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inflation which people expect to fall off a cliff doesn't fall off a cliff as fast or as meaningfully as people want and so I will explain inflation as three different chapters and we've seen the first two chapters play out so 2021 chapter one was all about energy inflation and you know we all talked about having almost ten dollar gas at the pump and what does it mean for everybody and it caused that initial Spike in inflation and then we had it come off and sax called this he said you know we're going to have this sort of double hump and 2022 was really the story of goods inflation right all these prices and all of these things went up because the input costs went up and we all had to Bear the implications of that but then that started to ebb now if you looked at the tail end of 2022 what I found super interesting was the number of articles I saw about wage inflation whether that was Biden using an 1800s era law to prevent a Railroad Strike the number of states that increased minimum wage the trend around unionization so in general my thought is that the pendulum is swinging very markedly away from capital and towards labor and as the labor participation rate stays low and continues to go down and also it's compounded by an unemployment rate that may go up right people are it's going to be harder and harder to get people to do the work you need at the company you have unless you pay them more and if that gets exaggerated then inflation will stay where it is it won't be as muted and it won't fall off a cliff as people want it'll be persistent that's my big contrarian got it wager for this year is that we that is quite sharing we see wage inflation that keeps inflation not going down as much as people want here's what I think is going to happen this year my big prediction is based on I think the world has too much debt I think that the economic slowdown coupled with Rising interest rates globally and a dearth of uh kind of asset Capital inflows means that there's going to be a lot of issues with a number of debt markets around the world particularly kind of emerging sovereign debt just to give you guys a sense Global debt is about 235 trillion dollars in public and private um you know that's somewhere between five and fifteen trillion dollars of interest payments a year depending on what the net rate is on 96 trillion dollar Global GDP and there's another trillion and a half of unfunded liabilities in the U.S and pensions and Social Security and all that sort of stuff I think this is the year where a lot of the debt markets start to unravel the the um the entity that steps in to try and support these um unwinding moments is the IMF and I think that no matter what the IMF does they're going to look bad I think that the you know it's sort of like like Jerome Powell this this past year right like you you raised rates too late you raise rates too quickly no matter what you do it has some adverse effect and impact it's either inflationary or it impacts growth and so I think the IMF is going to get a lot of heat for either acting not too soon uh or sorry not fast enough or or acting too aggressively and causing inflation as a bunch of these markets face credit risk this year so My Big bet is the IMF is going to play a major role and we're going to be talking a lot about the IMF later this year I think as a result the IMF will get a lot of heat and you'll end up seeing a lot of pressure and political you know just like we blame NATO just like we blame Jerome Powell and the FED will end up blaming the IMF for a bunch of problems uh that'll arise but the natural physics of what's going on is the world has too much debt and not enough growth to cover the debt the cost of debt that's it okay um as you guys know there's been a big shift in capital allocation a lot of the folks who were writing big checks into growth rounds are retreating back to writing smaller checks and seed and a rounds they don't want to write the 20 million dollar series B they want to write the five million dollar seat in a round uh no one wants to kind of follow the valuation no one wants to set the valuation for these growth businesses particularly if after this round you know you need another big round of capital and no one's sure if someone's going to be waiting on the other end as a result we're seeing tons of these businesses run into Capital infusion walls they can't pivot I think we'll see what we saw in the.com bubble we're 99 and a half percent of these companies actually die the half percent that we are going to emerge as the next hundred billion dollar Enterprise is the Googles and the Amazons of the world so there will be light at the end of the tunnel for the winners but generally there are hundreds of companies in Hardware in sinbio in biotech and high growth Enterprise software that require significant sales investment expense a lot of these businesses where the capital intensive nature of the business just doesn't have the market for it right now and my my Biggest Loser for business in 23 is the consumer I just don't understand how the consumer isn't going to finally tap out in this economy I mean they they have a mountain of personal debt credit card debts at all-time highs I think the average credit card rate hit 19.6 last week and is expected to rise even further uh the mortgage rates are above seven percent now so forget about trying to buy a new home or uh sell your home and your stock portfolio is down too and now layoffs are starting to pile up so I just don't understand how we're going to avoid a recession and you saw you know Kashkari saying that right the fed's gonna keep raising 5.4 percent is prediction you know I don't understand how if if rates are at five and a half percent that doesn't finally break the back of this economy and uh we go into recession
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