place if we all could have a little of access to such people. Thanks for democratising financial education so we can all improve our freedom and be happier. R