Forget 2% Inflation. With Margins Forcefully Squeezed, Big Companies Raise Prices, Point at Massive Inflation Overshoot

Smaller companies too: Boots-on-the-ground view of surging costs in the roofing manufacturing industry. The Fed will brush it off as “temporary,” but the inflationary mindset has set in.

By Wolf Richter for WOLF STREET.

Big companies, such as Procter & Gamble, have used their earnings calls to prepare investors, customers, and consumers for what is coming: Surging input costs are creating hefty margin pressures, and companies are confident they can regain their margins by passing on those surging costs by implementing large price increases. Smaller companies face the same scenario of surging input cost and margin pressures.

Todd Miller, President of Classic Metal Roofing Systems, which manufactures metal shingles in the US, sent me an email today where he goes into detail as to what his industry, and the broader home remodeling industry, is facing, in terms of surging costs, shipping issues, and supply constraints. This is Todd Miller, a long-time reader and supporter of Wolf Street:

“Our industry is dealing with supply chain shortages as well as rapidly increasing prices. While we have not had to go to this extreme yet on the types of specialized products we produce, I have seen the selling prices of “commodity-based” metal roofs increase by 30% over the last six months, with additional increases projected.

“We’re also seeing the industry-leading asphalt shingle market in a pickle. Prices are going up, manufacturers have distributors and contractors on allocation, and lead times of 30 weeks are being reported. We’re also seeing the industry cut back on product offerings.

“The end result is we have a very robust remodeling and construction market, with limited product availability and spiraling prices. Everyone is aware of the lumber issues, but we’re also hearing of major issues with windows, doors, and siding products.

“As a metal roofing manufacturer, here are some of the raw material increases we have experienced over the past six months:

  • Unpainted aluminum: up 15%
  • Unpainted galvanized steel: up 57%
  • Coatings used on our products: up 10%
  • Corrugated packaging: up 15% on average
  • Lumber for packaging: up 34%
  • Fasteners: up 5 to 8%.

“Typically, the metals and coatings make up about 85% of our product costs.

“And then we’re also dealing with escalating freight costs as well as difficulty in shipping internationally. Our customer in Japan is also experiencing a very robust market, but it can be 30+ days for us to get a container scheduled to take product to them.

“We do import polymer roofing underlayment from China and the big issue there has also been deliveries – getting containers to bring product to us.

“I suspect that some of the raw material prices will soften hopefully in late 2021 and early 2022. But increases in costs for labor and transportation will make it challenging for most manufacturers in our sector to drop prices – we will all be working to regain margin from the raw material increases.”

Miller’s last phrase translates into a common situation now facing manufacturers, where input prices have suddenly surged, squeezing the manufacturer’s margin. The manufacturer tries to catch up and raise selling prices. And even if some of the input prices, such as volatile commodity prices, drop again, manufacturers are unlikely to lower their selling prices because they’re still catching up with their input-cost increases and attempt to regain the margin they gave up as input costs suddenly surged.

In terms of publicly traded companies, the number of mentions of “inflation” during earnings calls more than tripled year-over-year so far, “the biggest jump in our history since 2004,” according to BofA Global Research analysts on Monday, cited by CNBC’s Carl Quintanilla, who tweeted this chart from the BofA analysis:

In the past, the number of mentions of inflation “has led CPI by a quarter with 52% correlation and points to a robust rebound in inflation ahead,” the BofA analysts wrote in the same report, cited by MarketWatch. The “major drivers” of these mentions were the costs of raw materials, transportation, and labor.

Procter & Gamble CFO Andre Schulten said during the earnings call last week, “The commodity cost challenges we faced this year will obviously be larger next fiscal year. We will offset a portion of this impact with price increases.”

They’re looking at raising prices on their products “in the range of mid to high single-digits,” he said. “We are analyzing raw material and foreign exchange impacts in other categories and markets, and we are assessing the need for additional pricing moves.”

All companies are planning to pass on the surging input costs via price increases, or they have already done so, and they’re all adding to inflationary pressures.

John Hartung, CFO of Chipotle said during the earnings call, “We think everybody in the restaurant industry is going to have to pass those costs along to the customer. And we think we’re in a much, much better position to do that, than other companies out there.”

Whirlpool in its earnings call discussed raw material inflation, “particularly in steel and resin,” that “will negatively impact our business by about $1 billion.” It said that it had announced “price increases in various countries across the globe ranging from 5% to 12%.”

Kimberly-Clark during its earnings call explained how it is trying to keep up with “raw material inflation,” as input costs are rising fast and price increases and cost cutting lag.

“So, one way to think about the run-up in inflation that we have for the year is that within the year, we will cover about half of that with pricing,” CFO Maria Henry explained.

“And then when you add in the additional cost savings both in terms of our increased outlook on the FORCE program as well as additional tightening of the belt around discretionary items, you would get to cover a good portion of the inflation,” she said.

“In terms of input cost inflation, that is ramping in the first quarter and the second quarter. We expect that it will peak, and then moderate, and in some cases come down a bit in the second half,” she said.

Kimberly-Clark CEO Michael Hsu summed it up: “We are moving rapidly especially with selling price increases to offset commodity headwinds.”

These examples represent a large-scale movement. And it boils down to is this: Forget 2% inflation. There are hefty margin pressures on companies all around, and they’re now resorting to hefty price increases to offset surging input costs. And their customers – other companies and consumers – are paying those higher prices. The whole mindset has changed. An inflationary mindset has become established in no time, and there will be a massive overshoot of inflation that the Fed will attempt to brush off as temporary.

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Check out these great roofing options for homes and other buildings, including multifamily, at Classic Metal Roofing Systems

  332 comments for “Forget 2% Inflation. With Margins Forcefully Squeezed, Big Companies Raise Prices, Point at Massive Inflation Overshoot

  1. OutWest says:

    Inflation, my biggest nightmare…

    • Joe Saba says:

      so sorry NO INFLATION(govt made up word)
      just fiat DEVALUATION(central bankster real meaning)

      ie LOSS OF VALUE
      fiat collapse when people lose TRUST IN CURRENCY

      • Finster says:

        The right way to think of it. Inflation isn’t the value of things going up, it’s the value of currency going down. The lower the value of dollars, the more of them it takes to buy the same stuff.

    • historicus says:

      OutWest..
      I’m guessing you’re not J Powell or a Fed Governor.

  2. Bob says:

    I’m angry. I’m completely despondent. I’ve missed this entire bubble market and have been sitting in cash. My entire life savings is being systematically destroyed and I have no idea what to do with my money. I’m ready to end my life if I end up being destroyed by this, but not before getting some justice against the criminals that have done this to me and other prudent people that “followed the rules”. There’s nothing to look forward to in this country. I can barely be bothered to work anymore. What for?

    • Eastern Bunny says:

      Chill out, it’s just money.

      • Bob says:

        You’re joking right? It’s your labor, being stolen. Enslaved while under the mass delusion that you have any chance at having a secure future let alone get ahead. That’s an incredibly stupid response. The fed is literally robbing you at gunpoint and you’re like “meh, go ahead, it’s only money”

        • bungee says:

          you can still buy physical gold with your savings. $2 million at today’s prices fits in a shoe box. and think of it this way – it’s the last thing the fed wants you to do with your money. so you’d be sticking it to them. you’ll be fine.
          p. s. the fed is not literally robbing you at gunpoint. you mean figuratively.

        • Eastern Bunny says:

          Just like seasons come and go so there are cycles in human affairs and history.
          There is not much you can do, early decades at the beginning of each century aren’t very propitious to human happiness. Unless you can fast forward to 2060 I suggest you take it easy and look at the bright side, things can be worse, they probably will very soon.

        • HK says:

          that’s kind of the point… that’s why the fed is here. i’m in my 20s I know for a fact that you aren’t going to pay for most of this in the end. It’s my generation that will be that one’s paying for it. You’ve worked all your life, your blood, sweat and tears for the labor and hours you’ve put in are now being slowly slipped away from you. It’s like the Fed, smiling at you while you pass away slowly…

          we can all learn that nothing in life is surely a guarantee besides death. So get some sun while you still can, because this is just the beginning. It’ll take years if not decades to reverse the damages.

        • Patrick says:

          Put it in physical gold and silver ASAP. You may be better off there than many other places. Do the math. It’s the antithesis to inflations.

        • nick kelly says:

          He is replying to you ‘ending your life’. What do you think a fire, cop or medic would say: ‘Ya do it’?
          There are millionaires terminal right now, for real, not just whining, who would give every dollar for another month.
          The good news: yr abrupt reply to the right advice is a pretty good indication u are exaggerating.

        • rhodium says:

          I did the same thing. I sat a huge chunk in cash thinking that the market would correct, but now we have all this. I still think the market could correct a bunch, but yeah, that’s the world we live in. Easternbunny is right, money ain’t shit now and sometimes you lose hard by no fault of your own other than not knowing the future.

          Your choice is to risk it all in their game or to not play it. If financial security is your goal because you’re afraid of discomfort and death, then get over your fear of discomfort and death and you will have won at your own game.

      • NBay says:

        And you probably aren’t homeless or in jail…..I’ve experienced both. Yeah, I did get suicidal thoughts, but like Nietzsche says, “The thought of suicide gets many good men through many bad nights”. Just don’t tell a “medical professional” any of that or you’ll be sucked into another bad place (a money making system)….there isn’t much around anymore that hasn’t been “entrepreneurized”…or “corporated”……..which I find sick as hell…..actually I’m as mad at this sick “chase money/consume” culture as you are at the Fed. Growth for growth’s sake is the ideology of a cancer cell.

        Wolfstreet is free…….good article and thanks.

    • Tony says:

      You could easily still park your cash in dividend paying ETFs/stocks/muni bonds. It’s inflation and the world isn’t ending. Relax….as they always say “diversify” Holding all cash is essentially having all your eggs in one basket and you’ll never benefit from compounding interest. You know as well as i do that there’s no such thing as a free lunch. Hoarding cash is a sign of fear.

      I understand the whole idea of hoarding cash and wait for a crash, but stagnant cash doing nothing out of fear is just as bad.

      I’ve known so many people over the past 20 years just hoarding cash, waiting for the end of times. It just sits in their savings account stagnant because they’re scared to do anything with it.

      “A broken clock is right twice a day”

      • Nacho Libre says:

        Incorrect observations.

        Money has dual purpose – as a store of value and as a medium of commerce.

        If someone wants to store the returns of their hard work, it shouldn’t be called ‘hoarding’. They shouldn’t be called ‘broken clocks’. They shouldn’t be labeled as ‘scared’.

        In fact, the Fed should be called the ‘robber’ and its policies should be called ‘robbery’.

        • bungee says:

          but those two functions work at cross-purposes and create the rock and hard place the central bank finds itself between. the store of value purpose is leaving money. it’s not coming back.
          hmmmm… if only there were some separate asset, easily identifiable, that was infinitely durable, impossible to artificially create and highly valued the world over and already held by governments and central banks that could fulfill, not the medium of exchange function, but just the store of value function…
          something ordinary people could buy in even small amounts to protect their wealth and fruits of their hard work.
          if only…
          oh wait. its called gold.

        • YuShan says:

          It’s very telling that what used to be called “saving”is now called “hoarding”.

          I’m wondering what the impact is of the anxiety that central banks are causing with all this. You usually hear only one side of the story (“gains” in stocks, crypto, real estate etc). But if the Fed prints $4T, these interest free, being debased as we speak $4T have to be held by SOMEBODY, directly or indirectly, and these people are losing out big. It’s all a big wealth transfer.

        • Jack says:

          This comment is primarily for rob.
          But also in reply to yushan, bungee and Nl.

          Rob, friend , I frankly feel for your pain and understand your disillusionment with what’s going on in this “ Once” a country of opportunity and freedom.

          That being said, I urge you to look for a good financial advisor, don’t lose hope in human nature.

          There are a lot of people who can advise you on what course of action you should plan depending on your circumstances, just be sure to ask at the outset how much their service might cost you.

          Good luck.

          Yu Shan ,

          I agree with you totally as to how saving for a rainy day has become synonymous with hoarding in the eyes of people with limited horizons.

          It is frankly appalling to see that prudence in managing your life affairs financially is looked at with such low esteem!!

          Wether individuals or nations, consuming less than what you produce is a mark of maturity and strength, alas with the scum that is currently dishing out unbelievable destructive policies (if you can call them policies ), there is only one way this will end, and it is NOT a happy one.

          I am disheartened by the turn of events in the US, there is seemingly NO plan post disaster.

          Just throwing money into a pit and burning it is not helpful to reconstruct this country.

          In regards to this article, I am afraid that the clamor to join the construction fray ( I mean residential construction) , is the last thing any creature with s half a brain should be doing now.

          You will be competing with large construction projects for materials and Labour! In an environment of rising iron ore prices is totally unjustifiable,

          Current iron ore prices are hovering around $190 per ton, even the Chinese steel manufacturers were screaming bloody murder from July 2020!

          With Brazil’s production of steel out of action and Australia, Russia and SA the main producers having a great run, it is NOT advisable to embark on any kind of building projects unless you’re willing to compete with more resourceful Parties.

          So there you have it ! If you can’t build a house, maybe put some of your money into the BHP, RIO TINTO’s of this world and ride the resources boom for the next three to six months !!!

          The other issue I’d like to take up here is the lack of local industries that could have fulfilled the role of the “ dependable Chinese producers “!

          If we had preserved any semblance of skills and training in the real world ( carpentry… etc..) instead of teaching the kids to sing and dance their way to financial freedom we wouldn’t arrive at this juncture to begin with.

          We are letting amazon, google, and facecrap dictate the policies that should run this country, and that is a great fallacy.

          People need to resume work, and life.

          The government should facilitate that.. asap.

        • Nacho Libre says:

          Jack,

          You complain about problems that ARE government facilitated and yet you advocate for more.

          1. The Fed (private entity) was facilitated by the government. Companies no longer have to compete for capital – your hard earned money. Fed just skims everyone’s wallets and provides cheap capital. Result? Everyone is forced to chase yields. Houses out of reach for median income earners. Stocks of companies that are losing billions are rocketing. Loss of confidence in dollars.

          2. Education is largely facilitated by the government. Lack of teaching in real life skills and emphasis on dancing & music – all because of it. Public schools (monopolies btw) are not filled with doers but with teachers that lean towards fine arts.

          We can do fine without the government facilitating, thank you.

        • Jack says:

          Nacho Libre

          “People need to resume work, and life.

          The government should facilitate that.. asap.”

          This is what you’ve missed reading ( or understanding) from my comment above.

          I think it’s self explanatory, the stupid measures to lock down the whole Economy and the country is one of the most destructive policies ever inflicted on the population of this planet.

          On any country’s level, restrictions on international travel would’ve sufficed to eliminate most issues ( if there was any).

          The rush to Lerch from one policy to the next regarding “health advice “ has been (and still is ) one of the most ridiculous aspect of the whole shambolic approach to in the last 13 months.

          So, NO. I am Not advocating for more government facilitation of anything other than :

          Reversing the huge F&@)(Up that they meted out to the thousands and thousands of businesses and individuals that were forced to close and rely on the government to get by.

          Thank You

        • bungee says:

          Jack,
          agreed but not gonna happen. after watching this theater go on this past year it is clear this is intentional.
          thank you for mentioning the elephant in the room.

      • Old school says:

        Whether you have made a mistake holding cash is hard to say. Asset prices at these levels probably are not sustainable. Probably going to be a blow off top and then asset crash. Not beyond possibility that asset prices go right back to 2009 lows as real economy is more debt encumbered and demographic and political situation is worst.

        • Paulo says:

          Yup. And they battle inflation with interest rates. Rising rates = falling RE prices. In a few years it should be a good time to buy a home.

          In 1969 my Father in Law bought bought 2 acres with a small house, a cabin, and a shack on it. His mother in law lived in the house, the drunk brother in law lived in the cabin, and some poor old timers lived in the shack for cheap rent. It carried itself for taxes and insurance. The night he closed the sale he was having a brew in the local Legion and heard the seller bragging about taking the ‘new to town’ sucker for 7K. He sat on it for 20 years or so and sold it for a huge profit. Now, after another 20 years, it has view condos on it and the property is worth millions.

          RE appreciated much more than gold over the same time frame. Just an observation. I’ve been reading about how gold is going to 5 K anytime now, for what? the last 10 years? Meanwhile………

          Sure, buying something you cannot afford at the top of the market and on credit is not wise. But if you have cash, there will be some good buys and people will be glad to unload their mistakes. Buyers can offer a fair price and make a win win out of a mess.

        • ElbowWilham says:

          Paulo: You can get lucky with real estate, but its location location location. If your FIL had bought 7000 worth of gold in 1969 it would be worth about $350k now. It it would require no maintenance, taxes, insurance, etc.

        • bungee says:

          Paulo,

          RE appreciated much more than gold over the same time frame. Just an observation. I’ve been reading about how gold is going to 5 K anytime now, for what? the last 10 years?

          all real estate is different. all gold is the same. gold holders are never bag holders. real estate is an investment. gold is savings.

          even though this is an investment blog, many here are obviously simple savers. it is not fair to tell young people with only meager savings, or old people on a fixed income or a nest egg to buy real estate. to go invest in an orchard or farmland. it is ridiculous.

          Gold however is perfect for them, young people can hold it for a very long time and old people can sell small amounts as needed. safety is becoming more and more attractive. the price of gold doesn’t matter. we aren’t waiting for 5K. we are expecting the market to break a la 1933, 1971 (but this time seems bigger…)

      • Gold, silver or Bitcoin and if you dare play the stock market right now. It will go higher since Biden will be putting trillions into the economy. I know the stock market can go only so high but might as well play it for now. Live for the moment. RF

      • Swamp Creature says:

        Lets simplify everything

        The Fed and our dear leaders know they can’t pay for all these benefits that they have promised by just raising taxes. So their only recourse is to print money. So they are stealing money from the savers and the people who have been “following the rules” . The little old widow with $300,000 savings in the bank are the target for asset confiscation. Also the Blue collar workers who’s entire wages are reported to the government is having their wages confiscated. If they ask for a wage increase then their jobs get shipped overseas.

        This above scenerio is forcing everyone into the casino with housing prices and the stock market going off the rails. When all the lemmings are fully into the casino then their will be no more greater fools and the ponzi game and casino will collapse and all the late comers will be wiped out. This is what is going to happen. You can put this one in the bank.

        I’m watching all this happen from the sidelines. I’m not playing in the casino.

        • Swamp Creature says:

          Correction

          I would change “Blue Collar Workers” to “Middle Class” workers which include WFH workers and other service jobs which can be outsourced overseas.

        • David Hall says:

          30 years ago the S&P 500 was at $750. Today it is over $4000. It has grown five times and paid dividends.

        • nodecentrepublicansleft says:

          I saw an interview w/that Dr. Doom guy who predicted the RE Crash in GFC. He said something to the effect of:

          “Yes, I lose some $ to inflation, but I don’t risk losing 50% of my life savings in a single day.”

          Nobody is forcing anybody to go into a casino.

          If you want to gamble, fine. But either admit you’ve got a gambling problem or FOMO.

          I get it. Real wages have been flat for my entire 52 yrs on earth. I’m tired of the wealthy/corps screwing over everybody else in this country.

          But panicking isn’t going to help……

      • Trailer Trash says:

        “It just sits in their savings account stagnant because they’re scared to do anything with it. ”

        In previous decades the financial press constantly moaned about American savings rate was too low and we should be more like those thrifty Japanese who saved money for a rainy day and lived modestly.

        Also in past decades local banks made local loans based on funds that local people had deposited in savings accounts. At least that is what we were told.

        That model has been replaced. Now local banks are just salesmen who sign up suckers then sell the loans to the big banks . Local people are now supposed to send all their savings to the Wall St parasites so they can centrally control all financial decisions.

        As we can all see from the ongoing financial crisis, those Wall St parasites have completely failed at their job of managing the financial system. I would sooner light cigars with my modest savings than send a nickel to the Wall St parasites.

        • billytrip says:

          Hear hear. I know that sitting in cash it risky of itself, but the last time I jumped into the market with both feet (2000), I got slaughtered.

          Never again. The whole game is to force the “retail” investor into the market and then get out the shears. Not this time. I have some assets that are not cash but I wouldn’t put a nickel into this bullsh*t market for any inducement.

          I recognize my cash is losing value. But not half in a matter of days which is what is coming to those “invested” in stocks.

    • Cash Guy says:

      Dump it into AT&T boomer stock for the dividends. F it, since I can’t buy a house (I get overbidden by 5% down-payment FOMOs), I might as well do it myself

    • Depth Charge says:

      I’m with you, Bob. Same story. I have to remind myself that at least I’m not like the guy I just passed on the sidewalk today, begging for money. It’s ugly out there.

      • Swamp Creature says:

        Bob

        Read this book “When Money Dies'” . The people in Germany in 1921 went through the same things we are going through now. Total chaos. Assassinations, civil unrest, shortages, inflation, currency devaluation, wage stagnation, starvation, Just when they though things could not get any worse they did. We may look back on events of today as “The good times” .

        • Heinz says:

          Let’s put it in perspective.

          These economic/social cycles do ebb and flow throughout history. It is part of the natural order that humans, for all their hubris, are not exempt.

          Nothing goes on forever– same with human affairs. Regression to mean is a law and the pendulum always swings back.

          Americans lived through miserable stagflation of 1970s-early 1980s and witnessed high price inflation for a number of years (even reaching a high of 13.5% in 1980).

          Many of them then must have had the angst and anger that we are starting to see today.

          Outcome of 1970s bout of stagflation– history tells us we that later in 1980s the economy rebounded and inflation was tamed (thanks to Mr Volker).

        • Anthony A. says:

          @Heinz: We don’t have wage inflation like we did back in the early 1980’s. That kept up with price inflation. We also don’t have Volker to fall back on. We have thieves in the FED instead.

        • otishertz says:

          They also had some really perverted and demented sexual fixations and general degeneracy and moral decay like today.

          There is a book called “Voluptuous Panic, The Erotic World of Weimar Berlin,” that can be found as a PDF online. It has wonderful art from the era and recalls the social climate of hyperinflation.

      • NBay says:

        Yep. VERY VERY UGLY.
        I’m in a 500 sq ft low income (50% of local median) hotel style 3 story over 62 complex with indoor outdoor carpet, cheap linoleum, plastic baseboards, paper veneer cabinets, zero “amenities”, unless you want to count the community garden, and a small general purpose hall, along with 250 other apts that have people like me who are grateful as hell to be here.
        In fact, make that I’m happy as hell.
        People don’t “need” much, especially when they are older. I’m glad I “wasted” my youth having TONS of fun and not worrying about retirement in some damned gated golf community.

        But there were MANY little factories making all sorts of things for minimum to a bit more wage back then. All rendered obsolete or eaten up by corporations now. I was even able to live in a van unhassled for 4 years to be able to make 527 skydives, and had lots of bikes. Like I said it was total fun and we were lucky.

        Kids today are totally screwed and ought to vote some really vicious net wealth taxes on the top 1% 0.1% 0.01% etc.

        See Wolf’s last article on wage and net wealth class warfare scores at present.

    • Paul says:

      Research ALL the Nomad Capitalist videos on YouTube, develop a plan then act on it. People complain because they are to lazy plan and act. DO IT.

      • VintageVNvet says:

        Truth! Thanks for some realism P.
        While it is always easy to ”blame” some body or some entity or some thing, the fact is that no one can actually control what happens all the time, even JPOO, or whatever/whoever.
        So, IMHO, the way to deal with the current inflationary situation is the same way one MUST prepare to deal with every situation:
        Control YOUR behaviour/reaction(s)…
        Planning, Preparing, studying the realities — as opposed to the constant bullstuff coming from all sides that is really noting more than propaganda.
        ETC.
        Talking to a neighbor on my bike ride around the hood in the saintly part of tpa bay area yesterday, he said they had just bought a townhome to ”downsize” to as their last child flew the nest, and listed and sold their house a day later in the active local market.
        Also saw three new homes, larger homes built to replace 700 SF cottages, that appear to be waiting for roofing and fenestrations, in other words, fully structurally blocked/framed and nothing happening…
        Appears to be a healthy housing market here, at the moment, but will almost certainly crash sooner or later EXACTLY as has been the case for my many years.
        Cycles folks, cycles!

    • I don’t think the replies you got so far are helpful. If you are 100% in cash, you don’t want to dump your cash into anything. What if there’s a crash and you put all your cash into risk assets right at the top of the bubble? That would only make the situation worse.

      Instead, what I would do is listen to my emotions. If I invest 5% of my portfolio in some asset, how would I feel if the price doubles tomorrow and how would I feel if the price is cut in half tomorrow?

      If the price doubles and I feel regret for not investing more, I invested too little. If the price is cut in half and I feel regret for investing so much, I invested too much. If the price is cut in half and I feel happy for the opportunity to buy more, I invested the right amount.

      I would start by investing $100 (or even as little as $10) in something tomorrow. That way, if I make a mistake, it’s just a small amount, but at least I got started and I can start observing how I feel about the investment.

      I don’t think being mostly in cash is necessarily stupid. One thing that I feel is very likely to happen is that in the next 5 or 10 years, some asset will unexpectedly drop by 50%, 75%, or 90% to a level no one thought possible (or plausible). Waiting patiently for that rare opportunity may end up being the best strategy of all.

      • YuShan says:

        Cash is an underappreciated asset imo. People focus on the zero yield, but ignore the option value. A few years down the line you may be able to buy the S&P500 at -50% or even -80% of what it is now. You’ll be happy you had cash.

        People always suffer from recency bias. Yes, cash was thrash in the past decade. The past decade was also the longest and strongest bullmarket in history (i.e. not the norm). And we have seen -50% drops in the stockmarket TWICE in the past 20 years, against an arguably much better economic backdrop than we have now. So a 50%-80% drop is not at all beyond the realm of possibilities.

        So I’m mostly in cash myself, combined with ~15% in gold as a tail-hedge.

        • Jack says:

          Yu

          Problem is , Nobody trust the current mob in charge of the printers!

          and since that is the issue, what guarantees do you have if we’re talking “ sovereign risk elements “?

          The whole premise of the current financial system’s foundation is the “capability of the US to honor its debt”

          The US was bankrupt in its previous history, the likelihood that will happen is increasing dramatically as fundamental reason for faith in its leaders is dissipating fast.

          There are no political leaders that give certainty to the masses, and promote reason!

          The ebb and flow of power is hard to control once you’ve demonstrated carelessness in abundance towards the weak and needy.

          The chance of That ( certainty), my friend is being diminished substantially by the rogue culprits who don’t care what the average citizens face.

          The famines and wars are by products of incompetence of the ruling class in every twist and turn of history books.

          So, where do we go from here?

          I’ve read a statement sometimes ago , a statement that we cannot preclude from our solutions to this problem,

          It goes …

          ( .., Revolt or Hunger!)

          The dam will break one day, the hope is that you’re not on the other side of the dam.

        • Michael Gorback says:

          Preach!

        • nodecentrepublicansleft says:

          When times are tough: cash is king!

      • Sean says:

        @Orthodox Investor, that’s good advice.

      • Always Look on the Bright Side of Life says:

        Wasn’t last March a great buying opportunity? The market dropped about 35% in six weeks with many really good companies dropping even more – that was the time to invest for growth.

        Instead of keeping everything in cash consider an indexed annuity with no caps and no fees. These annuities will allow you to earn a decent rate of return when the market goes up, but suffer none of the losses when the market goes down.

      • Swamp Creature says:

        Bob

        I disagree with a lot of the posts and advice on this site about “diversification” and getting your feet wet in the casino. This is the same BS I hear on CNBC and the shills like Rick Edelman, Jim Cramer, and Lawrence Yun. When things go down like they did in 1929 to 1933 EVERYTHING GOES DOWN!!!

        And don’t believe that things will necessarily get better. They could get worse. Much worse. I hope not.

        I was frustrated just like you are. At my stage in life I don’t have the time to recover from a bad investing timing error. I’m suppose to be retired but am still working way beyond the number of hours I had planned to at this stage.

        After thinking it over for a while I went to my credit union and bought a ladder of 1 year CDs yielding less than 1%. The rep there told me to ride out these economic times until more clarity emerges. Take a 3 to 4% loss every year against inflation and plan to come back another day. You can always save an equal amount that is being lost by inflation to keep the purchasing power of the principal remains intact.

    • YuShan says:

      I keep finding it strange hat there is no massive public outcry over the immorality of all this. Savings are the fruits of hard labour and sacrifice.

      I also find it disgusting how so called experts in the mass media keep parroting the line that inflation is a good thing and that we should have more of it. Although some of these people are genuinely stupid, I think most of them are not, so they must be evil.

      • OutsideTheBox says:

        Nope

        Savings are the result of being paid too much.

        You forget that capitalism is a uniform race to the bottom with 1% having 99% of the wealth.

        Everyone else gets subsistence only.

      • Swamp Creature says:

        YuShan

        They are both stupid and dangerous. Not necessarily evil.

      • Bobber says:

        In the view of most people, “savings” is holding some stocks, not sitting 100% in CDs, bonds, etc. Therefore, the ordinary person with something to invest has done OK in this environment. They have no reason to riot.

        Anybody holding 100% of their worth in cash or any other asset is speculating. They have no justifiable reason to cry when things don’t go their way. It is NOT risky to put 20% of a person’s net worth into the SPY, with the goal of matching inflation for the total portfolio.

        • Bobber says:

          That said, I agree with the sentiment. The Fed has no reason to suppress interest rates for decades, causing massive debt creation, asset inflation, welfare dependency, and government bailouts.

      • Depth Charge says:

        You think the leftist fake news media would allow it? They’re all just pushing the same narrative.

        • nodecentrepublicansleft says:

          Nothing is more “lefty” (like a dirty stinky tree hugging socialist hippie) than a giant transnational corporation like NBC.

          And NBC is owned by another massive, transnational corporation General Electric.

          GE has a horrible record of civil, political + criminal behavior:

          -Own or are responsible for 78 SuperFund sites
          -Released radioactive material on purpose in Richland, WA
          -Conducted experiments on hundreds of US citizens
          -Price fixing; Defense contract fraud; Consumer fraud
          -$200M settlement in ’98 for polluting Housatonic River.
          -War profiteering; Weapons manufacturing

          So yeah….all of that is “LEFTIST”?!

          The MSM is all owned by massive corporations.

          No massive corporation is “Leftist”. That’s ridiculous.

        • Wolf Richter says:

          nodecentrepublicansleft,

          You forgot the billionaires that own much of the MSN.

        • 728huey says:

          NBC hasn’t been owned by GE since 2006. They’re owned by Comcast niw, but they’re just as bad as GE ever was.

        • NBay says:

          Very well written nodecent-

          I’d just like to add a corporation is a huge dictatorship (bigger than most nation states) that through lobbyists and years of law writing/buying have firmly inserted themselves under the protections and benefits of what was once supposed to be OUR attempt at democracy. Lincoln described them as “enthroned” and warned they would “put all the wealth in few hands and the Republic would be destroyed”.

      • RightNYer says:

        It’s only strange until you realize there are more improvident people than there are prudent. In a democracy, this is what happens.

    • historicus says:

      The Federal Reserve is the enemy of the citizenry … and it will come to full view with this planned inflation.
      Inflation is a TAX, and what we have here is an unelected body laying a TAXATION on the people of this country. The PEOPLE have no representation on the Fed. So we have an arrangement of Taxation without Representation.
      Congress has the power to tax, and they must answer to the voters.
      Who does the Fed answer to? Not the People.

    • Sean says:

      Hi Bob,

      It sounds like you are hitting rock bottom in this area, mentally and emotionally. I wish you didn’t have to go through this.

      I too wish I had taken a different path. I could have been better off than I am right now.

      It’s true that we’re somewhat at the mercy of the system and the people who manipulate it, but I believe you and I also bear some responsibility.

      Who have we listened to? Have we listened only to people who talk about staying away from the stock market and sitting on a pile of cash? People who have a completely negative view of the economy or who want us to buy gold from them?

      The path I’ve chosen is to get a healthy dose of information from people like Wolf Richter, but to also learn from people who practice value investing. In other words, looking for opportunities to put cash to work for the long term.

      There’s no safe place for your money, but you can do more with it than let it sit.

      I have been watching Youtube videos by Joseph Carlson and Sven Carlin. My experience is they have integrity and I use them to balance out my view of what is happening in the economy.

    • Swamp Creature says:

      On CNBC Squauk Box this morning the guest was saying that things were great as long as the Fed can continue the easy money policies, wages can be kept down and profits from Wall Street and high tech companies can continue on their merry path upward. The biggest threat was not inflation but the reaction of the Fed to the inflation and the possible increase in wages across the board which would lead to and increase interest rates.

      The top 1% want it all. They want your soul.

      • timbers says:

        Yep. Abolish the rich. Tax them out of existence.

        It’s not just that they take control of our government with their money, turn it against us, rig it to impoverish and steal our wages for them selves. They also ruin our neighborhoods and drive us out.

        • Trailer Trash says:

          Even better, Eat The Rich!

          It solves two problems at once.

        • NBay says:

          Island natives during the Age of Exploration referred to sailors as “long pig”. So I guess the rich would taste like pork…..some of it maybe too fatty for some.
          And vegetarians could fertilize their soybeans with the ground up by products.

      • Anthony A. says:

        Interesting…inflation is “OK”, but wage inflation is not OK? So lets keep those wages down so profits will be UP. Beautiful stuff, and they said this with a straight face?

        • Swamp Creature says:

          Anthony A.

          Yep, heard it with my own ears on CNBC this morning. Wage inflation will trigger a move by the Fed. The hosts all nodded their heads in agreement, both the lib and the conservative. .

    • Swamp Creature says:

      Bob,

      I lot of people are in the same boat as you. We are suppose to be retired yet have to continue to work just to make ends meet. Working upwards of 18 hours a day 6 to 7 days a week, making about $10/hour after expenses. Then we have to listen to these scumbags like J Powel say that the biggest problem we have is the possibility of wage inflation. And if we get that wage inflation then companies will just shift their jobs overseas to third and forth world countries. We were suppose to have 5 income streams in retirement. Now 2 of them are yielding zero. 3 left. Now we had to quit working temporarily from pure exhaustion. So we’re down to 2 income streams. Fed annuity and SSA. Just pays our basic expenses.

    • Petunia says:

      Everything in life is about perspective. Just heard a discussion from Dubai of international money managers. One person thinks deflation is coming, inevitable in fact. His reasoning is that all the cash in the world is evidence of rising incomes and no/low demand.

      If he is right, you are simply making too much money, so much money you have nothing else you need. So maybe you need to change your perspective, you may be doing great, but don’t know it.

      His best investment advice was buy a home to live in and pay it off first before you look to invest elsewhere.

      • Depth Charge says:

        “His best investment advice was buy a home to live in and pay it off first before you look to invest elsewhere.”

        Which is the dumbest advice a person could ever listen to. Houses are the most overpriced they’ve ever been, and will fall 80%+ in some areas.

        • Petunia says:

          I think the advice was meant on a global basis, in which case, I would agree with him. I wouldn’t touch real estate in the US near any major “hot” market. But the no debt mantra was the most interesting part to me coming from a money manager. He is the only one I have ever heard say, pay off your home first, then come see me.

    • mtnwoman says:

      Bob, I am sorry your are feeling such anguish. But I am very glad you posted because I am in a similar situation and it has been wonderful to see the wisdom (for the most part) of Wolf’s readers in response.
      I am saving this thread.
      Thank you Wolf for creating this space.

    • lenert says:

      “When The Time Comes To Buy, You Won’t Want To” – Walter Deemer.

      • Rg says:

        I solved that problem early last year by setting decision points. I divided my cash into 4 “pots”

        When the stock market fell 10% I put in 25% of my cash, when it fell the next 10% I put in another 25%.

        I stuck with that plan and was part way through the third increment when the market started flying back up.

        So I still have cash, but I view that as diversification.

        Now the marketis so overvalued that in the next drop, I’ll divide my cash again, but I’ll wait until a 20% drop before I invest my first “pot”.

        Setting up a rule-based approach like this helps you overcome the fear.

    • Turtle says:

      Hey Bob, I’m about 30% in cash. I understand somewhat how you feel because I’ve been saving to buy a house in my home state, which is getting more expensive by the month. And as I’m working hard to save cash, Uncle Sam is diminishing its value while rewarding the irresponsible ones.

      Take heart, though. I believe this insanity will end simply because it is not sustainable. I don’t know when but reality always returns and when it does, those who were playing games start to get the short end of the stick and those with discipline to save start to see opportunities for buying low. I’m keeping my cash in 0.5% high yield savings (pitiful, but not 0%) and expect to eventually get that house I want after prices crash back to earth.

      In any case, you are valuable and I appreciate you sharing. You’re not alone. Stay the course.

    • Whatsthepoint says:

      Bob, sorry to hear your anguish….I don’t know your circumstances–age, skills, relationship status—but have you considered leaving the country? Keeping in mind that much of the world is mired in neoliberal circles of hell, you might find somewhere with both lower cost and better style of living…where your money might actually go further….if you’re being forced to run faster on the treadmill and you don’t control the power, sometimes all you can do is hop off. Everyone’s situation is different, but leaving (under somewhat unexpected circumstances) was the best thing I ever did.

    • HQ says:

      Misery loves company, Bob, and I’m in your club. I did as I was raised: worked hard, respectfully and responsibly; lived below my means; avoided debt; sacrificed pleasure today for a better tomorrow. I have a serious health condition on the horizon and a dependent parent, and I was hoping to muddle us through with my modest savings and very basic living.

      To realize all of that will quickly evaporate is disheartening, to put it mildly.

      This can’t be laughed off by saying “it’s only money”, offering a pat on the head and advice of going out for a walk in the sunshine. This is and will be devastating to many of us.

      • nick kelly says:

        Oh for Crissakes!! Look around the world or at the homeless near you. Poor ole Bob has roof over his head, power, a computer, some cash that SOO sadly has not compounded (neither has mine, my only ‘asset’) He also has time to comment although I’m not sure how buddy who is working two shifts of 8 hours and then 2 more hours can possibly have the time to agree with him.

        I can lament the Fed as well and many mornings I lament selling our house in 2014 that has gone up 500K.
        Then I tell myself to STFU and count my blessings.

        • HQ says:

          I don’t think the crux of Bob’s complaint – or mine – was lack of compounded interest. It was more the possible devaluation of his savings because of hyperinflation and a dearth of safer alternatives to maintain what he’s saved. I happen to think that is a legitimate complaint.

          Retorting with “at least you’re not homeless” isn’t very helpful, to say the least.

        • NBay says:

          “At least you’re not homeless” is a DAMNED significant retort, for those capable of ANY empathy at all. We are all human beings.
          Too much whining here.

    • Tony says:

      “I have all this money.” and yet you complain. Entitled much?

      • Nacho Libre says:

        What a boneheaded way of thinking.

        Bob worked hard for many years for that money. He paid taxes on that money. He didn’t splurge. He spent within means and saved the rest. That’s why he has that money. He is self-sufficient.

        That money is not from lottery. That money was not transferred from the Fed. That money was not from government stimulation.

        • OutsideTheBox says:

          Everybody who works, works hard.

          Bob got rewarded….many don’t.

          And now he whines ?

        • Nacho Libre says:

          Do you have more than $0 to your name? Many don’t. Why don’t you give it all?

          Now let’s make it even better. Let’s have a government agency to take away people’s savings.

          Stop whining and give up your money.

        • NBay says:

          Reductio ad absurdum, Nacho.

          Ever wonder why you have to resort to totally stupid and meaningless arguments to “make” whatever your “point” is ?

      • Bob says:

        There have been many supportive responses in this thread and it’s definitely good to know that I’m not alone in my feelings, but you sir do not know the first thing about me or where I came from. Calling me entitled is nothing short of laughable. I came from hell. Beaten and abused and struggling with mental health all my life. I have no safety net other than myself and the money I’ve scraped together by being frugal and careful. I have a parent that’s about to turn into a dependent. I’ve worked hard, put myself through college, made a smart bet on a career choice and have done reasonably well. How does it make me entitled that I just want to keep what I’ve earned and attempted to store for consumption at a later time? So you’re onboard with the idea that all money should be spent as fast as possible and lever up as much debt as possible? Sorry but that’s BS and so is your response.

    • Twinkytwonk says:

      Hi Bob, I’m in pretty much the same boat as you. I look at things to invest in and everything just doesn’t make sense mathematically so in this case the best thing to invest in is yourself. That could mean learning a new skill or buying tooling and equipment that you can use to make money. Alternatively, you may like hifi equipment, traditional antiques or retro videogames. If you buy these things wisely not only do you get enjoyment out of the item but it’s also an inflation hedge.

      This puts you in control of your money and imho that’s the best person to do the job.

      There is one thing that puzzles me though. In the 70’s we had high inflation but you could get ~10% on your savings with no risk. If we get the same inflation now and you can’t get any savings interest then people will have less to spend and businesses will go bust big time. Have I missed something obvious?

      • Anthony A. says:

        “Have I missed something obvious?” What you missed is the rich guys want ALL of our assets instead of just letting us keep up with inflation.

        And they don’t care about the businesses going bust either.

        • Twinkytwonk says:

          That may be the case but I imagine it would be like a zombie film with the super rich unable to leave their secure compound without being torn apart by the masses.

        • Anthony A. says:

          Twinkytwonk: It may come to that if the gov can figure out how to get the guns away from us citizens. Note that the White House is now a military encampment with fences, barbwire and soldiers all around it.

          Do you think the gov will trust us when things get worse?

          What will young school children think when they take their class trip to DC?

    • Ralph Hiesey says:

      Bob

      I completely get your frustration!– I’m retired with what seemed to be plenty of money for retirement. In 2012 I feared huge inflation was going to happen after the Fed in helicopter style dumped huge amount of cash. But it didn’t happen! It could be the same story now. Why??

      I now understand that the reason it didn’t happen before is that the helicopters dumped cash on the rich zip codes who held it without spending it. Monetary velocity went way down. Those people were happy to hold cash from the Fed rather than the other very questionable stuff like MBS that collapsed because the vast much less wealthy crowd who bought housing found they could not afford to pay–and house prices collapsed. But former MBS holders now had no desire or need to spend their new Fed cash.

      So why all the wild inflation talk now? Democrats in control! Panic! This is the signal for Republicans raise the chorus about inflation and spending–which is now predictable after THEY have been doing the big spending–or tax cutting for four years. Now those Democrats have to IMMEDIATELY STOP DOING that terribly wicked spending like what WE did before.

      But Wolf has told us about housing going up like crazy! And he predicts that before long will peak. Got it! Now telling us that home building material prices going up like crazy! I’m not sure why he is surprised. It’s the same story–a predictable result of the property buying panic induced by the new inflation panic among those with lots of cash NOT with the bottom 70% who don’t have any extra cash. The builders will find buyers at any price because of HOUSE ASSET inflation.

      Inflation is likely to hit a brick wall when price raising is attempted for things that the bottom 80% buy. This is not the 1970’s– tell me how their customers are going to pay. There are lots of unemployed, and underemployed who simply can’t. Inflation causing higher wages? How with so many who need better jobs?

      The people with those extra houses will either leave them empty, or charging rent with a negative cash flow problem–which if you have lots of cash may not be a problem.

      So inflation for the those that can afford it–especially for hard assets. Not so much for the rest of us is my prediction.

      Of course I realize could be wrong! Not taking any big bets.

      • OutsideTheBox says:

        Ralph

        I like your calmer, more reasoned analysis.

        Many of the commenters seem hysterical with fear.

        Democrats in power and all these folks lose their minds. Republicans did the same….yet then not one word of protest from the same folks.

        As another commenter noted….if you haved saved (hoarded) this much cash at least acknowledge that you are entitled and quite fortunate.

        Less rending of garments is called for.

      • jon says:

        If the CPI inflation goes up big time which I think is expected, then wont the FED be forced to raise rates ? This would increase mortgage rates, does it mean that real estate would go bust ? Also, 10Y Yield is determined by market not by FED. FED only controls short term yield.
        But FED can buy all bonds and keep rates under control although real inflation may be high. This has happened before .

        • Bob says:

          You seem to think that the CPLie is an actual measure of inflation and that the fed won’t do everything in its power to manipulate and lie about the reality so as to never raise rates again. If we were in a market economy things would be very different and I’d agree with you, but I’ve been a fool to believe that. We’re not different than China. We have a centrally planned economy and the powers that be wants one thing… wage slaves, period. If you don’t have the ability to take on lots of risk you’re screwed. Hell, you might be screwed anyway because there’s no telling what the water line is for someone to do well and not get crushed by this terrorist attack on the US citizens.

    • Dave Ryan says:

      Bob, first, I am sorry you feel this way. Second, my hope is that you find a way to regain agency in society and in your financial situation.

      • Bob says:

        Thank you. I honestly don’t see how right now but I hope so too. I’ve begun making peace with the idea of just spending what I have left and then ending my life when the funds run out. I’m too old to start over in the event of a wipeout and have no desire to grow old and be poor. I figure I have 10 good years left. I have enough money to live those out comfortably assuming a major health crisis doesn’t bankrupt me. I just see no hope for the future of this country, or really the world. Too much greed.

        • Eastern Bunny says:

          Bob you are a moron to think about suicide. You fxxxing idiot have 10 years of savings to live on and aren’t happy because you want more. I work for minimum wage, have partial disability and have a handicapped child. On top of this I take care my mom who lives with us because of her advanced dementia. I didn’t pay rent for three months and sometimes can’t get enough food for everyone and lives mainly day to day and I never thought of suicide. Your problem is not money or inflation, it’s meaning that is missing in your life , take your money and go to some third world country where people live on one dollar a day, you need some perspective, and quit reading economic blogs, there is more to life than this.

    • nodecentrepublicansleft says:

      Bob, suicide is a terrible thing to do to the people who love and care about you. Trust me on this, I’ve seen it destroy families up close and personal.

      You reminded me of a radio broadcast I heard once. The President of Haiti was speaking at the University of FL and he said that while the US had much to teach Haiti….that Haiti had a few things to teach the US as well.

      He mentioned our high suicide rate and that suicide was basically unheard of in Haiti….the poorest nation in the western hemisphere.

      Please consider you’re on a rock spinning at 1,000MPH while also going around the sun at 67,000MPH. Life is absurd as I’m sure you’ve witnessed a thousand times.

      You gotta let go of the fear/loathing. I get it, man. I truly do. I struggle with it to. But going postal won’t change anything. Gotta let it go….

      • otishertz says:

        The thing about suicide is no one ever thinks about the aftermath afterwards.

      • Bob says:

        I too have seen it up close. That’s how I lost my father. And frankly I don’t blame him one bit. He’s fortunate to have not been around for these recent years to see what the world has become.

        Thanks for your kind words and concern.

        As I see it there’s been abuse and bullying going on by the fed, government, and ultra rich. What do you do with a bully? Well, eventually you fight back. There’s nothing more dangerous than a man with nothing left to lose, and someday that will be me. That imagined better future and social mobility was nothing more than a mirage sold to suckers like me in order to trick them into working to make others rich and ever more entrenched.

    • Michael Gorback says:

      Your position was kind of extreme but look at it this way. Inflation has been slowly corroding the value of your cash. The alternative extreme would be to go whole hog on stocks and get chopped off at the knees after a crash. Lose it slow, lose it fast – who knows? That’s what diverse asset classes are for. I’ve had a significant position in both cash and gold for years. Cash for the deflation (which I firmly believe is the strong natural economic undercurrent that scares the hell out of CB’s) and gold for inflation.

      Both positions have been like dragging anchors on my portfolio but I’m not upset. It’s like buying insurance and being pissed that your house didn’t burn down. Rule #1 for me is don’t lose money. The dragging anchors have cut my returns to about 50% of the S&P but that’s how buffers work.

      The whole price inflation thing has me totally confused. I don’t understand the underlying forces despite extensive discussion on this blog and elsewhere.

      The housing thing is insane. I hear a lot about the selling being liquidation of second homes. OTOH, low mortgage rates push up prices for the buyer which IMHO cancels out the savings on mortgage interest. And when mortgage rates rise those new owners are not going to be happy.

      Another phenomenon is older people who would like to sell their house but realize they’d have to pay inflated prices for their next house. That decreases available units for sale which fuels higher prices.

      Meanwhile, whether you hold on to your current overpriced house or buy a new overpriced house, your property taxes are going to go up. You will be paying those taxes in real time while your paper wealth lingers in limbo. Might go up, might go down. As the saying goes the only certain things in life are death and taxes, but not increasing housing prices.

      What asset classes are unloved right now? Cash and precious metals. Unloved assets often present great opportunities. Since you’re in cash, you have great deflation protection but no inflation protection. Is there an unloved asset you could acquire to offset inflation? Got gold?

      Sorta related topic but not really except in terms of which nosebleed stocks to consider:

      I’m still in the stock market but in 2019 I dove into internet stocks. Not FB, Amazon, or the usual stuff. I bought into what I call the glue stocks – companies that make e-commerce possible.

      Appian, Okta, Twilio, Zynga, Shopify, Workday, PayPal, Trade Desk, Slack (ok, a dog), Zoom (didn’t know covid was coming but it was a great surpise return). Some of these are way off their highs but they are very volatile stocks and even with some them off double digits from their highs I’m still up 100-200% or more on them.

      I put other stuff in the mix 2019 and a couple in 2020 like Illumina, Match, McCormick, Ollie’s, Waste Management, Disney, Vail, SVB and Charlotte’s Web (which I should have dumped a long time ago), and Masimo but they have been mixed compared to the “glue” stocks. Some of these went off like rockets, others I mostly bought for the dividend but still appreciated well. Not sure about Ollie’s right now. Might sell it.

      This year I added about 18 more stocks, most of them “glue” stocks. These services are kind of hard for online businesses to change. If you have a database setup with one of these services the transition to another is very difficult. I experienced this myself with medical billing software. Think about moving billing data for a few thousand patients from one proprietary format to another proprietary format.

      Even with a crash, I think the glue stocks will prevail. Others are the covid-related companies. The technology provided by Illumina was used to develop the Pfizer and Moderna vaccines. This technology works at the genomic level. It changes the production blueprints.

      10X, OTOH, works on the protein production side (proteomics) , which what is what the cell actually does with the blueprints. IMHO proteomics has more potential but I wouldn’t kick either company out of bed. As Polonius said, “grapple them to thy soul with hoops of steel.”

    • RedRaider says:

      Don’t end your life. Remain calm. You sitting in cash is the correct place to be if there’s a crash in the near future. You’ll be buying assets for pennies on the dollar in the future. So don’t be too concerned about that slow devaluation of your cash. I feel your pain – literally! I too am in cash – 97.5% at the last reckoning. I think those who are currently holding assets are living in a fool’s paradise.

      So what’s the chance of a crash? I don’t know and neither does anyone else. What I do know is we all have to make that decision. We’ll find it easiest to live with that decision if we remain calm and aware of current developments. That way you’re doing all you can. The rest is up to God.

      • RedRaider says:

        P.S. The other 2.5% I use to day trade. My current vehicle is XLE and before that GDXJ. My goal is to make $100/day. Not much but it helps to counteract devaluation of my cash. My guess is commodities will remain a productive area for q2 but it’s just a guess.

        I also own physical gold and silver. I’ve owned it for 20 years and don’t even consider it part of my portfolio.

        This might not be your cup of tea so try and find something you’re comfortable with. Remember you have super protected yourself against deflation. That’s half the battle. The remaining half is inflation. Consider it an insurance policy protecting your cash.

      • RedRaider says:

        When it comes to remaining aware of current developments find some web sites whose information you trust. Wolfstreet is well rounded and high quality information. I have 2 other sites I read almost as much as Wolfstreet. Out of respect for Wolf’s site I would feel uncomfortable mentioning what they are.

      • Swamp Creature says:

        Bob,

        The other day I went to my usual breakfast coffee and donuts at Duncan Donuts. The parking meter charged .50 to park for 20 minutes. That used up my entire monthly interest on my 50K Treasury Money Market fund. The rest rooms were all boarded up because of Covid-19. All the tables were blocked with yellow police tape. So the little pleasure of getting coffee and donuts has been ruined. This has been going on for over a year with a lot of other things too. I feel your pain. Just hang in there and try to write down 10 things that you enjoy doing and do those things. Forget about what you can’t do anymore. That’s what I’ve been doing and its working.

    • Auldyin says:

      Bob
      I lived through years of up to 26% inflation in the UK in the mid seventies. One tax rate on ‘unearned income’ got to 99%. Our Treasury Secretary was dragged back from the airport by the IMF. You don’t get bigger basket-case countries than that. It seemed like the end of the World at the time with strikes and rubbish piled up in the streets, after 12yrs of a free spending govt that said there was no other way and refused to budge.
      We chucked them out in 1979 and a very tough govt turned it all round with fiscal and monetary discipline in a remarkably short time. Lots of people fought bitterly for the old way and many of them didn’t prosper under the changes. Everything for prosperity is still there underneath just waiting to spring back given sound management. All I’m saying is, don’t give up, it’s rarely as bad as you imagine in the end.

    • DR DOOM says:

      Bob: Ditch the FOMO or DOMO (depression) , in,your case. Keep reminding yourself of the joke of the two salesman facing a bear attack . One salesman is busy putting on running shoes while the other salesman is saying that the shoe thing is pointless because you can’t out run a bear. The shoed up salesman says I don’t have to out run the bear I only need to out run you. When the bear is feasting on the spoils of a collapsing fiat fed debt system you will be hauling ass to buy the spoils at a discount.

    • Just Saying says:

      I’m with you 100% Bob. Also pulled out in 2009 and been sitting on cash waiting for them to clean up the ponzi. We know the rest of the story. The whores and parasites will say we messed up not handing our savings over to the money changers. That doesn’t change the fact that they are whores and parasites who enable the fraud and theft of others savings. At this point say screw them all. Cut your expenses. Buy a small place in the country. Work for cash. Sit back and watch eh shit show crash. Good Luck.

  3. J-Pow!!! says:

    My evil plan is working!!!! Muhahahahaha!!! I am secretly stealing from the American people through inflation!!! Protecting my buddies in Congress who are incapable of balancing a budget!!!! I will continue doing this!!!! I will send free money to all my buddies!!! And a pittance to the common man to stop him from rioting when he figures it out!!!!! I have saved America!!!! I am a great man!!!!! Buy houses, fools!!!! I will Jack rates and crash howzing and stawks a year from now!!!! Then I will scoop up bargains!!!! Me and my buddies!!! In Congress!!!! In the hedge funds!!! In the boardroom!!!! Hahahahahahaha!!!!!!! I am saving America!!!! Saving you!!!!! Hahahahahahahah!!!!!

    • Phoenix_Ikki says:

      Nah, you’re not the real richman’s PUS boy Weimar Powell. You’re way too animated to be him. Have you seen the guy talk? He has about as much personality as a lump of coal. Sorry that’s an insult to the coal.

      • J-Pow!!! says:

        How dare you insult me — the great J-Pow!!! No more stimulus for you!!!! And what is this article about anyway!! There is no inflation!!!!!! Inflation is 2%!!!!! That’s what my index of coffee cups, t-shirts and doilies tells me!!! 2%!!!!!!! Be happy with your stimulis!!!!

    • Sounds like what Mnuchin did 08-09.

  4. The Bob who cried Wolf says:

    I’ve been telling customers since late last year to expect at least a 10% increase in prices this year, maybe prepare for 15. I was the messenger and it sucked. Now at least it’s going mainstream which makes it a lot less difficult for me to explain. I’m in construction and what I’m seeing has already started to price some customers out. These prices will correct some as production ramps up but the pent up demand and massive new demand will keep things pricey for a while.

    • Turtle says:

      Why is lumber, specifically, getting so much more expensive?

      I’m in tech and have seen zero increase from vendors other than the usual 5% – 10% annual increase in insurance, which is always planned for.

      • Paulo says:

        Turtle

        Low interest rates producing massive building surge, Covid reno projects from refis, and the occasional shutdown in sawmills due to Covid, plus transportation interruptions, all are adding to price increases. I just bought a lift of T&G pine for a feature ceiling and some steel roofing panels. My supplier apologised for all of the above. (haven’t got my latest bill yet :-) Plus, there are still percentage tariffs on Canadian lumber imported into the US, close to 30% of supply. Price goes up = tariff increase in real dollars.

        I live in Vancouver Island logging country and the industry is booming. When I drive past the marshalling yard/office there is a huge billboard advertising for workers. These are 150K per year jobs. They are all machine operator jobs, plus HD techs and fallers. It’s a pretty sophisticated industry as all the gypos went under last downturn. They can’t compete.

        • Turtle says:

          Thanks, Paulo. Very interesting to hear it from you, with what you do and where you live.

        • Trailer Trash says:

          But none of that has anything to do with the price of residential fuel oil tanks, which just went up $180 at one time.

          I am wondering if they are pushing prices way beyond cost increases in order to collect revenue now before building construction hits the brick wall in the near future, sending materials prices back down again.

        • newguy says:

          Was in Lowes recently and noticed a sheet of 4×8 OSB (exterior sheathing) is now $50. It used to be $10, twelve months ago. THAT is hyperinflation.

        • OutsideTheBox says:

          TT

          Think man !

          Texas had extremely cold weather with the resulting shutdown of refinerys and pipelines. The impacts from this debacle continue to reverberate throughtout the country.

          AND Saudi Arabia cut oil production way back….along with other countries. This affected global supply.

          A lesser contributer was a massive ship blocking the Suez canal.

          So domestic debacles and international policies and debacles are behind petroleum woes.

          Notice that the FED has no involvement in this scenario ?

        • VintageVNvet says:

          P,
          The shortage of lumber been going on for a while:
          Bidding for multifamily projects in SoCal in fall of 17, I was told it would be at least six months from signed purchase order, with deposit, before lumber could START arriving,,, and that was many hundred thousands of BF…
          Competent framing subs were saying they were booked for 3 YEARS, so the lumber was not the critical component.
          And to add some more anecdotal history, quotes for rebar, red iron, concrete, diesel fuel were good for 24 hours in the early ”oughts”, and were consistently revised if not booked by then.
          There have also been times in the past when the manufacturers of various construction components colluded to slow down and thus raise the prices,,, some ”execs” have even been convicted and jailed IIRC…

  5. Eastern Bunny says:

    It’s amazing how the Fed got so huge, so quickly.
    Without doubt the most powerful institution on earth.
    Our congressman debate for months a tiny 1% tax increase, yet here comes chairman Powell shaving off 10% of your purchasing power without anyone making a stand.
    He even gets featured on major magazines as a hero.

    • Depth Charge says:

      Until Jerome Powell and Co. start eating bullets, nothing will change. Violence is the only answer now. I’m not advocating for it, I’m stating a fact.

      • Bob says:

        Agreed 100%

      • cas127 says:

        There might be some of that, but the faster/easier (and therefore more likely) solution will be an increasing shift to some species of AltCoin that the DC degenerates can’t degrade as easily.

        It is no coincidence that the dawn of AltCoins came at the same time that DC committed to perpetual dollar dilution.

        It may not be BitCoin and DC will make a series of AltCoin assassination attempts, but so long as DC’s engineered inflation lies exposed, the base of DC’s corrupt power will erode.

        In the end, it is actually pretty hard to get a population to use a currency it has stopped trusting.

        DC has squandered an inconceivable fortune (trust in the USD) that it has absolutely no clue how to recreate.

        • YuShan says:

          In that context, it is very interesting to see what is happening in the “ape” / WallstreetSilver (Reddit) movement. Generally they are a bunch of idiots (imho), but it is a genuine activist movement against the Fed and the fiat system.

          They are creating hype, putting up billboards, advertise on Facebook (all these things paid with their own money), stamping dollar bills with texts like “Buy silver with paper” etc.

          This reddit has increased with tens of thousands of members in the past few weeks (now at 63.6k ). I really hope that this morphs into a broader movement (and hopefully a bit more intellectual) against central bank policies. Anyway, I encourage them.

        • John says:

          Buy physical gold and silver.

      • Phoenix_Ikki says:

        Agree but not going to happen. Most Americans are too willfully ignorant to know who he is or what the FED is all about. Their knowledge of interest rate is limited to low interest is good, high interest rate is bad for taking out a loan so I can buy things I technically can’t afford. Unless somehow you can tie real inflation and out of control inflation back to him and his cronies, definitely not a job you can count any MSM to do anytime soon. They’re still busy convincing you there’s no bubble out there, this is the roaring 20s without the hangover 1930s…party on Garth!

      • Sean says:

        When I see somebody write that violence is the only answer, my first thought is “Wow, they’re not using their imagination”.

        • Depth Charge says:

          When I see somebody type what you just did, I know they never paid attention in history class and have no clue about how the world really works.

        • RightNYer says:

          Mao – Political power grows out of the barrel of a gun.

        • Anthony A. says:

          Apparently, this poster has not seen the razor wire fence and armed military troops around the Capital. Great stuff to show your grammar school kids on their graduation trip to DC.

      • Turtle says:

        I don’t know about that but it is true that depraved minds will generally do as much as they are allowed to get away with.

      • Swamp Creature says:

        I think this may happen. Not hoping for it but its the next step.

        • Paulo says:

          And after that, more surveillance. The only thing missing is CCTV cameras on every corner like Britain. They already monitor everything else with AI and trip wire phrases.

          Wait a minute, my teeth fillings are buzzing. :-)

          I’m serious about the surveillance. The last time I crossed the border I was nervous and worried, and I don’t break any laws. :-) Must be old age.

        • Anthony A. says:

          I read recently that going about your business in a normal day in a good sized U.S. city, you are on video about seven separate times.

        • nodecentrepublicansleft says:

          Of course you all are hoping for violence.

          That’s why you keep talking about it!

          Don’t pretend w/the “I’m not advocating it….” blather.

          Grow some nuts and say what you really mean.

          Several folks here want violence and want to see the US burn. It’s been said many times. That’s what you believe….fine. There wouldn’t be any point in trying to change your minds.

      • Seen it all before, Bob says:

        Overthrowing the greatest Constitution in the entire world seems to be a bit drastic. With every revolution comes violence, murder, death, poverty, and suffering. Ask, Russia, Cuba, Vietnam, France….. how all that turned out. I guarantee this time, it will not be different.

        We should all just stand behind Bernie and elect him to avoid all of the other unpleasantness. Bernie will take care of the Fed. I guarantee it. And it won’t involve becoming a traitor to the greatest Constitution ever and to the US. Anyone who participates would become the new “Benedict Arnold” forever in history books. I would hate being called a traitor.

      • jon says:

        Don’t blame FED. Blame your elected representatives who are elected by the People. JPo is just a pawn like all elected reps.

        • Depth Charge says:

          The FED owns CONgress, not the other way around.

        • nodecentrepublicansleft says:

          That’s too much responsibility. It’s easier to cry about the boogie man than admit the truth: The public is full of morons.

          They keep voting other morons into office. The ones that can be bothered with voting.

          Why does everything suck? Because the public is stupid and apathetic. Like G. Carlin said: The politicians come from American schools, American communities, etc. This is the best we can do, folks.

    • historicus says:

      Powell also expanded M2 by 27% in less than a year…..
      IMAGINE THAT! What power…but wait….only Congress has the power to MINT. The Fed is there to provide temporary liquidity in banking events…not to permanently inject TRILLIONS.
      The Fed has been rogue, and has accrued new powers, violated mandates, and self authored their mission with each “emergency”…never to relinquish.
      Who’s watching? Congress enjoys the free money. Not until pitchforked and torch bearing citizens screaming of the inflation will they react. It cometh sooner than most expect.

      • otishertz says:

        No one will do anything but bellyache in the shame chambers of anti-social media. There will be no revolution. You only will have your like button and you will like it.

        Commenting gives the illusion that you are doing something when in most cases it’s less than nothing and you are sitting alone, harmless to the establishment, looking at a screen that is also watching you.

  6. Squanky says:

    Educate yourself and turn your anger and despair into positive action. Yes, life is unfair but in this country we have choices. Choose to learn more about different ways to use your money to generate money. People are making money in every market whether it is down or up, deflationary or inflationary, bull or bear. Ask the successful people around you how they are making money. if you do not know successful people then go meet some. I do not read Wolf to get depressed, I read Wolf to further my education. Knowledge, like money is power. Giving up or getting even will solve no problem. Again, educate yourself and make your money work for you, not against you.

    • Bob says:

      Please explain how to get “my money to work for me” when the entire system is a farce? Just dump it all into the ponzi market and pray that it goes up forever despite the very clear certainty that it can’t and won’t. Our government and fed has ruined this country. Now we have garbage crypto and TSLA. Please, tell me where one puts their money right now to protect it? Everything is seemingly in a bubble.

      • cas127 says:

        Re education…

        Crypto isn’t per se garbage…it is a stumbling, shambling, occasionally wild west attempt to figure out how to build a non-political (and therefore anti dilutional) currency…even as the betrayed trust in the USD falls apart.

        There is a rather significant amount of ferment in the AltCoin space and it is time well spent to learn something about the emerging options and structures.

        A lot of AltCoins may end up zeroed out…so great caution and wisdom is called for.

        But incrementalism, diversification, and education can go a long way (and not just for AltCoin).

        The political class *has* ruined a lot of things in this country…but most of all its own reputation.

        • YuShan says:

          The emergence of crypto currencies is a blessing, because it has opened peoples minds for alternative monetary systems.

          Also, blockchain technology as a transaction technology enables some wonderful stuff, like having gold and silver emerge as real money again that can be used in daily life to buy even small things like, say, an ice-cream or a cup of coffee. The physical nature of precious metals had previously sidelined them as transactable money for daily use, but it is coming back now.

        • Gomp says:

          If Congress is the sole “Minter of coin” then why isn’t crypto regarded as counterfeit?

        • Thomas Roberts says:

          Cryptos will crash eventually and stay much smaller. In the meantime, chia seems like the interesting altcoin at the moment.

          Gold and silver are always available. Just about all assets are currently overvalued. As for real estate, there will be big winners and losers, but, no one knows where the winners will be located. All cash will be alot better looking, when the stock market crashes. If you think you can still hop on, go up, and hop off in time, you may or may not succeed, good luck. Though, there is a possibility that after a recession, where the stock market crashes, there will be another crazy period of stock market growth.

      • andy says:

        Bob, invest your money into the most un-loved asset class you can find. Better yet the most hated asset class by everyone. What would that be? Why, the US dollar clearly.

        • Anthony A. says:

          Nah, oil is hated worse.

          But try to live without it, natural gas, and the derivatives such as all plastics.

        • Seen it all before, Bob says:

          In my humble opinion, the following are undervalued.

          1) Oil stocks. CVX and XOM are still creeping up as cars start driving and planes start flying again. They have fallen far but are essential. There are few electric cars now compared to gas and there are no electric passenger jets. CVX and XOM pay 5-7% dividends.
          2) Entertainment stocks. ie Live Nation, cruise ships, even airlines as people start flying again. However many are in huge debt and stocks are already higher than pre-pandemic due to speculation.
          3) Downtown condos in large cities. As the pandemic eases, and protests subside, these are a great long-term value. Maybe even better value after rent and mortgage forbearance end.

          I believe most of the RE bidding wars based on Wolf’s charts are in suburban Single family homes.

          Of course having, most of your savings in cash during this time is a guarantee you will have the cash if the housing market does crash.

          Lenert’s post above will join my favorite other quotes.

          “When The Time Comes To Buy, You Won’t Want To” – Walter Deemer.

          “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.” – Warren Buffet

          “How did you go bankrupt?”
          Two ways. Gradually, then suddenly.” – Earnest Hemingway

      • Sean says:

        First, stop choosing to believe the entire system is a farce. This isn’t Russia or China.

        Second, start learning about investing…not speculation or day trading…start learning about how to value businesses, and look for businesses that are under-valued by the market.

        Learn about the power of compounding.

        To help me in this area, I watch Youtube videos by Joseph Carlson and Sven Carlin.

      • Squanky says:

        Again educate yourself. You have some money to start. That is more than alot of people. Take an accounting class. Learn what a asset is and what a liability is. Ask the successful people here what educational resources they use. The stock market is by far not the only way to invest money. open your eyes to the world of money and find out what works for you. It takes time, patience and motivation. The computer is full of trash and full of wisdom at the same time, just like all the ways you can make your money work for you and become an asset vs a liability. Start with an accounting class, money well spent. Then start learning about all the different ways money can work for you. (education) Or sit back in despair and wallow in the uncertainty. Your choice. Again, ask everybody here what their best educational book or tool is. I suggest Rich dad, Poor dad unfortunately I do not remember the author but the life lessons are priceless.

        • Squanky says:

          Bob,

          Rich Dad Poor Dad: What the Rich Teach Their Kids About Money That the Poor and Middle Class Do Not! Paperback – April 11, 2017
          by Robert T. Kiyosaki

          Use this book to learn how to think about money. I read some comments on the book and yes the guy is a salesman. Look past the sales pitch and learn the life lessons, educate yourself about asset vs liability. I have never attended any of his seminars nor anyone else’s. I do not intend on attending a sales pitch about how to make money, the only one making the money is the guy pitching the sale. Take an accounting class and learn about cash flow. To me, the book is a foundation to a way of thinking about money, not how to make money. The life lesson is the value of educating yourself and the lesson that we have choices. Leave it at that and move forward from there. At least you have got a start. Good Luck.

        • Paulo says:

          I read the book “The Wealthy Barber” eons ago and saved like a bugger. Bought a house and paid it off. Did it again. Schooled and certified in two trades and have yet to hire anyone to do my work, although now get son to do electrical. Retired at 57, but here’s the rub. I’m retired but still like to work construction for myself. Heading out right now. Building is not work. Love it. Well, it is work and can be pretty hard on the body, but it’s still satisfying.

          The secret isn’t my experience or anyone else’s, it is having a plan. Any plan with measurable outcomes and a willingness to adjust plan as circumstances change. Love what you do and enjoy each day….not the end result of making money. It is one step at a time.

          I will always believe people can still get ahead in America and/or Canada. No one restricts effort. There might be regulations and structure, but anyone can get an education/training if they so choose even if it is just one correspondence course at a time (which is how I earned my undergrad credits). The BC Open Leaning Agency (before computers). Nowadays people can sign up for any training and get started online.

        • Young Buck says:

          Squanky, Im an accountant. Not really sure taking classes will help. You can learn more from youtube or google anyway.

        • Stephen C. says:

          Inspired by your comment about learning some accounting, and by those comments of others pitching in, I went online to see if I could find a basic course online for free. Seems like a ton of stuff out there and I don’t know enough about accounting to tell for sure where to start. (I assume Squanky meant financial accounting.)

          I did find one that seems promising, but it begins today so I will plop the link here and see if Wolf allows it.

          If not, know that the site is Edx dot org, name of course “accounting essentials.” Description: “An introduction to the financial and management accounting skills needed to succeed in both MBA study and in business.” And the provider is Imperial College London.

          Hope this helps.

      • Old school says:

        Fed has messed up price discovery especially in asset markets, but not completely destroyed it. Try to not make a big mistake going all in on anything, especially things with no earnings like bitcoin, Tesla or even gold. Who knows how it will play out? One scenario is that stocks are putting in a top that will not be surpassed in 20 – 30 years like Japan. Retirees need to preserve capital as much as possible and limit withdrawals to 3% to be safe.

      • Turtle says:

        Get diversified, according to age / goals. I spread it across index funds (mostly stocks, some bonds), cash and real estate (my home, that is).

        Read a Bogle / Boglehead book. The Boglehead forums are a helpful place to get advice on specific situations anonymously. It’s a conservative approach that generally yields better returns long-term than picking individual stocks. You effectively buy the whole market to minimize risk and reap broad overall growth.

        It’s not exciting. It is easy, especially with Vanguard Target Retirement and LifeStrategy funds (or equivalents from Fidelity) because they adjust automatically over time. The less you look at your portfolio, the less you’re tempted to make stupid decisions. Didn’t Fidelity discover its customers with highest yields were dead people?

        I avoid Bitcoin altogether. That’s gambling even more so than picking individual stocks. There are no crystal balls. With the Boglehead approach you’ll really only tank if the entire US and most of the world with it goes totally upside down

      • John says:

        Physical gold and silver. Or PSLV which is backed by physical.

        • Michael Gorback says:

          Buy gold that is backed by physical that you OWN. With GLD you’re just investing in a company that owns gold. You, yourself, don’t own any gold. A creditor attack on GLD could wipe you out.

          There are a few options. One is to go with bullion banks like Goldmoney or BullionVault. I’ve used both. They are very difficult to deal with. I think Goldmoney was the worst of the two. I had my account held by a family LP and the paperwork took over a year to resolve. BullionVault was much quicker.

          The upside is your gold is protected from a creditor attack because the gold is allocated to you as your property, unlike GLD. The downside is that to get your money out they sell your gold (or silver, whatever) and send the money to your bank. You incur taxes, which for gold, classified as a collectible, is 28%.

          OTOH if you use OUNZ your investment is allocated to gold ownership. If you ask ounz to send you gold they send you physical gold (not cheap but much cheaper than 28%). There is no tax. You’re moving gold you own (in OUNZ vaults) to another location (eg, your house). There’s no sale of gold, no tax.

          What happens after that is up to you. I would never advocate such a thing but you could tote your gold to a local dealer or to a friend and sell it without reporting it to the IRS. You could barter it for hookers and blow. This would be illegal. I’m just mentioning it for educational purposes.

        • VintageVNvet says:

          To J and MG:
          There is usually at least one PM retailer that makes a local physical market based on the spot for both AG and AU.
          Have dealt with a couple for whom cash in and cash out — with a small % for the house — no questions asked was the norm on a daily basis.
          Worked well for me,,, many moons ago of course.
          Only problem these days is that some are charging a HUGE premium for coins, and even a smaller premium for bars/ingots. (Over spot.)
          Waiting it out, as IMO the premium will go away eventually.

      • Aaron says:

        Bob, I can hear/feel your pain and I’m sorry you’re in the place you’re in. Taking your life or someone else’s doesn’t change anything that’s happened and you don’t get to decide what may change as a result of any action that you may take. As for “how to get your money to work for you?”… I suggest you take some time to look around you with a new perspective (admittedly, very difficult to do). Rather than looking for somewhere to “put” your money, look for opportunities to “invest” it, even if they are small and simple. I’m not talking about passively parking $ here, there, or somewhere else to chase some return. I’m suggesting you look for the needs of people around you. What could you do (even on a very small scale) to provide a service people want/need, so they’ll reward you with certificates of appreciation (i.e., money). If it’s not a service, maybe you take up trading a product that already exists. I guarantee that somewhere around you are opportunities others aren’t seeing… or, needs not being met… or, good/services that could be provided to people who want/need them. I’m advocating stepping away from your (albeit, well-founded) concerns over macroeconomic actions that are totally out of your (and my own) ability to control and instead, take a small amount of your cash and embark on your own microeconomic adventure to grow it the old-fashioned way. I truly don’t mean any of this as a criticism of you. I hope you try it and find some joy in “the doing”. Then, when the market crashes (& it will at some point) you’ll be able to jump back in with whatever portion of $ you are comfortable re-investing.

      • R Hughes says:

        Some specific suggestions. Dividend paying stocks; kings – over 50 years of continuous payment, champions – 25+ years, contenders 15 – 25 years. Preferred stocks, both no maturity date and fixed maturity. ETD ( exchange traded debt ), normally with fixed maturity. CEF ( closed end funds – all kinds ). ETF ( exchange traded funds – all kinds ). All these can be chosen with varying dividend ( interest ) rates from extreme conservative 2 -3% to medium 5-6% to aggressive 7 to 9%.

        Moving up the risk scale BDC ( business development co’s ) 7 – 12%, MLP’s (pipelines, etc. ) 5-12%, REITS ( real estate) 4-9%, MREITS ( mortgages ) 6-9%, Bonds varying from AAA ( if any still are rated such to BBB ( investment grade ) to CCC, 3 -10%.

        Not an inclusive list, but intended to show there are many many choices. From extremely conservative to highly aggressive. This also illustrates what diversification is all about. This may seem overwhelming but even a small say 25k could hold 6 to 7 choices and expect 4.5 to 6% a year, a place to start and reinvesting divs each year.

    • Depth Charge says:

      This is such an incredibly cheesy response when people are making money hand over fist speculating on crypto and meme “stonks.” It’s patronizing and, quite frankly, clueless.

      • historicus says:

        What will happen to CRYPTOS if there are REAL INTEREST RATES again?
        Imagine a Fed Funds rate of say 2%. What then of holding BTC?

        • Anthony A. says:

          Give me 6% CDs again and I’ll park cash there, for sure (as long as inflation is not much higher). Cryptos pay no dividends or interest. It’s all about capital gains.

  7. Tom S. says:

    I can’t wait to make a whole bunch more money thanks to the wonderful fed – keep the faucets on maximum! I’m sure the extra earnings from price increases will go right to my paycheck. Then, into my savings account to earn 0.15% while the price of a cup of coffee hits $10 and we mint our first dogecoin billionaire. Truly incredible. Although, it would seem as if a bout of inflation could really shake out the last of the bears…the global tumble down and market hangover from a sooner than expected end of ZIRP would be a real sight to see.

  8. Phoenix_Ikki says:

    Time for big papa money pump Jay to go on another round of 60 mins or CNBC to tell us inflation is temporary and if it last more than couple of quarters, also normal as expected as well. All within their master plan..maybe it’ll be more effective next time if he appears on 60 mins swinging a pocket watch and start doing jedi mind tricks ” You’re not seeing inflation… home price raise 20% in one year is not inflation…”

    • Depth Charge says:

      Does that joker on 60 Minutes with the softball questions for Weimar Boy Powell actually think people respect him? He’s a makeup covered clown boy.

      • cas127 says:

        As technology makes access to video airtime ever greater/more broad, the easier it is to see that the old talking heads were never anything “special” – just a collection of word-salad tossing empty suits, politically anointed dancing monkeys lacking intellectual capability or consistency.

        There is a reason why media news audiences collapse the second there is any competition made possible…people know they are being bullshitted and want out.

        If I could surf the internet while eating, I would never voluntarily view CNN again in my life…

    • Turtle says:

      Hah, and that’s 20% in one year AFTER prices were already as far above the mean trend line as they’ve ever been – and with shocking unemployment rates. He’s somebody’s Fairy Godmother, that’s for sure.

  9. Cash Guy says:

    I wish I didn’t discover this website. Now I can’t sleep at night.

    • Bob says:

      I hear ya brother

    • cas127 says:

      “Wolf…I don’t know why I can’t quit chu…”

      – Brokeback Dollar

    • Fat Chewer. says:

      Yeah, same here.

      All I ever wanted was a few pointers to get me started investing my newfound dineros. The first thing I realised was that you couldn’t make money on a simple term deposit anymore. Now look where I am! QE 1,2,3,4,5 =>infinity, cryptos, MBS, ZIRP, debt out the wazoo, ah, the list just goes on and on! And it seems really terrible out there.

      I can live on the smell of a jam sandwich, so I can stay out of this mess as long as I have my wits about me, but I really have sympathy for those who are struggling through all of this.

      Bob, you have every right to feel the way you do, but please Bro, but don’t do it. Live to fight another day.

  10. Fluxite says:

    Ya well, we’ve entered a rather new business cycle called “converting debt to inflation”

  11. Depth Charge says:

    The FED needs to be raising rates YESTERDAY. They have started an inferno and are pouring tanker trucks full of gasoline on it. They are going to destroy this country.

    • Ron says:

      People create inflation don’t buy on inflation

    • Turtle says:

      They really are playing with fire. It could very well develop into something beyond their ability to control.

      Maybe Weimar Boy’s mom didn’t teach him to be considerate of others?

      • Heinz says:

        Powell & Co with their rogue Fed policies went into that big monetary Roach Motel– you can check in but you can’t check out (normalize monetary/financial policies).

    • Kerry says:

      That is the plan. How people cannot see the intentional destruction of our economy is very perplexing to me…

      • newguy says:

        Yep, sooner or later they will have to raise interest rates, and then all these low yielding bonds that suckers have been buying for the past 12 years will become almost worthless. Ditto for stocks.

  12. hernando says:

    climb a wall of marginal debt or climb a wall of worry. Your choice.

  13. Chris says:

    Bob raises an important issue that I would love to hear Wolf’s views on. How should a rational person, who sees the fraud and ponzi-economy for what it is, invest? How should he save for his retirement in a world where (almost) everything is an unsustainable bubble? We live in an upside-down world where debtors get rich and savers get punished, and where people who make stupid investments make fortunes and people who make sensible investments get crushed. I share Bob’s frustration.

    • andy says:

      Well, for most people paying off their 3-4% mortgage sooner provides for 3-4% guaranteed return, and no taxes to pay on that return. You’re welcome.

    • Sean says:

      @Chris, I chose to invest in companies that pay dividends and that should be able to weather the eventual market crashes. I don’t speculate or gamble; I bought shares in companies that are undervalued or less overvalued than most, and intend to hold them for a long time (e.g., 10 – 15 years). Of course, it’s very difficult to find reasonably-priced companies now.

      I am repeating other comments I wrote in this article, but on Youtube I subscribe to Sven Carlin and Joseph Carlin. They both have integrity and a rational mindset about this kind of investing. They both recognize there will be a reckoning in the markets sooner or later.

    • Turtle says:

      Boglehead approach, same as always. Diversify, set and forget. Millionaire Next Door… pay off that debt. Be frugal and don’t gamble. Reality is real and it will return. The prudent ones do win in the end if they have enough discipline to stay the course and say no to seductive-idiot FOMO decisions.

    • DougP says:

      That is the problem for even those with some experience in all of this.

      Houses are way too high and they could crash quite a bit even if you can afford one now. If it is your primary home and plan to stay longer term then it is a safe place to be if you can sustain the payments and taxes.

      Stocks are on a tear and if you have been in them you made money but they could crash literally overnight. You can’t just leave it and not pay attention with all of the volatility these days.

      Cash is money in the bank but is getting and will get eaten by very real inflation which will continue.

      Cryptos are maybe LOL risky.

      Gold Silver has to be stored safely and then maybe sold at some point if you need the value. How do you sell it? Can yuo even get it now?

      Art collectables cars etc. Value goes with the prevailing wind especially short term.

      There is a loss being invested in anything at some point, and a loss in doing nothing. The trick is to get as much information as possible and choose wisely and then watch it carefully and try to see the trends. Whatever you are in will require a lot of attention to be able to get out in time. Try to lose the least possible and and accept that as a win.

      Too much uncertainty out there. This time is different. The result will be the same but the path is much more confusing this time.

      • RightNYer says:

        I agree with all but this:

        “Stocks are on a tear and if you have been in them you made money but they could crash literally overnight. You can’t just leave it and not pay attention with all of the volatility these days.”

        You didn’t make money unless you sold and realized your gains. For my anecdotal experience, very, very few people have done that.

        • dougP says:

          Yes I agree but that is my point, it is risky if you choose that path. Many here ask what to do to preserve principal and I can only think of what I offered.

          “Whatever you are in will require a lot of attention to be able to get out in time”

      • Michael Gorback says:

        I haven’t checked recently but at one point local gold dealers had no physical in stock.

        I wonder what would happen if the farcical COMEX paper traders actually stood for physical delivery, even if only 10% did. I think that would break COMEX. They don’t have enough eligible gold.

  14. cas127 says:

    1) I wonder if it might not be worthwhile to review the full history of the post 2008 commodities boom/semi bust…the macro dynamics seem approx akin today and

    2) One thing hopefully working against a wholly unconstrained inflationary environment is the existence of the internet.

    If nothing else, the internet is tremendously helpful in surfacing lower cost alternatives/possibilities in a world of more aggressive/abusive pricing.

  15. Rumple says:

    I work for a large national plumbing wholesale supplier. In the past year copper tube is up 70%, steel pipe is up 45%, PVC is up 60-70%. And more increases are coming soon. It’s only April and some manufacturers are already announcing their 3rd price increase this calendar year for the same product. There are severe supply chain disruptions with fixtures, equipment, PVC DWV fittings, and Pex tubing/fittings. A major garbage disposal manufacturer told me last week that large orders placed now won’t be able to ship until January or February 2022. Hands free sensor bottle fillers have 16+ week lead times. I’m telling my customers to plan on 4-5 month lead times on large Pex orders. These are items that historically you could walk into my branch and buy them off the shelf every day of the week.

    Before Covid, a lot of large scale construction projects here in the Bay Area were barely making financial sense for developers (at least that’s the rumor that has been floating around). How large projects built by San Francisco union labor will ever pencil out and get financed in this environment is beyond me. I’m seeing a number of planned projects get value engineered (replace more expensive materials/options with cheaper materials/options) and put back out for rebid and the owners are flabbergasted that the bids are coming back significantly higher than they were the first time. I imagine new construction starts will have to start to dry up completely if this doesn’t turn around soon.

    • historicus says:

      Rumple..
      The central bankers (Fed) have no faith in free market forces. They attempt to “create” things by pushing one way, but fail to realize that “for every action, there is an equal and opposite reaction.”
      Powell goosed the housing market by purchasing MBSs. The last times the CPI was YOY 2.6% (1999 and 2006) the 30yr mortgage was 6%. Now its 3%.
      So housing explodes due to the abnormally low rates that are essentially the inflation rate.
      But so does all the building materials. As you note, sharply sharply higher. Now stories of shortages and the inability of contractors to even come up with bids on jobs due to the uncertain of price and supplies.
      So there is the “equal and opposite reaction” of the Fed policies…
      They have frozen the market IMO. Central bank manipulations away from free market forces (the low rates) will bring dislocations….and here we are….just beginning IMO.

      • polecat says:

        You know, I think that Jerome be huffin beaucoup cubic miles of that noxious Schawbian Sewer Gas. As in ‘You will own nothing, you stupid FORMER citizens .. and Love It.’

      • cas127 says:

        “but fail to realize”

        They realize, they just don’t care.

        Governments have been running fiat sh*tshows since time immemorial…so they have at least a passable sense of consequences and scenario pre-planning.

        What paper governments *do* care about is public perception…so long as government created inflation isn’t pinned on the government…all is right in their world.

        But, hopefully, the communications that the internet Age makes possible will pour out their punchbowl and expose their policy failures.

        DC, as a permanent floating political class culture, really is almost never held accountable (spending’s arrow only runs one way in DC world).

        But the awareness, anger, and demands for accountability are rising.

    • R Hughes says:

      Good luck getting fixed bids from subs. Back in the 1975 to 80 period I remember issuing bids good for 7 days. Copper and so forth were doing the same dance it was insane. No company or sub would sign a fixed price contract unless it contained escalation clauses.
      Finally Volker raised rates and by 80, 81 construction had ground to a virtual halt and prices escalation went into reverse as there was excesses of material and labor, and any project had to meet a hurdle rate of 13 to 15% interest. Interesting times. As M Twain said times don’t repeat but they often rhyme.

  16. Trucker guy says:

    I’m too young enough to know the real ins and outs of financial apocalypses of yore. I wonder how much financially responsible people were feeling like the world was ending in the lead up to 08, the great depression etc.

    Can’t time the market and all that but you can see smoke on the horizon and feel the wind blowing your way. While it can easily feel like everyone else is cleaning out, I really doubt the people around me looking like they’re rich are anything but drowning in debt. My work has everyone making the same wages because it’s a union gig. The guys there have all taken a 50k/yr job and bought vastly overpriced housing, refinanced mortgages, and loaded up of unrealistically priced trucks, boats, motorcycles etc.

    I know people who haven’t gotten a decent raise in years but have bought brand new vehicles and toys in the past 6 months.

    The market is only able to support this behavior for so long, you can only get so much debt. And when nobody can pay for it because wages stagnate and prices inflate, there has to be a bust. Either wages inflate with asset prices and it doesn’t matter until the global economy goes up in smoke. Or it collapses on the small scale like it normally does and those in the lower and middle classes get slaughtered for thinking they have money.

    I really doubt I’m going to regret stacking paychecks in the bank and having my housing paid in full for the next 15 months.

    I know a lot of lower class people that suddenly didn’t have to pay for housing and “found” their monthly payment for a new car is quite high. My near death mid 80s grandparents bought a new suv when they can barely manage to leave the house, let alone even drive.

    I sincerely doubt the highly leveraged will make out like a bandit. I doubt the ones who did clear out on the bitcoin casino or the stonks crowd will have anything to show for their luck in 5 years. Easy come, easy go. The peasants don’t understand wealth, only glitter.

    • Boomer says:

      You are on the right track. As pointed out many times we are in the Mother of All everything bubbles. As Mohammed El Erian points out the do nothing Fed will likely cause persistent inflation. They will be forced to slam on the brakes. Cash will look pretty darn good when the Markets crash. When made good money in cash accounts when Volcker slammed on the brakes.

      Make your own hedonic adjustments. Forgo the Latte, drive old cars, eat simple healthy food, pay down the mortgage. JPow doesn’t want you doing that. People like Stockman recommend US Treasuries.

      • YuShan says:

        The ironic and counter-intuitive thing is that cash/ short duration bonds are usually the place to be when inflation runs hot, because rising rates will crash everything else.

    • Turtle says:

      “the people around me looking like they’re rich are anything but drowning in debt”

      Yep, I used to lament to my wife, “Why do all our neighbors have nicer cars and this and that when they’re nurses and teachers and I’m earning $________”.

      Her answer? “Because they’re in debt and you’re not.”

      That was a relief to hear. Keep it up, Trucker Guy. I saw how it unfolded in 2007. People were spending on houses and trucks just like they are right now. It didn’t end well for a lot of them. But those who refused to gamble and those who were disciplined savers were able to buy into the various markets low and repeat the benefits long-term.

      • Paulo says:

        Turtle,

        Where I live the nurses and teachers make a decent wage and have steady incomes. It was the mill and oil workers who spend like crazy and had all the toys. There is one section of oceanfront we call teacher row as they all bought there in the 70s and paid their houses off.

        Wow, a ruffed grouse just walked by my window and is now staring at me. “Get to work”, he says.

        Bye for the day.

    • Beardawg says:

      Trucker Guy

      Insightful observations from someone so allegedly financially inexperienced.

      You will do well.

  17. drifterprof says:

    Dalio (“Big Debt Crises”) nails it in a lot of ways:

    “…the most defining characteristics of bubbles that can be measured are:

    1. Prices are high relative to traditional measures
    2. Prices are discounting future rapid price appreciation from these high levels
    4. There is broad bullish sentiment
    4. Purchases are being financed by high leverage
    5. Buyers have made exceptionally extended forward purchases (e.g., built inventory, contracted for supplies, etc.) to speculate or to protect themselves against future price gains
    6. New buyers (i.e., those who weren’t previously in the market) have entered the market
    7. Stimulative monetary policy threatens to inflate the bubble even more (and tight policy to cause its popping).”

    • Turtle says:

      I don’t know why people can’t see this, why they have such confidence. I have very little confidence in any market now. The only thing I’m doing is carrying on with my retirement contributions because that’s long-term and a worthy habit to maintain indefinitely but getting in on anything else right now makes me very, very nervous. The catalysts may be different but it looks a lot like 2006 – 2007 in terms of people’s irrational behavior to me.

  18. drifterprof says:

    Dalio:
    “One person’s financial assets are another’s financial liabilities (i.e., promises to deliver money). When the claims on financial assets are too high relative to the money available to meet them, a big deleveraging must occur.

    Then the free-market credit system that finances spending ceases to work well, and typically works in reverse via a deleveraging, necessitating the government to intervene in a big way as the central bank becomes a big buyer of debt (i.e., lender of last resort) and the central government becomes a redistributor of spending and wealth.

    At such times, there needs to be a debt restructuring in which claims on future spending (i.e., debt) are reduced relative to what they are claims on (i.e., money).”

    I’m pretty sure the central government will not redistribute spending and wealth in a way that saves America from further disintegration. But one can hope.

    • endeavor says:

      If your finances are sound and you want or need a new truck or house, that’s ok. But too many are loading up with debt to buy such things and will be crushed. Depending on your age and job prospects, invest what you can afford to lose, save what you may need to live on. Deflation usually follows hyperinflation so plan for both outcomes. It’s a shame that it has come to this.

  19. Lawefa says:

    Nobody wins with inflation. You can’t produce 10x’s the dollars faster than the real growth of our weak “tech crazy” economy and hope to come out unscathed from severe inflation. This one is gonna really hurt and it’s been blatantly obvious that Powell and Co. are criminal minds that have lost complete control of the money supply. Poor Wolf can’t write an article these days without a crazy “WTF” chart that makes no sense to any sensible person. None if it makes sense at this point because we are well into uncharted territory in so many sectors its absolutely ridiculous.

  20. A says:

    American capitalism in 2021 is just socialism with extra steps.

    In a socialist country the government would buy homes and redistribute them to keep prices stable. In 2021 american capitalism the government gives free money to billionaires to buy homes and redistribute them into billionaire-owned rental companies to keep prices stable.

    It’s just socialism with extra steps (that just so happen to keep the billionaires rich).

    And if things ever get messed up, like they did in 2020, the FED just hoses everything down with inflation as a kind of “reset button” before trying again like we’re seeing in 2021.

  21. kleen says:

    Well, the obvious: Inflation punishes savers and benefits debtors.

  22. YuShan says:

    Right now people are apparently just swallowing the price rises. Perhaps this is possible because of all the stimulus? But if wages don’t also go up by the same rate this cannot be sustained and then companies will have to swallow at least part it by decreasing their margins (which is already happening, per Wolfs post).

    My own reaction to inflation in the past decade has been the replacement of many branded food products for cheaper (=low margin) alternatives, which then turned out to be just as good and in some cases better. That’s also sticky. If I became a billionaire overnight, that behaviour won’t change back because it has been permanently etched into my brain now by a decade of ZIRP/NIRP.

    • Turtle says:

      I find that the health food store “generic” grands (like Sprouts or Whole Foods 365) have better ingredients for a lower cost than the brand names – and they are at least as good.

    • Dan Romig says:

      YuShan,

      That strikes a nerve with me. I walk into the grocery store and tell myself, “Dan, you’re a millionaire, you can buy whatever you want.”

      Do I? Nope; I clip coupons and watch the sales flyers like a hawk. And I like it that way! I do treat myself to fresh and good quality fruits and veggies as it’s a great investment in one’s health and wellness.

      To Bob, use inflation to make money. Investment in commodities such as ag crops (ETFs). But keep yourself very diversified.

  23. historicus says:

    Beware the “rate of inflation” chart. It is a trick.
    A flat 2.5% inflation chart…horizontal…looks like nothing is happening.
    This is what they will show us.
    But at 2.5%, the dollar loses 28% in ten years. That is VERY meaningful.
    Look for a compounded and aggregated inflation chart….see if you can find one.
    And the metric they use for inflation is notorious for under measuring.
    The Fed …since 2009….has been unbridled…..to the delight of two powerful groups…Wall St and Congress.

    • historicus says:

      And how can a Fed that exists with certain understandings which allow their special powers, PROMOTE INFLATION when they are bound to “stable prices”? How is it that people look dropped jawed at Powell who promotes an inflation rate that rips 28% off the dollar in ten years and not ask “Wait. This isnt right.”
      And that is the low end.
      “In the past year copper tube is up 70%, steel pipe is up 45%, PVC is up 60-70%. ” (from another post)
      Add in Corn, Beef, Soybeans, Lumber, Wheat…..all the essentials..
      This is not transitory but FULL BLOWN RUNAWAY INFLATION. IMO.

      • Swamp Creature says:

        I look at my Dental Ins premiums. These folks in Missouri are so cheap they hardly pay for anything. If their premiums went up 5% then that’s the floor on inflation. BC/BS went up 9% probably because of Covid-19. So inflation is somewhere in that range.

      • coalman says:

        Last week in Oz, live beef cattle price hit $9.06 a kilo, highest ever.

        • VintageVNvet says:

          That really is amazing ! $1.16 at the close of CME today cm.
          That is up from $0.85 or so about a year ago.
          Thinking it is because of the swine flu situation in China, eh?
          BTW, that translates into about 2x – 3x for regular ”ground beef.”
          Much higher for select cuts of course.

    • Turtle says:

      In ten years? Who cares. Markets have got to tank harder than 25% before that time* and cash will be king for a short while again as opportunists dive in to pickup the pieces at discount.

      * No crystal ball

  24. historicus says:

    Wolf…
    Time for a SELL recommendation.
    First quarter was all about money required to be invested.
    Now, with this brutal inflation here, but not acknowledged by the “authorities”….
    Sell in May and go away…

  25. Fat Chewer. says:

    The butterfly effect. Cascades. The wind suddenly starts blowing over the plain. There are clouds out to sea. Hurricanes.

  26. X-Pat DE says:

    Well, Todd’s first mistake is actually being in a business which produces something – today’s winning companies sell “apps” or governemnt green-credits and trade in “XYZcoins” and use “crypto-link-technology” to secure their futures!
    Alternatively Todd should be manufacturing his shingles out of gold and silver. Those raw materials are guaranteed not to move a fraction, with al the paper ETFs holding them down.
    Could actually be a market for ’em …

    In all seriousness, though, inflation is coming, has to come, with all the fiat the CBs have magicked into existence.
    They sowed the seeds we, the plebs, shall, as always, reap the whirlwind.

  27. Swamp Creature says:

    This is so much like the late 70s with cost push inflation hitting the housing market. Jimmy Carter 2.0 This created a housing panic where people went out and bought anything they could qualify for. In 1981 it all crashed and prices actually declined in high priced areas. The home improvement industry boomed because people couldn’t afford to move with 18% mortgage rates. This could happen again.

    • Mike T says:

      That’s what I think too. It’s 70’s stagflation just around the corner.

    • Turtle says:

      If I remember right, my Dad’s VA loan was 16% in 1984.

      Imagine what 16% would do to home prices today. Cash holders would be buying homes in Santa Monica for $400K. =P

      • Anthony A. says:

        My mortgage loan on a house in Los Angeles in 1981 when I moved there was 18%. Scary…with a wife and two infants.

    • Phoenix_Ikki says:

      I would looooove to see that so I can see the look on the face of all my house humping friends finally shut up about housing goes up forever gospel. Sadly, most of them will probably still be in denial when that happens, cognitive dissonance is a real PITA.

      However, as much as I wish that will happen. I give it about as much odd as the next 2 or 3 president will be a socialist or stand up against military industrial complex.

      • Depth Charge says:

        Nah, they’ll just walk away from their houses en masse. We’ve seen this movie before.

    • It is and it isn’t. We are winding down the forever wars, nearly as long as Vietnam, but military spending will not rollback. The labor market is set to tighten, while in the 70s the surge of military reentering the economy caused unemployment. The Fed had already allowed inflation to sneak into the economy during the 60’s. This Fed has kept rates too low too long. The crisis in confidence in government was still ahead in the 70’s, while now the crisis is behind us. At present inflation is running hot in the EM, which correlates to deflation in consumer nations. In the 70s we still had the Arab Embargo ahead of us, now we have OPEC + trying to wrangle production cuts to maintain the stable pricing of global energy. (Recall that episode of negative prices). Pretty soon Iran will be back in the global oil market. Consumers drive fewer miles, and according the recent census pop growth is receding, not expanding. The Fed has been pumping asset values for the last decade, the decade of the 60’s was lackluster for stocks, however wage inflation did figure into economic growth when labor unions were a factor and corporate growth through product sales and profits rather than financial engineering was the business model. Apple and bananas, not the same, but similar.

    • VintageVNvet says:

      Huge deltas between then, when I bought my first house with 20% down and an 18% first mortgage for $40K,,, and now, with same house worth approx $1MM! Thinking I paid about $5-6K for a new F150 the same year.
      Other than agriculture workers, there were not many ”undocumented” folks around, and none to speak of at all in the construction trades in NorCA.
      When I put a one day ad for workers in the Chron in ’81, 40 guys showed up at 0800 on a Saturday morning, and some of them actually made it working until noon after a thorough explanation of the project = hard work,,, , got paid $5 cash /hour, while I evaluated their work, and were hired on long term (some at much better $$.)
      Try that now, eh?

  28. Mike says:

    I come to this site to read what Wolf has to say. And not let some guy like Bob hijack the topic, and vent about woulda,coulda,shoulda. I started my own business part time, 6 years ago, and last year sales exploded due to lockdowns, so now I’m full time. Ditched the corporate world, after 35 years. Very pleased I did this. I avoided the stock market, and put my time and Money in my skill sets. Most of the wealthy do the same, and not through stocks.

    Anyway, what Wolf is saying is across every single industry, including the one I am in. Delays, shortages, and resultant price increases due to whopping demand. So there has to be a ton of consumers feeling a LOT better than Bob, bc they are spending away non stop, for all kinds of goods. So it’s both demand and supply side pressures. Equals inflation. This is what the Fed has wanted ….. for years… big time inflation.

    It’s way under reported in terms of measures being used by the government, and has been running around 9% year after year. Go to ShadowStats for the reality. CPI is intentionally way off. And has been for years.

    Your currency is being massively debased, again, intentionally so, as have all currencies. Since all are being debased, the dollar has appeared only relatively ‘stronger.’ The fed has decided that all the debt is not going to be repaid, so they are inflating the debt away. Consumers are behaving accordingly, and simply spending that cash rather than holding onto it, as they realize cash is trash, so it might as well be converted to something they can use. Whether they need that something is another story.

    This all could lead to hyperinflation. Ironically all the debt itself is very deflationary. So how can we have both ? Well you can read about that in James Richards series of books on all of this. He predicted every bit of what has been happening the past 5 years. So you all might want to heed his advice, and diversify your income sources, where you place your money ( and no, multiple stocks is NOT diversification).

    • Turtle says:

      Everybody’s entitled to their own comments. That includes you… and Bob.

      Yours is too long; didn’t read. You don’t have to read mine.

      Good day.

  29. breamrod says:

    nothing like a sharp stick in the eye( 15 to 30% price increases). to wake people up about the fed. But congress is to blame as well as the ordinary citizen.” give me my stimulus now” is all I hear it seems. All of the smart folks hear on Wolf Street are exceptions. The average person needs to learn to turn off the T.V. and listen to their inner voice. Bob I feel for you and all of us. Hang in there! You’ve got plenty of company.

    • Poor like you says:

      Which generation is getting what it deserves? I hope you’re not referring to Millennials.

  30. Petunia says:

    This past weekend, I have gotten two of those hanger shaped door advertisements put on my front door. One was for a general contractor and the other from a roofer. What was impressive was the quality of the ads, both laminated glossy paper. Times must be good, because before they used to be just business cards or flyers shoved in the door jam.

    • Turtle says:

      Uncommonly thin pink or green printer paper, halved with scissors.

    • Depth Charge says:

      You must live in an economically repressed area. Contractors out west don’t need to advertise and aren’t even calling people back they’re so busy. They cannot service their existing customer base. There is a shortage of labor.

      • Petunia says:

        According to reports, I am in a red hot real estate market and prices are up. The entire southern US is like this. I keep hearing about labor shortages, but I think it is a big lie. They are building everywhere and still I get ads for home improvements at my door.

  31. Micheal Engel says:

    1) The “Mentions of inflation” on the chart is a bull trap. There is a huge gap between the CPI y/y and the “Mentions of inflation” crap.
    2) the economy is strong, the economy is strong in repetitions is another bull trap.
    3) SPX yesterday might have one or two days out of line bull trap.
    4) US mfg capacities are rising, financed by higher debt, based on hope. Mfgs have no choice in order to compete and survive, because of the new Fed fad.
    5) The global overcapacity is growing, because US no longer trust China.
    6) But what if the orders will suddenly die, ==> many small businesses will pay the price, because they committed too, listening to the siren song : economy is strong, the economy is strong… JP #1 on the hit list.

  32. Fred Flintstone says:

    It is all transitory…..figure on a decade or so. After that you’ll have plenty of toilet paper with Lincoln’s face on it.
    but……. lets be nice and vote in more government…….while the country falls to pieces.
    Every generation has to earn its way……this one is getting what it deserves.
    Unfortunately…….no man is an island, including me.

  33. Stay glued to your screens, fellow commentors, because the Bond Vigilantes are coming back to town. Looks like my estimate of 3% to 4% inflation, reported by our truth-challenged Government, will be more like 5% to 6% as we head into Fall. The powers that are will fudge every item in the ingredients to the CPI, but us Sheeple or Serfs or Peons, as we have been treated since the Greenspan Implosion Rescue of 1987, will see that THE TRUTH IS OUT THERE when we open our wallets to shop or pay bills.

    Difficult to say where interest rates will be by the Third Quarter of this year, but THEY WILL BE NOTICEABLY HIGHER. Gee, maybe the Banksters will start paying us at least 1% on our cash balances at their crooked, bonus grubbing institutions! Savers have suffered long enough. Time to grab the pitchforks and shovels and join the Bond Vigilantes in showing the Fed that rates have to adjust upward to compensate paper holders for the daily erosion of their Fiat. Got Gold?

    • YuShan says:

      “Got Gold?”

      We’ll need to find out whether the gold price reacts negatively to the higher yields or positively to the higher inflation. It’s not a given that gold will protect you!

      (I’m holding some myself as a hedge against inflation and counterparty risk so I hope it does, but I’m by no means sure it will)

    • Petunia says:

      I’ll believe the inflation story when they increase Social Security by the high inflation number.

      • timbers says:

        I’m with you. Probably won’t happen. Instead, the numbers will be fudge and that 6% Social Security increase will instead be transferred to “investors” via asset inflation (QE, ZIRP, etc).

    • wkevinw says:

      I saw a very “academic”-oriented inflation model that said the inflation spike would be ~5-7% yoy at the end of this year and would quickly snap back to the 1-2% that is the “actual”/core rate.

      The investment opinion based on this was that there are too many positioning for long-term higher inflation.

      This seems possible to me, but I have no data on the quality of this model.

  34. Fred flintstone says:

    David Young……I’am sure all our Harvard trained government economists have learned by now that one and one equals one……most got their masters at the Stalin institute for honest government.

  35. GMac says:

    Bob, and Wolf Street Co., aren’t we supposed to sell cash-covered puts on companies we love when we are not invested (i.e., sitting on cash)? If so, T, XOM, MSFT, JD, WMT, PFE, DUK, JPM, IBM, BABA, CTXS, CSCO. *Not a recommendation, just prompting to think and discuss.

    • YuShan says:

      You are right in principle. However, I personally wouldn’t try to stock pick so I look at indices. The strikes are so far out that it hardly pays if those strikes are even available (for S&P500 I’m looking downward of 1200 to consider buying).

  36. I don’t buy all this talk about inflation because inflation occurs in free markets when the purchasing power of the currency drops.

    Today’s markets are not free; they are owned by a handful of plutocrats who can raise prices, not on the basis of supply and demand, but because “their margins are squeezed.” That’s not inflation, that’s price gauging.

    • Old school says:

      It’s called pricing power. Apple has it, not because of me as I have never bought an Apple product. Tesla has it. Not because of me either. Walmart doesn’t have it as they net out about 3%, but it’s retail and margins are low.

  37. Florida Kid says:

    The almost unanimous sentiment is that the Fed lackeys are incompetent. I disagree.

    My perspective is that this is ALL on purpose. The system ain’t broken, it’s FIXED. The actions and so-called policies of the fed are meant to benefit the fed and whomever their owners and associates are at the expense of the rest of us.

    You think this bankster cartel got to where they are by either giving a f*ck about you and your family, or executing incompetently on dumb strategies?

    I don’t know what the end game is here but my suspicion is that they want to destroy the dollar, along with substantial American wealth, so they can ultimately usher in a new system that is even better for them and even worse for us.

    Crypto: humanity’s hope. I’m not claiming that people aren’t using them to speculate. But, personally and for many others, they are used as a viable alternative to the trash fed dollars. Hate it or whatever, but if you seriously are looking to escape then cryptos appear to be, in my opinion, the best option for anyone stuck in this criminal system.

    • Depth Charge says:

      Which is why it’s going to end badly, and likely with violence. These crooks have an “out of my cold dead hands” mentality.

    • OutsideTheBox says:

      Cryptos first best use is money laundering.

      Followed by drug traffic.

      Followed by organized crime.

      Sorry…..the crypto well has already been thoroughly poisoned.

  38. random guy 62 says:

    This article nails what we have seen in the past few months in manufacturing.

    Costs began escalating with the trump tariffs, but they dropped pretty quickly afterward and bottomed out in 2020. It was annoying, but pretty tame.

    This round is different. Our suppliers are hitting us fast and hard with price increases, and we are not hesitating to pass them on to our customers. It’s a full-on frenzy.

    The mentality has changed.

  39. Willy2 says:

    – If one Wolf Richter believes that as a result of rising PRICE inflation interest rates are going to roar higher then he is sorely mistaken.

  40. Heinz says:

    I get it that producer raw material input costs are jumping due to “surging costs, shipping issues, and supply chain constraints” as per Wolf’s article.

    I would like to see a deep dive into this phenomenon, particularly the why and how of it.

    Did the 2020 pandemic responses (lock downs, etc) and subsequent ‘reopening’ initiate all this?

    So where is the main source of this remarkable surge of commodity inflation and why is it coming to a head now?

    Will it be transitory or stick around, I wonder.

  41. Micheal Engel says:

    1) Mfg should operate like a sparrow : grab your crumbs and run.
    2) Increase ad campaign to liquidate inventor.
    3) High turnover instead of hording, because the future is deeply unknown.
    4) Hording for and speculations purposes is GME.

  42. Eferg says:

    Great article and interesting comments. A subject near and dear to my values. Indeed, inflation is coming. Gradually at first, then ….

    No surprise, because the Fed has a psychotic level focus on “avoiding” deflation. They have synthesized trillions in response to the smallest economic hiccup. Stock, bond and property inflation is a result. Bubble is a common descriptor of this. Now the government is channeling trillions to people and consumption. What Wolf has documented here about inflation of goods and services is a result.

    “Fixing” this would require power drunk political types to rein in their spending and the Fed to price the cost of money (aka interest rates) at market levels. Neither will happen. The Fed raising rates would crash all classes of asset prices. Their dreaded boogie man of deflation would be staring at them. And, what politician is going to be responsible spending money they think is created out of thin air.

    So, inflation is a pretty likely result. It will be accompanied by lots of soothing words about how it is temporary and beneficial. But the result will be that the saver class will be bankrupted – slowly at first and then quickly. For many in government, this is great because a new victim class is created requiring government “help”.

  43. Xavier Caveat says:

    Prices are going through the roof?

    It has the feel of the 70’s to me, the pricing of a Hershey’s milk chocolate bar (back when they didn’t taste like waxy sweetened mud) going from a dime to a quarter.

    You get used to the new inflation normal though, and we’ve all lived through the mother of all housing bubbles, so we’re hep to price increases already.

  44. topcat says:

    It doesn’t matter if prices all jump in 2021 and stay higher – that still isn’t inflation it is a one time increase. Inflation drops back to 2% the year after.
    I do not see any chacne of incomes rising to create inflation, which Merican wiorkers have the clout to enforce wage increases? Amazon packers? Where are the unionised jobs that used to come with leverage.
    Fugedaboudit there ain’t no inflation in the US economy there are just temporary shortages of supply. .

  45. Beardawg says:

    The stuff at Dollar Tree stores is still a dollar, and they seem to not be short on inventory (except peanut butter). Blows me away how they can sell stuff for that cheap !!

    • YuShan says:

      Regarding food, I see in my own supermarket that prices of bulk and white label products are pretty sticky. It is the branded stuff that goes up. So I don’t buy those :)

  46. Kerry says:

    Inflation has already occurred. It is an increase in the currency. What we are seeing is the CAUSE of inflation. And you ain’t seen nothin’ yet…

  47. Tim says:

    I would just like to say that those talking about diversification are right. If those of you who have been expecting catastrophe had been diversified these past number of years you would be better off.

    But that leads to another form of diversification that is just as important. Be diversified in the the content you take in. Read different viewpoints and different interpretations of what is happening. This will also lead to perhaps better decision making and not putting all your money in cash or gold (not that there isn’t a place for these things).

    One perspective is that added spending by the government does not have to lead to inflation if a substantial part of that money is used to reduce debt. Debt constitutes the vast majority of the M1 money supply.

  48. rick m says:

    Petunia is right, it’s about perspective. And everybody’s just got blown up like a cartoon house in the past fifteen months. Never watched much TV, but shut off talk radio too, it’s depressing and repetitive now. Living where everyone has guns, I have to take threatening behavior seriously, but lots of people talk rough to get it out of their system so they don’t shoot anybody and it’s not hard for grownups to tell the difference.
    German, Austrian, and Swiss banks displayed gold bars in their windows fifty years after the hyperinflation, when the stored product of your sweat disappears like smoke your memory will not, a particularly painful lesson in governmental perfidy. Smart people learn their lessons early and cheaply. Inflation is here, still in the hallway but about to become the life of the party. Always shows up drunk. Jerome Powell isn’t better or worse than his post-Volcker predecessors. Another pseudo economist doing too much Keynesian empty handed magic trick stuff. Sacrificing the currency to save the markets will kill both. The Fed has little control left, everyone knows it, the short term is looking stormy. What to do? You have a lot of company if your money’s in your house value, and you pay the gov the vig (taxes) and they let you keep the rest(maintaining it for them)until you sell. Storm surge in the kitchen keeps me a renter, gold and silver were reasonable some years ago, and probably still are. When a weed dealer I know quits selling contraband to day-trade in crypto pools, it’s time to shelter-in-place in your mind. And maintain a healthy perspective by talking to people who aren’t buying or selling anything, and who aren’t fixated on public health issues that are not well understood. I try to remember that things never go as good as you plan, but seldom go as bad as you fear. Easy to say, I know. Sometimes sheer perseverance, inertia, and plain bloody-mindedness can get you across a thin spot where you don’t dare stop.
    Mr. m. Engel’s posts have the quality of the hexadecimal system to me: I don’t understand it but dimly sense it’s superiority. Wish I did, but I’m an old binary coot.

  49. Bobber says:

    I read through all the comments and see a variety of opinions regarding Bob’s dilemma. What strikes me most is that there was practically zero discussion about diversification, which is the bedrock of successful risk-free long-term investing. Many people have an all-or-nothing approach, which sets themselves up for potential failure.

    The Fed has been suppressing interest rates for decades in response to lackluster economic growth. This has built up huge systematic risks, contrary to what the Fed admits. We are walking on a tightrope. Fall to one side and you have years of Fed-induced inflation that could wipe out your CDs, bonds, cash, etc. over time. Fall to the other side and you have massive deflation, potentially wiping out much of your stocks, RE, gold, and Bitcoin in a matter of months.

    The only way to reliably limit risk in this environment is to diversify and hold a share of each. If you put 100% into any asset class, YOU ARE SPECULATING. Even if you hold 100% cash and CDs, you ARE speculating on an asset price crash that might not ever happen. There is no such thing as a safe reliable asset in this environment.

    Bear in mind the quick downside potential of various asset classes. Stocks can be down 50% in three months, but cash and ST bonds can only lose to inflation. So, if you want to be conservative, hold the bulk in cash and ST bonds, but ALWAYS keep a portion in inflation resistant assets like stocks, gold, RE, etc. to protect yourself in case the Fed continues down its path of heightened inflation.

    The goal of any serious conservative investor should be to reap some MODEST upside while protecting against severe downside. This is easy. Here’s a sample conservative allocation that won’t lead to any big errors over time:

    Cash, CDs, ST bonds – 50%
    Gold/Silver/metals – 5%
    Real estate/REITs – 10%
    LT bonds – 10%
    Total world stock index fund – 25%

    If things continue as is, you capture some of the upside and beat inflation. If things crash, you have lots of dry powder and are ready to pounce.

    • Beardawg says:

      Bobber

      This is nice sensible advice which many WS’ers surely appreciate (including me). I would add to any/all commentary like yours that the use of Stop Limit trading is a tool available to everyone. Shorting does not seem like much of an option in a QE economy, but guarding your investment positions with Stop Limit orders will protect you, regardless of what sector / ETF / Stock / Mutual fund you decide to invest in. As positions go up, just move the Stop Limit numbers up in lock step, thus locking in the gains.

      • Beardawg says:

        I wanted to add that discussions in WS regarding the ponzi nature of the markets and unwillingness to participate seems to presume an investor can ONLY Buy / Hold ? Hence my preceding comment.

      • Bobber says:

        I agree with that, as long as you keep the stop limit order in your head or your offline notes, and not as an order hanging in the trading system. The reason is the market makers will take advantage of that.

        I learned this the hard way. One time, I put in a stop sell order at 10% below the current trading price. The market maker dipped the price down for a second to trigger my order, then the price popped back up again on the next trade. Lost $5k in the blink of an eye.

        After that debacle, my advice is to never put a stop limit order or buy limit order in the trading system, especially for thinly traded stocks and small caps.

        • Beardawg says:

          Bobber

          Good advice. I trade mostly large sector ETFs so probably not a concern for me – but yes – on thinly traded securities, that makes a lot of sense.

        • RightNYer says:

          Those people belong in jail.

  50. Micheal Engel says:

    1) IWM is waiting for the FANG..
    2) IWM, a perfect blond. A delicate perfume from head to shoulders and her deep cleavage.
    3) Traders are hooked.
    4) But what if the perfect H&S is a fake.
    5) Since Mar 2020 low it’s all higher highs a higher lows, until today.
    6) The distance between Mar 5 low @206.82 and Mar 15 @234.09 peak is a pole. Traders can use it to target bullish and bearish targets. The pole length is : 27.24.
    7) Jan 25 high horizontal line @217.50 is L1. L1 is a dividing line.
    8) Feb 10 open @229.49 horizontal line is L2 is the next dividing line.
    9) Today high is < Mar 15 peak. It's the first lower high since Mar 2020.
    10) If IWM turn down, breach L1, cont down under Apr 20 low, but still above the neckline, the trend is still up.
    11) If A is Mar 25 low @208.03, B is today high @229.39 and C is
    the next low, traders can take bullish targets using the pole.
    12) 1 day -2 trading days of out of line traps shouldn't change the outlook.
    13) If Mar 5 low will be breached the trend have changed. If the correction isn't too deep, it's possible that Mar 15 peak will be beaten.

    • Dan Romig says:

      14) This morning, took profits and sold large percentage of portfolio’s equities.

      15) C’est la vie; getting back to speed on bicycle after new knee nine weeks and six days ago. Velocity is the drug that I need …

  51. Phoneix_Ikki says:

    Just saw this on Barron’s today….these Fing people….I guess we know what we will hear from them…these Fing people, guess they are taking forever bond buying and lowest interest rate for the last 600+ yrs to the graves.

    “The Federal Reserve’s policy-setting panel is all but certain to maintain its current ultra-easy policy stance of near-zero short-term interest rates and heavy securities purchases to continue to spur the economic recovery from the steep pandemic downturn. There will be no updated Summary of Economic Projections or “dot plot” of the FOMC members’ guesses of the federal funds target rates.

    However, the FOMC will discuss when to reduce the current pace of monthly securities purchases from the current $80 billion of Treasuries and $40 billion of agency mortgage-backed securities. Fed Chair Jerome Powell has said the central bank isn’t even “thinking about thinking about thinking about” tapering its bond buying. (Although he may have added another “thinking about” that I might have missed.)”

    • Brent says:

      I felt Mr.Bernanke uneasiness when he started QE & TARP (supposed to be temporary) 12 years ago.

      Mr Powell is completely different.Psychotic scowl,girlish giggle, “Whatever it takes,boys,whatever it takes !!!”

      One $1T,another $1T,yet another $2T,no end in sight of those $$TTT’s pulled like rabbits out of illusionist’s hat…

      Corporate and personal income taxes cover 45% of the Fed Gov budget,the rest is pure magic.

      Just like working in demolition.One chooses a G-spot ☺ and starts pecking away at it with 100lbs jackhammer.

      At first nothing happens.Then tiny cracks appear,eventually 1000lbs chunk of brick wall slides off and crashes 200 feet below.

    • Wolf Richter says:

      Phoneix_Ikki,

      That thing on Barron’s that you cited got something important confused: Powell’s comment about “not thinking about thinking” was about rate hikes, not asset purchases.

      That’s a big difference, in terms of time, because the sequence is this, per Powell:
      1. taper asset purchases
      2. end asset purchases and keep balance sheet flat
      3. talk about rate hikes
      4. hike rates.

      There is quite a bit of time between #1 and #4. Powell said that they’re not even “thinking about thinking” about #4. They might be doing #1 and still not “think” about #4.

      • Phoneix_Ikki says:

        Good point Wolf. As for taper asset purchases, I know they plan on doing that but my confidence of them staying the course once the market found out and react by throwing a temper tantrum, Powell boy will probably immediately reverse course depends on the severity of the reaction.

        At least one equation out that is we no longer have Trump slapping Powell boy around every time the market reacts. However that conditioning has already been baked into these numb nuts MO.

  52. Depth Charge says:

    As a cash “hoarder” I continue to cut my consumption to the bone. Higher inflation = lower my own standard of living. It’s a game, to me. When everybody is spending everything they have, and I am saving, I truly believe I will come out on top. Sure, it looks ugly right now, but we’re at peak insanity. Once the air starts leaking from all these asset bubbles, people will be flooding the exits to generate cash. I am a buyer when they’re all panicked sellers.

    • Trent says:

      Keep a list of people who have things you want to, but refuse to buy now because of price. Six months from now, or whenever the BidenHarris Depression kicks in, you might revisit them with a
      “Did you ever sell that? I will buy it for cash.”

      • Depth Charge says:

        My goal is a gently used vehicle still under warranty with under 20k miles, and a piece of acreage “for sale by owner.” I will have cash for both of those, and I will buy when the liar loans are gone. At that point, prices will have collapsed. Until then, I “hoard.”

      • nodecentrepublicansleft says:

        Yeah, Trent, any economic problems the country faces will be the result of the Administration that stepped into their offices to start work 3 months ago!

        Just like it was Obama’s fault for GFC. Never mind 8 yrs of horrible decisions by Prez Dick Cheney and Baby Bush the Lesser (sock puppet), like say….starting TWO (2) wars and cutting taxes for the rich?!?!

        And who controlled Congress for 6/8 yrs during Cheney’s horrific reign? The GOP.

        Thanks for the LOLs though and yes, I’m sitting on 100% cash.

  53. CreditGB says:

    I did not see these soon to be spectacular cost increase items included in the listed inflationary cost pass alongs. Did I miss them?

    >Biden “Rich Corporations Taxes” (plus on your suppliers of oil, fuel, power, nat gas, all others).
    >Biden new regulations now being formulated costing billions to comply.

    Or are businesses not going to pass these along this time. Maybe they’ll just suffer massive losses and go out of business this time?

    Pretend for a week you are a large firm CFO and looking at massive new taxes and regulations on your products and services. Your margins are not that great already. What do you do? Well, we’re all waiting.

    • nodecentrepublicansleft says:

      Man, being an apologist for the wealthy and corporations that have been ruining this country for centuries is some bad/sad optics for you!

      Let me run over to my fainting couch and grab a handkerchief to catch all my tears for the obscenely wealthy who would gladly slit your throat just to hoard another penny.

      My brother told me about being at a party in NYC back in the mid-90s for some stock-brokers and how somebody broke a $100K bottle of wine.

      You’d probably burst into tears for them and demand federal funding to replace it for them.

  54. SpencerG says:

    Other than labor costs (which will come back down after the extra unemployment benefits run out)… I cannot imagine what would be pressuring Chipotle’s input costs. Has the price of beans, rice, and avocados gone up that much?

    • Petunia says:

      My takeout chicken fried rice went from $6-$11 in the last few months. At least the chicken pieces got bigger. But it’s not a cheap lunch anymore.

    • RightNYer says:

      It’s not just beans, rice, and avocados (although those have gone up at least at my grocery store). It’s the disposable containers they use for takeout. It’s labor (as you said). It’s utilities. It’s liability insurance, health insurance, etc. It’s plasticware. It’s the cost of the fryers and other metal containers. It’s the cost of refrigerators. All of those things in a heavy use commercial environment have to be replaced more than you’d think.

  55. jm says:

    As I’m fluent in Japanese and was heavily involved with Japan in the 70s and 80s, I’d already seen this sort of “buy now or be priced out forever, prices can only go up” mentality once before the dot-com bubble and the 2005-2008 housing bubble. So I’ve also seen one more bubble-burst than the rest of you. A lasting memory is of turning on the TV in my Tokyo hotel room one Saturday morning in late 1989 to see a show with a Nomura investment advisor in a very expensive suit lecturing to a group of equally well-dressed middle-aged Japanese ladies on how no one had ever lost money in Japanese stocks as long as they’d stayed invested at least three years. All Japan was obsessed with speculation not only in stocks but also real estate and tradeable country club memberships. Some friends took a mortgage on a million-dollar condo.

    In a few years it was all dust, the crashed stock and real estate markets not recovering despite the Japanese central bank’s Zero Interest Rate Policy. We are nearing the end of one the greatest bubbles of history. The Fed economists are desperate to prevent deflation, and know there are powerfully deflationary factors out there. They have no reason to believe that the stimulus checks and augmented unemployment benefits are going to keep going out if and when the Covid crisis ends. And they have occasionally been quite explicit that measures like QE were being used because government fiscal policy (i.e., deficit spending) wasn’t stepping up to the plate. The Biden administration is now on deck with a fungo bat. If the Fed finds it was wrong about current inflation being only transitory, it _will_ raise interest rates. Note that Yellen expressed dismay that policies intended to sustain the economy were fueling speculation.

    My quite left-of-center younger daughter worked at the Fed in the Greenspan years as research associate and found the economists there to be very serious and public-spirited. They’re not hacks. You should all take the Fed very seriously when it says it intends to maintain a 2% inflation rate. They’ll tolerate higher inflation only as long as they perceive it as transitory due to Covid pandemic side effects, expecting prices to naturally return to normal.

    • SpencerG says:

      Very well put.

      For all of the carping bout the Fed, I have no doubt that they are “very serious and public-spirited.” What were they supposed to have done when faced with a once-in-a century pandemic… resume tightening?

      That said, my concern with them is that for three decades they have preferred incremental changes to decisive action. There comes a point when the way you do things goes from “bias” to SOP. We have seen them halt their plans TWICE in the face of “taper tantrums” just in the past decade. Can anyone see them collapsing their Balance Sheet by 17% in just two months the way the Bank of Canada just did? How about pull a Volcker and shut down the economy for two years to wring runaway inflation out???

      To ask those questions is to answer them IMHO.

      • Phoneix_Ikki says:

        Pull a Volcker? Like or hate him, one cannot ignore that’s about as decisive as it gets when it comes to FED’s action in recent history. Sadly my pessimism will not allow me to imagine we will withness something as decisive as that in my lifetime.

        The guiding principle of the FED is not longer about kicking the Can down the road but now rather creating the Can as the new reality.

        • SpencerG says:

          I am certainly NOT criticizing Volcker. He did what had to be done. And he did it so successfully that this nation has had only a single year of 5% inflation (or higher) in the past four decades… as opposed to 7 out of 8 years before 1981.

          His success is what has allowed the Fed to get by with incrementalism right up to the present day. But as I said, eventually, bias becomes procedure…. until an organization forgets how (or when) to take decisive action.

      • historicus says:

        Spencer
        “What were they supposed to have done when faced with a once-in-a century pandemic… resume tightening?”

        The Fed had the Pedal to the Metal when things were good…
        record stock prices, record unemployment. They didnt “pause” they kept right on going.
        Then the unforeseen…the pandemic.
        The Fed MUST have the courage to “back off”, retrieve and retire, when things are good so they dont have to do remarkable over the top monetary expansion on top of remarkable monteary expansion

        • SpencerG says:

          I agree that the Fed has to be willing to “take away the punch bowl.” And be allowed to do so.

          But I read the recent history quite differently. The Fed from 2017 to 2019 lowered its Balance Sheet by 19% AND raised the Fed Funds rate by 2%. The balance sheet reduction was gradual and telegraphed to the markets well in advance… the interest rate hikes were NEITHER. I thought at the time that they should focus on one or the other but they didn’t and then came the “problems.”

          The first problem was that interest rates in the market weren’t following the Fed’s lead any more. The 10-year yield actually DROPPED throughout most of 2019. That’s not supposed to happen when the Fed is raising rates. They had pushed that string as far as they could.

          The second problem (which I candidly don’t understand) is something technical to do with the Balance Sheet Reduction versus actual “currency in circulation.” There was some discussion of the issue before Powell killed the asset selloffs. I think Wolf even had a post or two about it.

          The reason that I thought at the time that they should have been aggressive on one or the other is that to do otherwise increases both difficulty and uncertainty due to too many moving parts. This happens a lot in government.

          Because the Fed failed to prioritize what was MOST important (in my opinion it was the asset reduction and NOT interest rate hikes) they ended up doing neither as well as they could have. The markets (and the President) began to throw a fit and that was that. “Live and Learn!”

          But I have to say that the Fed did NOT resume monetary expansion in 2019. They simply halted monetary tightening… probably in anticipation of an upcoming election year (which even Volcker had to do in early 1980). Everyone thought that the Fed was preparing for another round of tightening in 2021… but THEN the Pandemic hit.

  56. Trent says:

    All those Screw Biden’ers, that preemptively bought four years worth of consumer goods and supplies to help promote the Biden Depression, are laughing at the people that called them hoarders.

    Anyone want to buy 50 pounds of copper pipe fittings? Only 200% more than they cost last November.

  57. Brant Lee says:

    What’s worse than politicians running the economy and business? Bankers.

    No mercy. Money is about control. Is anyone surprised about our state of affairs when bankers are in control? The peasents are only numbers, like everything else on the planet.

  58. Auldyin says:

    Definitely looks as if it’s getting in to all the CPI stuff now and not just the ignored outside ‘asset’ stuff.
    Are we finally going to see the Fed’s mettle at last on some obvious inflation in the index where it can’t be ignored? They’ve tried for 12yrs.
    It could be the big one, Volker-time!
    Edge of the seat stuff.

  59. Martok says:

    I can’t reconcile what top financial experts like Jamie Dimon, CEO of JPMorgan and many others say about a economic boom – when I read thru these posts.

    “Dimon says vaccine rollouts, deficit spending, post-pandemic euphoria and a dovish Fed will provide an economic ‘boom’ that may last until 2023. … Spent wisely, it will create more economic opportunity for everyone.”

    I hear on the other side of the argument of crazed irrational exuberance of buying stocks on any news, WallstreetBets insanity, crypto-mania, Fed spending sprees, etc, etc.

    The Bulls of WS seem to indicate that the infrastructure passing will create a immense boom like we never seen before, like FDR did for the Great Depression.

    I’m asking if anybody here if they can reconcile these beliefs that the economy is recovering and a time to invest.

    • Winston says:

      “I can’t reconcile what top financial experts like Jamie Dimon”

      They have a personal financial incentive to pump the bubble, just like cryptocurrency owners.

      • Martok says:

        Winston,

        Thanks, I have been so suspicious of someone(s) of that caliper saying that.

        I remember too well the pumpers before the 2000 and 2008 crashes.

        Regards!

    • SpencerG says:

      I don’t think there is any doubt there will be an economic boom given the end of the Pandemic and the massive infrastructure spending bill coming down the pike. So Jamie Dimon is right about that. The question is whether it will come with a level of inflation that we haven’t seen in 40 years.

      Moreover, just because there is an economic boom doesn’t mean that there will be a stock market boom. Biden is proposing to drastically increase Capital Gains taxes next year… which means rich people are going to start shedding capital assets THIS year.

      Moreover, the Biden Administration so far hasn’t met a government regulation on business that it doesn’t like (or at least consider). Too many of those regulatory headwinds will take us back to 2010-2014 when massive amounts of deficit spending still couldn’t lift the economy.

    • Auldyin says:

      M
      Everything about everything financial is the interest rate.
      Anybody with debts wants to keep it down. (I don’t know J.P.Morgan debt level ?)
      Anybody with savings, especially cash, wants it up.
      The downers have been winning for at least 12yrs and they want to carry on doing so.
      All the price crazyness that goes on in everything is a side effect of ultra low interest rates.
      The Fed claims to be neutral and they say there’s no need to put rates up because there is no inflation in the CPI.
      If inflation appears in the CPI it will call their bluff.
      If they don’t put rates up substantially and screw all the parties with debts they thought they could afford at low rates, we’ll all know once and for all whose side they are on.
      Don’t hold your breath but emigrate if they’re still on the debtor’s side.

  60. historicus says:

    What could be the worst can scenario

    A falling stock market due to a Black Swan event
    in conjunction with an inflation
    in conjunction with a Fed that is keeping rates at zero to “stimulate” the economy and banking system.

    Brace yourself.

  61. kitten lopez says:

    Bob-
    do a LIVING SUICIDE. that’s why i’m like this. it’s the only thing that gave me ENERGY. a living suicide means you have to live like you don’t care what happens or what many people think because… you’re “dead” already. but you get to stick around and experiment and see what happens and PUSH it.

    it’s why i love in secret like performance art out in the open and make people freeze or avoid me. i save so much TIME seeing who i attract as my truest biggest soggiest or most powerful self.

    it’s been ten years. quite an adventure, but it’s the only way i could see underneath the mainstream and offline and in REAL LIFE.

    i was so wild wrong and off in my youth, i assumed i’d die at 27, which was just fine with me because i didn’t wanna die old in NYC and then ANYWHERE in the U.S.

    i awoke at middle aged hating the career me me and abortion happy feminism… anti-family anti people all ME. that’s our pain in america. the long chopstick narrative. we don’t feed EACH OTHER with the long chop sticks…

    yet. some of us will.

    a living suicide has taught me to use my predilections for pain terror adventure and facing my fears, by doing the absolute scariest thing i’ve got left on my list: admitting how much you love need someone or how vulnerable you feel or how much you don’t know.

    i used to start fights as my old form of suicide, but now i stand still and face a situation and try to adjust things when they go bad to see if there’s another way than binary fuck yous/i love yous.

    like i mentioned on here i was courting back another man by dancing outside. why? because that’s how we used to flirt when we were young. we’d position ourselves to be seen, seen WELL, or just… show up when someone’s leaving class so’s you can give a tiny LOOK.

    we did secret notes. we giggled.

    but my man froze because that’s what they do when they’re over 25 years old and i’ve kissed some kid boys who had the guts and lost themselves.

    but they will have that joy beaten out of them by american dating today.

    all this “fearlessness” is my living suicide and what i’d like to leave and mess up in the world: the uptight deadness.

    i won’t “fix” anything but i can REMIND some what this looks like for when it comes back around to being human or moving a violent situation into something more calm (only people who’re comfortable with navigating violence and that intensity can transform transmute voilent energies. it’s very scary and hard. sometimes you have to be like the submissive dog rolling over on your back, and i’ve had to learn that in various situations. i calmed down an almost riot on a broken down bus on the side of the road in the dark and i wanted to hurl my guts out afterwards and a girl came up after and said, “i saw what you did. nice job.”

    i hope she or someone else learned how it looks to be strong but still willing to be disemboweled.

    these are tricks and experiments of a lifelong suididal tendency from someone who felt like she was born as an aberration. me.

    no one’s winning. i’m not. but i’m still here and fighting and trying to save James or kids who come up behind me and feel the same.

    Bob, you’re not a kid, but you know too much have too much rage and heart and vulnerability (in admitting your agony here) to waste your death.

    what a waste for that guy to blow himself up in his RV. we all knew the “real” story as to why a guy that age would do such a thing.

    but us artists poets thinkers… this is why it’s time for a new STORY. and no.. this is NOT just a money site as you see.

    this is EXISTENTIAL, Bob.

    so you can go ahead and off yourself (shrug), and yeah.. it’ll really REALLY mess up your folks’ heads but when you’re in agony who cares?

    i get it. i’ve got lots of suicides in my life as an artist and weirdo. we don’t hang in so well. that’s why i tried to die early.

    but i’m still here and life is BORING and living as if you’re ALREADY DEAD is actually thrilling.

    you will get more love BACK when you’re not holding in your stomach and that love will set your head right again and put money and resources in their proper places.

    good luck, Bob, and all the other Bobs out there.

    Living Suicide…. write down all you’d do if you were living another life. and then… why not NOW???

    (smile)

    xxxxxxxxxx

    much love for real– sweaty leaky difficult sometimes-i-hate-you love!

    Kitten

    x

    • Depth Charge says:

      Interesting take.

      • kitten lopez says:

        “interesting take” made me smile because it’s the understatement of ’em all, as the cops were called routinely on me the first 4 or 5 years til i got used to flying this thing around… or everyone in san francisco was too distracted with hating the president to bother with me for a change.

        in hindsight (but i’m still living it out), it seems the most logical of approaches because, well… have you ever seen that old Oprah show on FAILED suicides??? Holy cow!—you thought you had problems before you shot half your face off, the drugs made you a vegetable, or the train only cut off your legs so you could live in a wheelchair…

        and James wouldn’t let me leave and wander off into the world to find my next adventure (or not) as i’ve always done. i never wanted to belong to anyone but i was stuck hard so i said, “okay, Thames… as long as i get to be myself from now on. i can’t behave for anyone anymore… ANYWHERE.”

        and he barely hesitated before he nodded and said, “okay.” he had to know by then it’d be like adopting a tasmanian devil on acid. but he just made sure i had my flip phone with me in case i needed him to come get me from the precinct.

        but now that i’ve had time to check out and see how unhappy bitter and miserable most people seem nowadays in this world, i realize the story is that we’re supposed to turn our failures quietly and politely inside— as Bob is dutifully doing— into self hatred and shame and suicide and despair and addiction so that we never question or successfully opt-out of the system that exists with our continued pacified collusion.

        in sticking around this long and getting used to my new life and ways, i’m finally at a position that i can ask entirely different QUESTIONS. that’s how i knew Unamused was onto something REAL. because we’re still locked into the same old paradigm and the same old questions.

        when Bob–and all us Bobs—assume we have a right to live and exist in spite of our inability to be constant heartless dreamless wealth creators extractors whatever, that life is more than all this cheap crap… maybe OTHERS will come up with new unseen ways of taking care of each other?

        as a relapsed former Quaker girl who’s lived with the hypocritical violence of simply being different, i still want to find a creative way of being as free as possible without violence, madness, death or a softer serfdom.

        that’s why i wonder… what if we together went around or behind what we’re incentivized to do? they think they know us because they made us, trained us. there is freedom in finding the spaces no one knows even EXIST, or think we don’t WANT.

        even if i’m completely mad, this is more interesting than politely committing suicide, removing myself from the game and quietly being dead when i actually LOVE being alive as myself when i’m in The Moment. being dead while ALIVE here on earth enables you to ironically finally LIVE and love as if you came back and got to say all you were too shy to say when you thought rejection would kill you.

        i’m opposite girl. always have been. it’s my job to try and bring an “interesting take,” because the idea used to be that in conversations we were hoping to inspire or give courage to other “interesting takes.”

        i want the freedom of another way, any other WAY. we’re stuck in predictable, tired, trifling binary thinking and reactions.

        most importantly to ME, my own Living Suicide has completely reinforced my life long belief in Romance and the Awe of Being Alive. / it’s a form of “as long as i am the romance i believe in, it exists!”

        x

  62. rick m says:

    It works for her, that’s the main thing. She didn’t say anything about wanting revenge. He feels stolen from, rightly so, everyone who works for wages should feel the same. I try not to make permanent decisions while in a temporary state of mind, without minimizing anyone else’s situation that I naturally cannot really understand.
    “Revenge is for suckers, I never got any”
    -Henry Gondorf, The Sting, 1973

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