Inflation getting real
And JPow, Janet Yellen and their cast of merry cis and trans people have no ability to stop it
By now, you have seen the headline that inflation was 8.2% in September. For the “inflation is transitory” crowd, this is bearish news and the markets reacted as you’d expect, moving from 40 points up on the S&P to down 70 in an instant.
In short, the federal reserve is losing, having waited way to long to stop the stimulus and start raising interest rates for a virus we can now ALL admit was never going away and wasn’t that dangerous to the vast majority of working age and school children. In short, the global economy is F@&k’d, COVID policies are to blame, and “Putin’s price hike…” is the most pathetic political talking point of all time. Let’s review.
Commodities are expensive because they are scarce, oil and natural gas in particular but also lithium, coal and copper. Scarcity can only be resolved by investment, which requires permits, certainty and workers.
Food prices are up tremendously, and regardless of the “official numbers” we are fed, one has to look no further than Pepsi’s revenue this quarter, up as a result of a 17% price increase. I had lunch yesterday WITHOUT booze with one other person and the bill was $97, including tip. The truth is 8.2% doesn’t even begin to cover the real cost increases citizens are seeing and to be honest, it’s not even winter yet when we run in food stores, and energy prices go through the roof.
But what’s most remarkable about the present predicament is that no one in Washington and at the Federal Reserve itself seemed to see it coming. They spend all their time on diversity and equity and inclusion and promoting people based on sexual preferences or the color of their skin but overlook the only thing that matters! Competence.
What happened? Our policy makers paid people to not work. As a result, many quit the workforce and haven’t returned. Those that are still employed? Many bitterly complain about being forced to go back to the office but make no mistake, their absence is why productivity is WAY down because they are walking their dog and picking up their kids and working out during the day. The piper is beginning to get paid as we are seeing en masse in Silicon Valley with layoffs. The bottom line is that lower productivity leads to a supply problem but as interest rates rise, they only impacts the demand side of the equation. Ergo, the Federal Reserves strategy to get a handle on inflation is to raise interest rates to crush demand down to existing supply.
Meanwhile, we remain sitting on a time bomb that is $31 trillion of national debt with interest costs to service it rising wildly, a huge entitlements system with Medicare and social security expenses ever expanding and we refuse to address it (SS up 8.7% for 2023), an energy crisis of our own making and a proxy war in Ukraine costing a cool $60 billion so far. Look out below, because the S&P is going to start with 2xxx very soon. It’s why I remain almost solely in treasuries yielding 4% and with a massive amount of oil and gas exposure heading into winter. It’s not investment advice but sitting on your hands is a bad idea right now.