August 2022 CPI 8.3% - Higher than Predicted

[JohnyMac]

August CPI came in at 8.3%, .3 points higher than predicted; Consequently, the DJIA is down over 700-points at this writing.

Keep in mind that August 2021 CPI was 5.3% so the two year average is 13.6%. That is using the 2018 CPI formula. The Jimmy Carter era CPI puts the two year inflation at around 21%. To my minds eye and 1:1 research, I would think is closer to the truth.

Crude continues to fall which I find interesting as the EU is scrambling for fuel to produce electricity. Or are they scrambling? Maybe the Davos Crowd wants Europeans to freeze this winter. You know you have to tear down the economy to replace it with the Great Reset or Build, Back, Better.   

Some fun things to watch later this week...
> Thursday Whole Sale PPI will be coming out, and
> Friday, starts the RR strike across the country

[Nemo]

CNN thinks its bad too.  Thats warning alone.

Imagine the numbers if oil prices were not dropping because people were not buying.

Nemo

https://www.cnn.com/business/live-news/stocks-markets-today-inflation/index.html

Falling energy prices may be good news, but less pain at the pump isn't helping consumers all that much. There's still sticker shock at the supermarket.

The US government said in Tuesday's August consumer price index report that overall food prices soared 11.4% over the past 12 months. That spike is the biggest increase since May 1979, while food-at-home costs had the largest year-over-year jump since March 1979, skyrocketing 13.5%.

[Nemo]

And a more recent report from CNN.   Tie your shoes tight and hold on to your hat.

Nemo

https://www.cnn.com/business/live-news/stocks-markets-today-inflation/index.html

2 min ago
Down and down the stock market goes...

From CNN Business' Paul R. La Monica

...where the selling ends, nobody knows. The Dow was down 1,300 points, or 4%, with minutes to go before the closing bell mercifully rings on Wall Street. The S&P 500 and Nasdaq plummeted 4.3% and 5.2% respectively. The end of the trading day will temporarily stop the selling. But investors have another inflation report to (fear? dread? seems unlikely that anyone is looking forward to it) on Wednesday.

The US government will release figures for the producer price index, which measures prices at the wholesale level...as opposed to today's consumer price index report. Economists are anticipating more inflationary numbers.

The forecast is for a year-over-year increase of 8.8% for overall producer prices and 7.1% over the past 12 months for core PPI, which excludes food and energy costs.

[JohnyMac]

Well now, it looks like the market took a serious dump today thanks to the CPI report. Yet, the toneless Biden White House celebrated the 8.3% CPI. "Let them eat cake". It is so good because of their Inflation reduction Bill that passed. 

President Biden threw an "inflation reduction" party Tuesday; even as inflation hit a worse-than-expected 8.3%, the stock market tumbled and stubbornly high prices for food and housing continue to slam American households.

Biden, 79, had classic folk rocker James Taylor kick off the White House South Lawn bash with his 1970 hit "Fire and Rain"; a song reportedly about suicide and heroin addiction to belatedly celebrate passage of his Inflation Reduction Act spending bill.

But Biden, who hailed the 74-year-old Taylor as "a voice that heals our soul and unites a nation," failed to mention the market rout sparked by the dismal Labor Department's Consumer Price Index released earlier Thursday. - The New York Post

The Wholesale PPI is coming out Thursday.    Stay tuned, 

[Felix]

My/Our Merrill Lynch advisor left a phone message today to call -wants to discuss arranging accounts more "defensively".
Well, OK... and after following the age-old cant of "diversifying", where must we now instead, concentrate to preserve value in a system primed for epic collapse?
Gonna laugh out loud if he suggests taking possession of actual PMs/coinage/bullion.   And yet, why hasn't he?    Why won't he?

[pkveazey]

Felix.... I have a good friend who is a financial advisor and I've never heard him or any other financial advisor mention investing in PM's. For some reason, they all seem to want you in Stocks, Bonds, or Annuities. Meanwhile, back at the ranch, all the Millionaires out there are buying all the Physical Gold and Silver they can get their hands on. For those folks who don't want to be in Physical PM's, there is always unimproved real estate or some other commodity. The market is the last place on Earth that I want any of my money. I personally got into buying Physical Silver back in 2016 and hope like Hell it will save me when money becomes worthless.

[Felix]

PM's will definitely be on list of topics when meeting with advisor.
At what scale and by which instruments might a portfolio include PMs as a hedge against equities/currency melt-down?   Pay no tax (big losses there, every time) in converting a stock to physical metal?  And why have PM prices been declining for months even as bad economic news keeps raising?

I occasionally peek over at "Seeking Alpha" and pay particular attention to the comments sections which offer individual commentary.
Here is one such article, the comments are interesting.
https://seekingalpha.com/news/3879430-silver-slumps-to-two-year-low-gold-extends-string-of-declines

[pkveazey]

Felix, I'm glad you asked that question. There is PAPER SILVER and there is PHYSICAL (hold it in your hand) SILVER. The price of Paper Silver is called the SPOT PRICE and PHYSICAL SILVER is priced based on the SPOT PRICE. That makes absolutely no sense but that's the way it works. There are over 100 ounces of Paper Silver sold for every 1 ounce of Physical Silver that exists. The Paper Silver is sold on the stock market and the price is manipulated all over the place. When you see the Stock market go down, you generally see Silver Spot price also go down. We are at or nearly at the point where the Physical Silver holders are going to say, "Screw this. I'm not selling my real Silver at those fake prices and they will divorce Real Silver from Paper Silver. When you buy Real Silver from a dealer, you pay SPOT PRICE plus a PREMIUM. In todays world the premium has risen from about $2 over Spot to as nuch as $10 over Spot. When the breakaway happens, Physical Silver could go to the Moon. Some folks say it will got to $100 per ounce and others say it will go to $1000 per ounce. NEVER BUY PAPER SILVER. It is worthless. If you have paper silver and sell it for Spot price you will will not get Real Silver for it. You will be paid in currency. If you make a small profit when you sell, you will be taxed on that profit. If you have PHYSICAL SILVER, it is outside the system and nobody knows what you paid for it and nobody knows what you sold it for. Always pay cash for Silver so there is no record of it. Also never buy more than $10,000 worth at a time because $10,000 sales must be reported to the Government unless you buy it in private from a non dealer.

[JohnyMac]

I have been watching this exchange and I agree with all of it when it comes to PM's. You want physical PM's no paper.  Heck if you need silver bullets for zombies or werewolves, you can't melt down paper PM's to make bullets.

Another thing to look at are I-Bonds. They are a nice hedge against inflation. Certainly part of a diversified portfolio.

Just my opinion, the best place to put stocks and the like is into land. They ain't making new land. Then commodities like, a diesel tractor & farming implements, tools both hand & powered - heck I bought a saw mill to process logs - fasteners both nails & screws, etcetera. Commodities. Although expensive, I am proponent of solar. My neighbor who swore he would never buy solar is putting in a 10 KwH system now. He cashed in his 401K from one of the companies he worked at to pay for.

Talking about commodities, don't forget fuel tanks both diesel & petrol, livestock; chicken's & rabbits are easy, followed by pigs & goats if you have the space. The least productive are cattle but if you have the space and access to hay for the winter, purchased or processed on your own, they can provide a lot of food (Half a steer lasts MrsMac and I for a year) including dairy products.

Today, we need to 'think out side the box' when it comes to our savings and retirement.

I will close with this. I think the market (DJIA) will recover to the 32K - 34K point area leading up to the mid terms through Fed interference. Remember, the Fed is now trading in the US Stock market. Even if the GOP takes over both houses, I suspect the market at best, will become stagnate and hover in the 28K to 32K range. If the GOP only takes one or none of the houses, then the market will crash ala October 1987 (Lost 20% in one day) or September 1929 (Lost ~30% over two days) post the midterms.

By the way, did anybody hear or read that the Japanese Yen crashed to 20-year low yesterday? Probably not. 

[JohnyMac]

More info out on August's CPI.

The Core CPI, which strips out the more volatile categories like food and gasoline, measured 6.3% in August, up from 6.2% in July. The month-on-month gain of 0.6% was double what economists had expected. - CNN Business

.

Apparently this is why the market took a dive yesterday. Today, the DJIA is up around 100-points. I suspect some folks are buying up some undervalued stocks today that may have corrected to much yesterday. This buy up will dry up when the PPI comes out tomorrow. Then of course we have the RR strike starting on Friday. That alone should cause some correction again going into the weekend. RR stocks already are dropping; TRN, CSX UNP, and GBX are down today.

Worth watching 

[JohnyMac]

The Wholesale PPI came out and inflation was 8.7% a drop of .1% from July but .2% higher than July, excluding food, energy and trade services, PPI increased 0.2%.

At this writing DJIA down about 75-points.

Next week the Fed meets to decide what percent to raise interest rates by. Similar to past predictions, the increase will be .5 to 1.0 Percent. It would be a boost to the Dem's, if the increase was low or not at all. Stay tuned,