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U.S. inflation rate climbs again to 7.9%, CPI shows / MarketWatch Article

edited March 10 in Other Investing
“The rate of U.S. inflation rose again in February to 7.9% — a 40-year high — and Americans could face even more pain because of the Russian war on Ukraine. The consumer price index rose 0.8% in the month, spurred by the higher cost of gasoline, food and housing, the government said Thursday. The increase surpassed Wall Street’s forecast of a 0.7% gain. The surge in the cost of living in the past 12 months is the biggest since January 1982.”

Folks can slice & dice this any way they want. The war in Ukraine and resultant commodity shortages are partially to blame. So too is the ramp-up in activity following pandemic induced shutdowns. From an investment standpoint you might argue that this is a signal to buy commodities. But you could also argue that the news was widely expected and so commodities have already been bid up to unsustainable levels. Some will argue that this is just a temporary, abnormal or transient “blip” … that prices will come back down eventually - or will at least begin to rise at a slower pace. Additionally, you can fault the CPI index as overstating, understating, or simply not being relevant to the average consumer. Take your pick.

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Comments

  • I drive 1-2K/year, so I'm relative impervious to rising gas prices. (Gasoline and used cars have gone up around 40% Y/Y, at least triple any other non-energy category.) But the Starbucks I walk to raised its prices twice in the past four months, adding up to about 20%. Now that hits me where it hurts!

    Most staple prices seem to be rising fast enough that one does not need a stop action camera to observe them. They're changing in real time. As you wrote, though, what one sees is what one spends money on.

    BLS table of Y/Y and M/M price increases by category, as of February.
    https://www.bls.gov/news.release/cpi.t01.htm
  • Energy/oil prices may not rise at the same rate but since they have risen substantially, I believe that affects every other commodity price, agriculture for example. raw materials, metals. I think you will see costs of finished consumer goods rise for quite a while, though predicting that rate is a guessing game. I also don't think the FED is doing what it takes to contain inflation. Another reason to own commodities.

    Hence, my bet is still on commodities for at least this year but quite possibly for years to come. When I first started coming to Fund Alarm/MFO some 15 years ago, commodities was the daily discussion. It wouldn't surprise me we get to that cycle. again.

    If I'm wrong I will edit-delete this post to erase all evidence of my stupidity:)
  • edited March 10
    Most in my neighborhood heat with propane. Nat gas just came in, but having it “piped” to homes is expensive. A lot of screaming here about the cost of heating this winter. Looks like petro-based heating costs are probably up more than 35% over previous winter. I supplement with wood. Even that is up anywhere from 50-150% over past year depending on source. One of the cheaper mills would sell all I could haul in a pickup for $15 two years ago. Last summer it had tripled to $45 per load. Of course the cost of fuel to haul it has also doubled.

    Your Starbucks doesn’t hurt that much yet. But the guy or gal grinding the beans and brewing it needs to drive or take public transit to work, needs food and shelter, medical care, auto insurance, fuel, etc. So as these prices filter through the economy I’d expect your coffee to ratchet upward in price. Inflation ought to be viewed in total I suggest. Short term - yes it affects some more than others. But over many years / decades it impacts all of us in similar fashion - ISTM.
  • Glad to see many of us drive fuel efficient and hybrid vehicles so that pump price don’t impact us. Can’t get away from increased food and consumer prices. We just watch our spending accordingly. We have kids in colleges and have to watch their 529 investment choices.

    Commodity is a good vehicle to counteract higher inflation. We started over a year ago using mutual funds and ETFs. Volatility comes with the territory (oil and precious metal prices) but one has to be patient. Yesterday was a good day to add a few shares.
  • I've noticed that some online retailers are increasing prices of items they already have in stock and presumably paid their vendors for. Often stock levels of those items are in the thousands. Why? It's a pure money grab.

    The only way to go is Series I Bonds currently paying 7.12% for six months and given today's inflation figures probably near 8% from May. It's the best inflation protection in the world - even though real world inflation is so much higher. We all know the figures are massaged.
  • @Simon, so help me understand....pure money grab, how so? Are they not getting compensated for the risk they took in bringing in inventory and running an effective business for their shareholders? Isn't that a competitive edge for a company...the company that has better logistics, inventory strategy is better positioned in their market place. On a go forward are they not having to pay higher input prices?

    Question for you, what should they do, should input costs suddenly deflate? Raise their prices to account for their current inventory that is now "over valued" and ask you to pay more because what fair is fair as you seem to indicate in your commentary...you think that will happen, I'm thinking no, in that case you no wanna pay more? Or just lower prices and eat it and take it in the shorts with their margins? Would you buy stock in the company?

    You don't like the price, you don't buy it...the cure for high prices is high prices...market forces will dicate what they can charge.

    Unless of course we like Socialism...then let the gov't set prices and see to what level of crazy this will get....

    WWKS (What Would Krugman Say?)

    Why is everyone so suprised we have run away inflation? What did we think was going to happen? Print and hand out to oblivion and no inflation, c'mon man!

    Do agree with you, I Bonds...maybe the best investment over the next decade....we shall see...do think we'll likely need some currency and commodity in our investments....kind of like BLNDX...but so hard to get right consistenly and managed futures can be volatile at times....

    Best,

    Baseball Fan

  • I believe BBF has made a point. When the price of bananas gets to high what happens ? As they ripen they lower the price & hope people buy them to make bread or they rot & get thrown out! Risky business in deed.
    Series I bonds. Let me know when the amount to purchase increases 5X.
    Thanks , Derf
  • The democratic socialism proposed and practiced widely elsewhere has nothing to do w socialism where gov sets prices. But serious people know that and don't scaremonger.

    WWKS answers (not that that is what is really being asked, I bet) are easy to find, albeit wonkish:

    https://stonecenter.gc.cuny.edu/credible-irresponsibility-revisited/

    https://twitter.com/paulkrugman/status/1501275391083880451

    "Expected inflation more than a year out appears to be up only slightly."
  • +1 david
  • PK tw today, slightly upbeat:

    Thinking about the macroeconomics of the Putin shock. In the '70s oil price shocks were associated with severe recessions. But did they *cause* those recessions? A classic study including some people you may have heard of said no 1/:
    https://pbs.twimg.com/media/FNvNsXoX0AcHSeP?format=png&name=small

    The price of oil in 2022 dollars. The '70s spikes were followed by big recessions. But the 2010-11 spike wasn't, nor were the '85 collapse and 2015 collapses followed by booms 2/:
    https://pbs.twimg.com/media/FNvOjo3XEAEYS8t?format=png&name=900x900

    The difference was monetary policy: the Fed squeezed hard after '73 and '79, but didn't overreact to later fluctuations 3/:
    https://pbs.twimg.com/media/FNvO1djXoAYA8_w?format=png&name=900x900

    This time, unfortunately, we're coming into this with inflation already elevated. But longer-term inflation expectations still seem anchored 4/:
    https://pbs.twimg.com/media/FNvPrDrXsAUq6Hg?format=jpg&name=medium

    I favor gradual rate hikes, because the US economy does look somewhat overheated. But the Fed should resist demands that it slam hard on the brakes. We do not have to have a Putin recession 5/

    plus 2 comments:
    Another difference is the renewable option: today we have a few more choices then the '70s, not sure we'll use them, but some might.
    ... a good point. Not only do we have renewables, but they are generally a lot cheaper to implement than even the pre-invasion oil/gas prices.
  • edited March 13


    Barron’s ran the numbers for the items the government CPI omits:

    “Excluding food and energy from the CPI seems like exactly the wrong thing to do right now. This week, this column is doing the opposite, stripping out everything but necessary items. Call it the Barron's Basics CPI, comprising year-over-year changes in foods like meat, eggs, bread, milk, and produce, in addition to shelter, gas, and utilities. The average change in those items climbed 16% in February from a year earlier—and that's before about a quarter of the world's wheat exports and a 10th of the world's oil exports effectively went off-line.”

    The Economy - Inflation is Worse than it LooksBarron’s - March 14, 2022
  • Barron’s ran the numbers for the items the government CPI omits

    That 7.9% inflation figure that everyone is touting is comprehensive.
    Excluding food and energy, the Y/Y figure is 6.4%.

    I gave the link for the BLS data in an earlier post: https://www.bls.gov/news.release/cpi.t01.htm

    Food is rising at exactly the same rate, 7.9%, as the overall inflation rate. Sure, the meats, poultry, fish and eggs subcategory is rising faster than that, but nearly all other food subcategories are rising at a slower rate. If Barron's is suggesting that the other food items are not "necessary items", it sounds like it is rigging its numbers.
  • A 14-point thread about frontloading of inflation expectations, longterm prospects and maturities, and construction timing:

    https://twitter.com/paulkrugman/status/1504158983669616642
  • more detail for the intellectually and economically curious

    https://twitter.com/paulkrugman/status/1504516423439298564
  • Blanchard asks about projections, plus rate of IR increases

    https://twitter.com/paulkrugman/status/1504797235745370113
  • Ball don't lie...let's stick to reality and not libereral advocacy econo-babble shall we?

    "But lest you doubt that Biden, not Putin, is to blame for the pain at the pump, at used-car lots, at grocery stores, and everywhere else these days, we present four charts below that make it clear that price spirals started long before Russia’s troops moved into Ukraine – and in fact began to accelerate right at the time Biden was signing his “American Rescue Plan” into law."

    "Take a look and judge for yourself whether Biden is being honest about why inflation, which hasn’t been a problem in four decades, is suddenly reaching into Carter-era heights – just as economists such as Summers predicted."

    Stunning how the impact of this administration's poor decisions have impacted many Americans.

    Kind Regards,

    Baseball Fan



    https://issuesinsights.com/2022/03/17/four-charts-prove-biden-is-lying-about-putin-and-inflation/

  • If politicians, pastors, and parents do not lie, who would?

    But none of these people think they are lying when they do because that is the purview of sociopaths and very few people are.
  • edited March 20
    “just as economists such as Summers predicted."

    I follow Summers weekly on Bloomberg’s “Wall Street Week.” ISTM his main gripe has been with the Federal Reserve. They’re way behind the curve. (Wonder who nominated the current Chair?) As far as the parties go, didn’t the Rs initiate the mailing of stimulus checks? Why was it a good idea for Trump to send them out (accompanied by his personal signed letter) but a bad idea for the Ds to do the same?

    Yeah - you can debate the whole ball of wax if you want to (tax policies, the impact of Covid, assorted legislation and years of very low interest rates). But let’s not oversimplify. You’ll find economists on various sides of the inflation issue (it’s complex and has more than 2 sides.)

    I’ve always accepted in my mind that paper currencies eventually depreciate. Hence - the reason for investing is assets like homes, precious metals and stocks. The best way to make a paper currency “appreciate“ in buying power is to bring on a severe recession or depression that nobody wants.
    ISTM Japan went down that road. Sure - the Yen appreciated, but their stock market was in the dumpster for 25 years.
  • It is human nature for people to read and quote material that makes them feel good about their own ideas (I.e., about themselves). So, difficult to give information to people that are not seeking it. I was not going to mention it but this past week, Moody’s internal research showed various metrics / components of inflation were lower in January before they spiked in February as the war talk ramped up. They have a nice one page graphical depiction of this. Those interested can go to Moody’s website and download.
  • @Baseball_Fan

    You pretend to be reality-oriented but post from rightwingnut sites w comedy charts instead of engaging w data-based posts? I mean, give yourself a fighting chance. Did you actually look at those I&I charts? Attempt to comprehend the twitter threads instead.
  • edited March 20
    Larry Summers’ past actions / speeches tell you that he is not a highly objective person. E.g., he called Raghuram Rajan a Luddite. It is difficult to take seriously folks who compromise their own credibility for political expediency. Separately, Larry was also considered for the Fed Chair job before it was given to Powell. I like Larry as an academic (watch Wall Street Week) and Powell as the Fed Chair as I think Powell is more inclined to preserve the independence and credibility of the Fed.
  • edited March 20
    Let’s look at it this way: If you invested in a real estate fund a year ago you’re up roughly 25% over that time. If you invested in a commodities fund year ago you’re also up about 25% over that time. If in a gold (mining) fund, you’ve gained about 15% over the past year. And if you’ve held a passive S&P index fund for a year you’re also up 15% over that time. If you own a home it’s likely appreciated more than 15% over the past year. (And you can still borrow against it if you want for under 5%.)

    I never hear anyone gripe when their investments do well - even extraordinarily well. That kind of “inflation” is presumably OK … simply means you and I are “smart.” While the (often related) increases in reported cost of living somehow elicit ire.
  • Issues & Insights - who they are

    Yeah no biases or slants there at all (snark).
  • edited March 21
    har, wonder if anyone remembers IBD

    LSummers is altogether objective insofar as being evidence-based goes; he just interprets the data differently from some (not all) others, as do all economists.

    In other words he does not conclude based on whim or caprice or prejudice. But maybe you think objective (highly?) means without an opinion or hunch or feeling or something?
  • There are enough sign posts in my previous post for those interested to dig for facts.
  • @mark, so can I surmise that you're and @davidmoran's thoughts are that the NY Times is not also biased?

    Guys, my point is whether it's true or not or somewhere in between, my position is the voters will confirm this autumn that inflation is real, is not going away any time soon and that this administration will pay the price as for certain the perception despite liz warren Biden, Krugman attempting to explain, redirect, out right lie.... public perception is what counts

    Enjoy your day

    Baseball Fan
  • @BF, everyone has a bias whether they care to admit it or not. The NYT is far, far less biased than I&I. What I am looking for in linked articles that have basis in more facts than not. Alternative facts do not count as facts, they are woefully uninformed nonsense, outright prevarication's, or goofy opinions. Unfortunately what you say about the voters is mostly true.
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