Finimize - ♣️ How to bet like Bill Ackman

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Today's big stories

US consumer prices rose at their fastest rate in nearly 40 years last month
Bill Ackman has made a big bet on inflation, and you can do the same – Read Now
Software giant Oracle reported better-than-expected results

Federal Reservations

What’s Going On Here?

Data out on Friday showed that US consumer prices rose at their fastest rate in nearly 40 years last month, but the Federal Reserve might want a minute to think twice about its next step.

What Does This Mean?

American consumer prices just won’t settle down: the dastardly duo of supply shortages and booming demand meant prices rose 6.8% last month compared to the same time last year. That’s the fastest annual rise since 1982, and a big jump from October’s 6.2% increase. And sure, a good chunk of that was due to rising food and gasoline prices – they’re up 6% and 58% respectively. But there’s more to it: prices were up across the board, with clothing, used cars, and housing rising 5%, 31%, and 4% respectively versus last year. That's partly why core inflation – which strips out the typically more unstable food and energy prices – rose by 4.9% compared to the year before, and reached a 30-year high.

Why Should I Care?

The bigger picture: The Fed’s got a decision to make.
Investors are expecting the Federal Reserve (the Fed) to accelerate the wind down of its bond buying program at its final meeting of the year next week. While that could cool down rising consumer prices, there’s a snag: the latest jobs report for November showed a weakening jobs market. So if the Fed follows through, it could risk hurting that fragile market – and the wider economic recovery – even further.

Zooming out: ...And so does the Bank of England.
The UK economy isn’t feeling too hot, either: data out on Friday showed it grew by a worse-than-expected 0.1% in October compared to the month before. That’s a sharp fall from September’s 0.6% rise, and that was before Omicron emerged. That might make the Bank of England think twice about raising interest rates, which would make borrowing more expensive and risk further denting economic growth.

You might also like: Here’s how to hedge against rising prices.

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Analyst Take

How You Can Bet Like Bill Ackman

Stéphane Renevier, Analyst

What’s Going On Here?

Bill Ackman’s got a good track record.

And now, he’s betting on high inflation. In fact, his $170 million inflation trade is now worth $1 billion.

Ackman reckons there’s a tricky mix at play: government support, supply disruptions, and pent-up demand have all created the perfect conditions for high inflation.

And he doesn’t see it dropping soon, either. In fact, he reckons there are a few factors that could keep inflation way above the Federal Reserve’s target for way longer than expected.

But there is some good news – and boy, do we need it. See, whether or not you agree with Ackman, you can pretty much replicate his profitable inflation bet.

So that’s today’s insight: why Bill Ackman thinks inflation will rise higher and stay there, and how you can profit from his prediction.

Read or listen to the Insight here