![]() ![]() And, you know, basically oil drillers just kept drilling, even if they weren't free cash flow positive, just low interest rates and new technologies came together, and they just, you know, they didn't ask if they should, they asked if they could, and they could, and so they just kind of made a lot more oil. And so, we entered this period of structural oversupply. And that's because North American shale oil ramped up production faster than global demand kept going up. And so we've been in this period of oversupplied oil. You know, ever since 2008, we've basically been in an oil and gas bear market, and especially the past five or six years. And so one of the areas that is still being sticky is higher energy prices. And then longer term, we're also seeing a risk for potentially energy driven inflation. But, a big question is whether now we're going to have these kind of very large structural fiscal deficits, or where to go back to kind of a more baseline, you know, say 5% of GDP deficit, which is still huge, and in the kind of historical context, but it's different than more of a, you know, kind of a multi trillion dollar infrastructure bill added on top of that, and so that's kind of a big political question to watch over the next year or so. continues to do more stimulus, like particularly in the form of infrastructure stimulus, right, so we're past the fast-acting kind of adrenaline stimulus, we just kind of give out checks and stuff. So, one big one, for example, is whether or not the U.S. But they depend on a couple decision points. Now, longer term, there are still multiple factors at play, they're probably resulting in a more pro-inflationary environment. And so, by most metrics, we are running hot in many ways, but the rate of change is likely to cool off a little bit. And if you even just say inflation indicators stop going up now, and they just kind of go flat, we would still be elevated by the end of the year. ![]() And, you know, right now, we're above that. Now, if you look longer term, I mean, the Fed's long term target is about 2% average inflation the way they measure it, which is PCE. So 5% could be the peak for this particular, you know, kind of moment in time, and this is in year over year terms. So the year over year numbers are likely to be lower than 5%. And so as we go into, you know, June, still has pretty low base effects, but as you go into July and August, especially, those base effects get harder. So that stimulus driven things that supply chain driven things, all sorts of problems like that. But that additional 2% was largely, you know, actual inflation. ![]() And, you know, somewhere around 3% of that is, you know, if basically, if inflation did nothing abnormal over the past few months, and you just compared it to that May 2020 period, because that was a very low point for inflation, you'd have roughly a 3% year over year period, right, so, so maybe 3% of that is base effects. And so, the base effects are a pretty big figure, like, for example, we saw roughly 5% year over year CPI print, this past month. I think, you know, there are a few layers of inflation here, and some of those are more transitory where others are more sticky. ![]()
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