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Get Ready for 'Sticky' Inflation, a Top Investing Consultant Warns

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Inflation has been worrisome for Maria Fiorini Ramirez for the last two years, ever since the coronavirus pandemic began causing disruptions in the economy.

Now the financial services veteran argues: “Inflation will stay very sticky — like Krazy Glue. We have yet to see all the price pressure work its way through the system. The pace may come down two years from now,” she tells ThinkAdvisor in an interview.

Once dubbed “The Fed Psychologist” for her astute analysis of Federal Reserve moves and international monetary policy, Ramirez is president and CEO of Maria Fiorini Ramirez, an independent global economic and financial consulting firm based in New York City, with offices in Florida and California.

Her MFR Research helps clients, like the state of California and New York City, invest in securities, largely short-term bonds and new issues.

MFR Securities is her BD for large institutions, states and municipalities, for which it provides research, advice and execution.

In the interview, Ramirez offers her forecast for the U.S. economy, whose future improvement, she says, is contingent on filling the numerous job openings many workers are snubbing.

She has an upbeat outlook for the stock market mainly because an end to the supply-chain disruption “will boost stock prices,” she says.

As for the prospect of interest rate hikes, the Federal Reserve and other central banks globally are “way behind in their ability to bring interest rates closer to inflation rates,” she contends.

She spoke no English when, at age 14, Ramirez and her family immigrated to the U.S. from a small town near Naples, Italy.

Her first step into financial services was a clerking job at American Express Banking Corp. Evenings, she attended Pace University, where she earned a B.A. in business administration/economics.

Before working for six years at Drexel Burnham Lambert, she was with Merrill Lynch for a decade as a fixed income market analyst.

In 1992, she founded her own independent firm after two years as a wholly owned subsidiary of John Hancock Freedom Securities.

At Merrill, which she joined in 1974, when she was in her early 20s, she blushed at jokes told in the overwhelmingly male trading room.

Decades later, she would lead hundreds of traders — overwhelmingly male — to safety from the South Tower during the 9/11 World Trade Center terrorist attacks, a horrifying experience she talks about in the interview.

ThinkAdvisor recently spoke with Ramirez, who was on the phone from Florida.

Her not-for-profit work varies from educating children in India to building water wells in Kenya.

In 2004, she was awarded the Ellis Island Medal of Honor.

Here are excerpts from our conversation:

THINKADVISOR: Do you foresee inflation going down; and if so, when?

MARIA FIORINI RAMIREZ: No. I don’t see it going down at all. Inflation will stay very sticky — like Krazy Glue.

Prices may adjust a little bit when the [economic] disruption comes to an end. 

But once minimum wages and other compensation go up, they don’t come down because insurance premiums go up. Everything goes up.

The pace of inflation acceleration may come down two years from now. But we’re far from that. We have yet to see all the price pressure work its way through the system. It’s going to take at least another year.

Were you surprised when inflation started to rise so fast, or were you expecting that?

We’ve been worrying about rising inflation for two years now because of disruptions in economic activity when everyone around the world started getting sick [from the coronavirus].

But we had no idea it would last this long. However, disruptions create problems, and those problems are reflected in higher prices.

We’ve always thought that, maybe, inflation was more permanent in nature. And with the supply-chain disruption, we couldn’t have been more convinced than in the last six months.

What are your views on interest rate hikes, which are anticipated to start in March?

The Fed and central banks around the world are way behind in their ability to bring interest rates closer to inflation rates. They’ve been lagging behind for about 12 years. 

The Fed has a lot to do. If they increase rates by only a quarter of a percent in the first quarter, the next four quarters would still leave the Fed funds rate of one and a quarter percent, when inflation is running above 5%.

How does this affect retirees and pre-retirees depending on fixed income savings?

Keeping money in the bank leaves you with less money to spend every day that you keep it there. You have to put your money in stocks. 

You can’t leave it in fixed income because it’s at the bank, and the banks are giving you nothing at all in interest.

Broadly, what’s your forecast for the U.S. economy this year?

The economy will do better if all the job openings that we have can be filled. There’s a lot of demand for people. 

Due to the pandemic, working from home has accelerated, and different ways of life in different places and different ways of spending [have emerged].

People will be able to continue to spend, but the spending will be different. It won’t be going into stores in the mall. More of it will be online.

What will they buy predominantly?

More for improving quality of life, such as their housing. A lot of people are moving to bigger places outside large cities.

So housing is going to be strong, as will everything that goes into [furnishing] a house with goods.

What’s impeding consumer spending right now?

The distribution problem [shortages] is really horrendous. So the sooner the better when they can get things off the ships and onto trucks and trains, and into stores. 

That’s going to help sales and businesses. And it will boost companies’ stock prices because earnings will be good since the companies are passing on their higher prices.

What’s the biggest threat to the U.S. economy?

Politics — what’s going on in China, for example, and what’s going on with Ukraine and Russia. Those things are not predictable.

I’m really fearful because there are aggressors in the world today that have a different mindset [versus earlier eras]. They’re very unpredictable.

What’s your outlook for the stock market for this this year?

The stock market will go up about 15%. Companies have been able to pass on higher prices. Earnings will stay pretty good. 

What’s the biggest threat to the stock market?

Instability in the world. It’s political. In certain countries [people] want more power.

Some say that the pandemic doesn’t matter much as far as the stock market is concerned because it’s done so well despite the effects of the virus. 

What are your thoughts about controlling the pandemic?

The pandemic is impossible to control because we don’t know how many times the virus will morph into something else.

The pharmaceutical companies are lagging in how to take care of it, how to take care of people and how to prevent it. But I don’t think it’s preventable because of how it changes.

What are the implications?

I’m not a biochemist, but I’m on the boards of a hospital and insurance companies, and I’ve listened to a lot of experts that aren’t [opining] on TV but who do this for a living. 

What they tell me is that it’s very, very difficult to forecast what the next stage of this virus is going to look like. 

But we know that we have to live with it and that it’s constantly going to change. Over time, it will become more like a flu, maybe, to the extent that more people have been vaccinated or get [COVID]. 

Maybe it will turn into something that’s less deadly, but I really don’t believe much of what I hear about the virus on TV.

What might the next big market-moving event be?

If there is one, it would be more on the downside than the upside. [Within the U.S.] we know we’re dealing with [issues like] higher prices and shortages. 

But when things come from the outside, from left field, as with the pandemic, there’s no easy way of dealing with it. 

Globally, we’ll never get over this.

In 2001, Americans were shocked by the exogenous event of terrorists attacking the two World Trade Center towers in New York City. At the time, your office was across the street. 

By chance, you were in the South Tower on 9/11. How did you escape?

I had a meeting on the 92nd floor of the North Tower, but I decided to first see a guy in the South Tower and was planning to see the other company in the North Tower afterward.

But of course, I never got there.

When I arrived on the 54th floor of the South Tower, I saw pieces of paper and metal coming down [outside]. 

The guy I was meeting with told me, “I think a plane hit the top of the building.” 

Actually, the plane had hit the other building. 

I screamed and told all the traders in the room that I thought we should get the hell out of there and take the stairs.

I panicked. I said, “We have to run out. I don’t know what’s going on, but I don’t feel good about this.” 

Maybe I felt that way [partly] because of an ominous nightmare I had the night before of being on a plane with my family.  

A lot of the guys in the room followed me to the stairway. I encouraged hundreds of men to walk downstairs with me.

What happened then?

After walking down about 15 floors, I took the elevator, which I know you’re not supposed to do. But it was packed.

I walked out of the building just as the second plane was coming and hit the [South] Tower, the one I’d been in. 

It hit the building at an angle. Closer to the bottom of that angle was the 54th floor. 

It was the Tower that fell first.

What sticks in my mind most is a woman in a red dress who fell from the Tower. She had broken through a window. I remember the red dress flying and her landing. 

I thought, “Am I living through this, or am I dreaming it?” 

I bought a disposable camera at Duane Reade and took pictures all the way back to our apartment.

You were so lucky that you didn’t get stuck in the elevator and that you got out of the building!

About 10 years ago, a guy came over to me as I was having dinner in a restaurant. 

He said, “I want to thank you for saving my life because I followed you downstairs when you told us to leave.”