Gold: Inflation? What Inflation? -- June 15, 2023

Locator: 44943B.

Updates

Later, 10:20 a.m. CDT: two additional thoughts while biking.

First: has inflation in the past two years affected your lifestyle, your quality of life, or your standard of living. If the answer is "yes" to any of the three:

• you are not doing something correctly;
• you do not live in Texas;
• or both.

Second: I forgot to mention in the big expenses below. Except for those living in one of handful of states, state income tax far exceeds any "federal" inflation concerns for the audience to which this blog is addressed. Texas, where I reside: no state income tax.

Original Post

Inflation? Bloomberg's chart of the day: gold. Link here. I'm certainly getting mixed messages here.

Inflation: fairly superficial but excellent summary and explanation.  The third wave.

• first wave: "demand-led," primary in durable goods
• Covid-19;
• shortage of chips (computer, not potato);
  
• logistics (west coast ports, truck-drive shortage); and,
  
• that was it
• now: durable goods -- outright deflation [where not to invest]

• second wave: "supply-led,"
• the energy shock coming out of the war in Ukraine
• if you don't understand this, you are not alone, neither do I
• I think it's a stretch; writer needed three points
  

• third wave: "greedflation" -- wow, wow, wow -- we discussed this quite awhile ago and is part of the reason the "inflation" story has not concerned me much (at all?).
• within a reasonable range, "inflation" is "good" for investors (don't take that out of context)
• when running from a bear in the woods, you don't have to outrun the bear; you only have to outrun the others trying to outrun the bear
• "greedflation": the analyst considers this an unusual profit-led inflation story;
• profit-led inflation occurs when consumer-facing companies toward the end of the supply chain persuade shoppers to accept price hikes by pointing to plausible explanations -- such as historically-elevated inflation -- LOL -- 
• exactly what we mentioned on the blog some months ago [think new auto sales and grocers]
• compare costs at your local regional grocer with those of Walmart
• Target: markets a "better" shopping experience (but not for LGBTQ any more -- but that's another story for another time
  

"Greedflation":

The true reason for these elevated prices could have more to do with expanding margins and keeping investor sentiment high than with increased input costs.

"It's using excuses," Donovan said. "It's using a cover."

************************
What Wasn't Mentioned

US debt / US spending (which, by the way, I don't accept as a significant cause of inflation nor do a lot of economists including Nobel laureates -- in other words, I'm in good company.

Government policies mandating expensive alternative energy sources. Huge, unnecessary cost as far as I'm concerned but

Automakers: jacking up prices on ICEs to cover huge costs of EVs.

Grocers: most recent inflation number, 5%. A loaf of bread that cost me 99 cents last year should cost me $1.05 this year. In fact, I'm paying $1.49 for that same loaf of bread at Target or regional grocer. Walmart at $1.29 or thereabouts. One can do the math.

Cereal makers: 50% margins on corn flakes.

Rotisserie chicken:

• Costco: $4.99.
• Regional grocer: $9.99.

****************************
Inflation Vs The Real World

Personal net worth: "everyone" seems to worry about inflation impacting quality of life, standard of living, investment returns, whatever.

Don't take this out of context, but within a reasonable range inflation has little impact compared to other factors:

First, inflation is only a factor if you buy inflated goods. 

• Example: the cost of US stamps and the cost of mailing packages has surged. For me, it could "break the bank." But, my overall postage has come to almost $0.00 -- e-mail has replaced mail. And I "never" mail packages any more -- Amazon does it for me -- and one can get true free mailing from Amazon without paying for Amazon prime.

Second, high cost items. In general:

• state income taxes in most states (added later)
  
• twenty years ago, I was paying college tuition: one, a private college; another, out-of-state tuition -- huge expenses; I don't have those any more
• a new car every three years? Nope.
• a McMansion? Nope.
• a boat? Nope.
• an RV that is seldom (if ever used after the first six months)? Nope.
  
• swimming pool maintenance? Nope.
• unexpected need for new air conditioner? Nope.
• need for cruises, Disney vacations? Nope.
  

Break, break: a family of four could forego this year's Disney vacation and with one stroke, offset all other inflation "stuff" this year.

Second, more high cost items. Family, personal.

• "big family"
  
• divorce
• medical care, inconsequential: age 65 -- Medicare; supplement paid by prior employer
• not working, no job, temporary / permanent:
• redundant, laid off;
• medical condition;
• lack of skills, education
• drug addiction

Second, more high cost items. Telecommunication, entertainment.

• way more "smart phone" than you need
• way more cable, streaming than you need
• way more computer than one needs: buy Chrome, not Apple
  

Break, break: cancel all subscription-streaming this year. That will more than offset all the rest of one's inflation for the year.

Third, transportation costs.

• I'm retired, so daily driving almost unnecessary
• warm-weather, dry state, urban, in good health: can bike almost anywhere.

Fourth, utilities: inconsequential.

• small footprint
• warm weather, highly competitive sector

Fifth, offset --

• for savers and investors: getting higher return on savings, investments
• best example: dividend-paying utilities, others need to increase dividends to compete with bank rates

So, yes, I get it. Inflation. 

But the country has much bigger problems than this focus on inflation by the mainstream media -- it gets tedious. One needs to ask why the mainstream media focuses on inflation. I have thoughts on that, also, but time to move on. The market opens in fifteen minutes and I haven't even gotten to Bud yet -- another non-story -- but a great opportunity for savvy investors. Which I am not. LOL.