Latest Inflation Numbers and Discussion

[madatrub]

The inflation report this morning is a lagging indicator. The bond market is looking past that report with the oil and other commodity bubbles bursting, gas prices dropping, a huge inventory buildup, and the USD rising. It is a good time for savers and fixed income investors. All those businesses that have been gouging consumers have created their own demand destruction. The short term profit gains are going to lead to longer term misery.

Be careful with claims of "huge inventory buildup". Gasoline is still on a knifes edge, especially in PADD1. We normally build leading into this time of year.

 

[Winemaker]

One major key is whether Russia turns the Natty Gas pipeline back on July 22nd. They shut the pipeline down every year for maintenance for 10 days contractually, but it is unclear whether they will oblige. All hell will break loose then in Europe, as they will pay big Euros to get their hands on any form of hydrocarbans.

 

[almost there]

Nah, they have solar and wind now.

 

[Freedom56]

Be careful with claims of "huge inventory buildup". Gasoline is still on a knifes edge, especially in PADD1. We normally build this time of year.

I was referring to retailers. I should have made that clear. Prices for consumer electronics are plunging fast. All those hard to get furniture items are now being liquidated. Apparel prices are dropping fast.

 

[aja8888]

Nah, they have solar and wind now.

If they get the politicians talking in the right direction, maybe those windfarms will start spinning again!

 

[madatrub]

I was referring to retailers. I should have made that clear. Prices for consumer electronics are plunging fast. All those hard to get furniture items are now being liquidated. Apparel prices are dropping fast.

got it, thanks for the clarification!

 

[almost there]

Am thinking nukes will be labeled green agsin.

 

[Koolau]

Nah, they have solar and wind now.

True but they don't seem to have any wind or sunshine.

 

[Koolau]

If they get the politicians talking in the right direction, maybe those windfarms will start spinning again!

Okay, ya got me. That'll take care of the windmills. But none of them seem "bright" enough to energize the solar panels.

 

[almost there]

I was joking. Natural gas and Nuclear will be labeled green energy soon.
So, they will meet all their mandates. As there is no other solution.

 

[Aerides]

I was referring to retailers. I should have made that clear. Prices for consumer electronics are plunging fast. All those hard to get furniture items are now being liquidated. Apparel prices are dropping fast.

Interesting. I had a look at the sofa I ordered in Jan 2021 that didn't arrive until the last week of Dec 2021. It went up $500 since I ordered.

The bed that I cancelled after the third or fourth "two more months!" delay is now $700 more.

While I do see some sales still on furniture, none of the things I looked at over the past 18 months have come down.

 

[SecondAttempt]

My entire life I have never been concerned with inflation. My stocks grew faster than inflation over the long term and I owned my house so I was not impacted by hosuing price increases. Food prices changed so slowly that I hardly noticed. Gas prices sort of trended up but varied so much that it was hardly noticable. It's not that I did not believe the numbers or the impact on people, I just was not personally impacted in a way that I noticed.

But yesterday I went grocery shopping and, wow! I was shocked by some of the increases to the point that I just passed on some items. A bag of chips for almost $7, no thanks. I chose healthier and cheaper snacks. Anyway, it got real for me to the point that I a made conscious choices where I rarely did before. I guess the only silver lining is that my home value has nearly doubled in the last few years.

What concerns me is that I am not sure that higher interest rates will have the impact that people, including the Fed, expect. I think what is going on right now is that a lot of companies see an opportunity to raise prices because everyone else is and they are doing it. That only ends when consumers balk and I see no sign of that happening anytime soon.

 

[NW-Bound]

a lot of sales at local big boxes here. Back to school sales already started. They have too much stuff. Not a day goes by that I don't get an email from Best Buy or NewEgg with deeper discounts on computers and electronics. Can't speak to food -- my wife does all the food shopping. Can't speak to cars - I don't need one right now.

A week ago, I thought about getting another 1-GB SSD to add NAS capacity. Went on Amazon and made a selection, but then had an afterthought, and left it in the shopping cart.

Went back to look at it today. Saw a message: "Price reduced from $67.99 to $61.99". Alright.

Still have not bought it. One heck of a price, but not sure I need it, instead of moving files around between existing storage to consolidate and free up some room.

 

[ShokWaveRider]

A week ago, I thought about getting another 1-GB SSD to add NAS capacity.

I am sure you meant 1tb not GB. But anyhoo, I have 3 of them on a shelf, 1tb are becoming obsolete, I need a 3 or 4tb, but no deals.

 

[almost there]

My entire life I have never been concerned with inflation. My stocks grew faster than inflation over the long term and I owned my house so I was not impacted by hosuing price increases. Food prices changed so slowly that I hardly noticed. Gas prices sort of trended up but varied so much that it was hardly noticable. It's not that I did not believe the numbers or the impact on people, I just was not personally impacted in a way that I noticed.

But yesterday I went grocery shopping and, wow! I was shocked by some of the increases to the point that I just passed on some items. A bag of chips for almost $7, no thanks. I chose healthier and cheaper snacks. Anyway, it got real for me to the point that I a made conscious choices where I rarely did before. I guess the only silver lining is that my home value has nearly doubled in the last few years.

What concerns me is that I am not sure that higher interest rates will have the impact that people, including the Fed, expect. I think what is going on right now is that a lot of companies see an opportunity to raise prices because everyone else is and they are doing it. That only ends when consumers balk and I see no sign of that happening anytime soon.

Interest will have an effect. But at this time they are still artificially low. Its been like this for so long, people seem to forget. Or something?

 

[NW-Bound]

I am sure you meant 1tb not GB. But anyhoo, I have 3 of them on a shelf, 1tb are becoming obsolete, I need a 3 or 4tb, but no deals.

Yes. 1 TB. One cannot even get a 1-GB USB flash anymore.

What did I say about getting senile?

PS. I hate to throw things away, so keep adding incrementally.

And I still have several 1-TB and 2-TB HDDs not being used, before I changed my mind and wanted SSD for low power.

 

[jazz4cash]

Would you rather earn 4.5% from an A rated 3 year corporate note or 1.3% from cash balances or a whopping 1.5% from short term bond funds and watch your capital erode at the same time?

You have to look at the big picture. How high can rates go with $30T in national debt and $54T in corporate debt? Zero rate policies create bubbles and hurt savers. A normalized rate environment will be better. It will be painful short term for bubble induced investments, but will be great for savers and fixed income investors.

I would rather earn 4.5 on a three yr note like the one I just purchased. With this level of inflation the real rate is much less it was even when rates were zero. I am hoping the inflation will subside before the security matures. Hoping to lose less than I would otherwise.

 

[Chuckanut]

I was joking. Natural gas and Nuclear will be labeled green energy soon.
So, they will meet all their mandates. As there is no other solution.

Like it or not we will need bridge fuels. And a dose of old fashioned conservation via increased efficiency wouldn't hurt either.

 

[Running_Man]

I'm actually surprised it isn't higher. It FEELS higher, but YMMV.

The shelter component being up only 5.6% is ludicrous and housing makes up 30% of core inflation. Rents are up nation wide nearly 40% in major cities.

 

[SecondAttempt]

The Core inflation rate (for those of you who don't eat and don't require the use of energy) was only about 6%.

So the key to bringing down inflation is to stop eating, stop using energy to control your home's climate, commute, heat water for bathing, cooking, etc. Wait if you aren't eating you probably aren't cooking. That's a two-fer. Lucky you.

I live in Hawaii. Nature keeps my house at a comfortable temperature. No need for climate control. I eat only vegetables that I grow with irrigation only from rainfall and rice that I buy with the proceeds of sold avocados and coffee beans. I bathe in water caught from the rain. What inflation? Just kidding.

While most of the above is true, I do eat meat though much is in trade from hunters who hunt pigs on my property and give us pork and fish in exchange. Still, grocery shopping earlier this week was shocking. And the price of gas has me seriously thinking of retiring earlier than planned. I get to work from home 2-3 days per week so that mitigates as well.

Seriously though, people can make choices and will start doing so. Yesterday I bought a local brand of an item for about $3.50 when the Kraft version was over $7.00. Previously the local brand was about the same and Kraft was usually on sale for about 3.99. No more. I suspect the big consumer brands are going to start feeling this soon.

 

[ShokWaveRider]

What do we expect the fed number will be this month? .5%, .75% or 1% Rate increase?

 

[Magus]

I was referring to retailers. I should have made that clear. Prices for consumer electronics are plunging fast. All those hard to get furniture items are now being liquidated. Apparel prices are dropping fast.

Apparel prices and home furnishings are both still going up per BLS and from my own experience, including in June. You are far too confident in your deflation forecast

 

[JoeWras]

Apparel prices and home furnishings are both still going up per BLS and from my own experience, including in June. You are far too confident in your deflation forecast

Well to be fair, there are some negative numbers in these areas. The problem is they suffer from base effect when compared to last year. Smartphones and TVs and Men's suits are good examples. 18 months ago, the electronics skyrocketed due to the stay at home thing. Everyone got what they needed so they are now going down. Men's suits, however, have skyrocketed this last year because they were cratered during the height of the pandemic.

These items are just a tiny portion of the CPI. The real issue is shelter (a huge element of CPI), and that's going to take another year to unwind due to the way it is measured.

 

[Koolau]

I live in Hawaii. Nature keeps my house at a comfortable temperature. No need for climate control. I eat only vegetables that I grow with irrigation only from rainfall and rice that I buy with the proceeds of sold avocados and coffee beans. I bathe in water caught from the rain. What inflation? Just kidding.

While most of the above is true, I do eat meat though much is in trade from hunters who hunt pigs on my property and give us pork and fish in exchange. Still, grocery shopping earlier this week was shocking. And the price of gas has me seriously thinking of retiring earlier than planned. I get to work from home 2-3 days per week so that mitigates as well.

Seriously though, people can make choices and will start doing so. Yesterday I bought a local brand of an item for about $3.50 when the Kraft version was over $7.00. Previously the local brand was about the same and Kraft was usually on sale for about 3.99. No more. I suspect the big consumer brands are going to start feeling this soon.

My son tried this life-style on Hawaii for a while - including selling produce. It sounds idyllic but it turned out to be a lot of work. It takes a special person to live off-grid and isolated. I was proud of my son for trying it, but completely supported his decision to sell and return to the mainland.

We believe we have the best of both worlds. In Honolulu, it's very much like living in a moderate sized mainland city, except for the near perfect weather - and the perennial high prices

So glad to hear it is working for you. Aloha.

 

[Freedom56]

Apparel prices and home furnishings are both still going up per BLS and from my own experience, including in June. You are far too confident in your deflation forecast

Remember all bubbles collapse. We had $4 trillion injected into the economy in 2020 followed by $1.8 trillion in 2021. People stayed at home and saved money which is abnormal behavior for the 67% in this country that live paycheck to paycheck. As the economy opened up, they went on their massive buying binges. Prices of everything surged and corporations took advantage of the surge in demand. The stock market became a casino and still is. Look at the price of GameStop today. Crypto was the rage. We have all seen this movie before in 2000 and like then this bubble will take years to unwind. You only have to look back at the so called energy crisis of 2000 where Enron traders manipulated the market to create a crisis that never existed. Over the past year, traders/speculators with fresh money have manipulated the entire commodity futures complex driving prices up. But it's all headed for a hard landing. The CPI reports are a look into the rear view mirror and heavily biased by housing/shelter costs. Commodity prices are collapsing and this is a fact. Eventually this will be reflected in future reports. What happened to the talk about $6.20 gas by the end of the summer? The crude oil bubble is collapsing. It doesn't take a genius to understand that when you have one supplier discounting oil by 30% it puts pressure other suppliers as their customers abandon them and buy the discounted oil. All bubbles pop and there will be no exceptions this time.