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Kyle Bass Believes Real Inflation Rate is Around 12%

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EDITOR NOTE: Producer prices are up 6.6% year over year. These are the costs of production that manufacturers will eventually transfer over to you, the consumer. Kyle Bass, founder and chief investment officer of Hayman Capital Management believes the producer price index presents “cooked numbers.” The real inflation rate is more like 12%--almost double what’s been reported. What this means is that any cash you stash away in a bank account will lose up to 12% annually. There is no reason to store money in any place where it will lose value, gradually at first, and rapidly in the near future as inflation accelerates. At this point, the only safe haven assets that will not only preserve your capital but also grow it are non-CUSIP gold and silver. Your only other choices are to risk your funds in an overvalued stock market or to allow them to be gradually stripped of their purchasing power.

  • Kyle Bass, founder and chief investment officer of Hayman Capital Management, took issue with the latest producer price statistics released Tuesday, saying that the actual inflation rate is probably around 12%.
  • In an interview with CNBC, Bass explained that the hotter-than-expected PPI reading comes as a chain-weighted number, which doesn't tell the full story of price increases.
  • "These are numbers that are designed to artificially be low," he said. "If you look at a non-chain-weighted index of inflation, we think it's running about 12%."
  • Bass noted that the Federal Reserve's easy-money policy has added about 34% more money to the system in the last 14 months, a move that effectively cuts into the consumer's buying power.
  • "That means people that have money in the bank, in their savings, are losing, call it 5% to 12% of their purchasing power now annually," he said.
  • The famed investor advised people to move out of cash in order to stay ahead of inflation. He pointed out that stocks keep up with about 85% of inflation, so investors in the market are "not going to lose too much" by putting money there.
  • However, Bass said that investors in the stock market would have to score a return of "a mid-teens number" to keep up with inflation.
  • Government data released Tuesday showed that the producer price index climbed 0.8% in May. Economists had generally expected an increase of around 0.5%. Core PPI came in at 0.7%.
  • Compared with last year, the PPI was up 6.6%. This marked the largest increase since at least November 2010, when the 12-month data was first calculated.

Original post from Seeking Alpha

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