Coming This Christmas: More Inflation

I must admit I was quite amused Thursday morning as I picked up my Wall Street Journal at the door. One of the headlines read 'Price Jumps Awaken Caution in Markets which was describing some of the fear that seeped into equities Wednesday after the largest year-over-year CPI increase in over three decades. I almost wanted to do my best Bruce Willis Die Hard impression of 'Welcome to the party, Pal'. As my regular readers know I have been hammering on inflation all year and I was pushing early in 2021 saying inflation was neither 'temporary' nor 'transitionary', a contrarian outlook at the time. However, this view has become mainstreamed over the past month or two. Evidently members of the Federal Reserve and most of the chattering classes in the economic punditry spend little time talking to the ordinary people who make our economy go. They don't converse with their local barista who has had to move in with her boyfriend with another couple as there is nothing available that they can afford to rent on their own. They don't talk with their hair stylist who has had to pick up a part time gig as a bartender to make ends meet. They don't have friends their age whose children have 'boomeranged' home a few years out of college as they can no longer afford to live on their own. If they did, they would have known the inflation genie was let loose some time ago and it is going to be very hard to put her back in the bottle without severe economic disruptions. I know I have just posted a lot of anecdotal micro level observations. However, at the macro level, inflation has eaten up every cent of the average wage gain in the country over the past year and then some. This is making a significant labor shortage even worse. I know of three restaurants in my town that have closed over the past three or four months. Not because of a shortage of demand, but they just couldn't pay enough to get sufficient help to keep their establishments open. All of this is going to made worse by vaccine mandates on large employers as well as being implemented regionally. This is why dozens of fire stations in New York City have recently temporarily shut. One of the stories sent to me by the Seattle Times this morning is around how classes in parts of the city are being cancelled due to staffing shortages. This will all start to impact consumer sentiment, confidence and spending even more significantly in the months ahead. Combined with continued global supply chain shortages, the holidays are shaping up to be one Scrooge would be proud of. This is why I am substantially underweight the retail sector in my portfolio and will probably continue to be so as 2022 gets ready to commence. This surge in inflation should continue to boost most hard assets. This is why I bought a loft in Delray Beach last fall and have held the Florida land bank known the St. Joe Company from the $25 level last year. I also think GrafTech International , which just reported solid quarterly numbers, could be a good inflation play. More on that name in my column on Monday. We're holding a Veterans Day Sale for our Action Alerts PLUS investment club. Get in on the conversation and get the latest investment ideas and trading strategies. For 48 hours, we're offering 30% off with this special sale. Click here and save $150.

Coming This Christmas: More Inflation

Combined with continued global supply chain shortages, the holidays are shaping up to be one Scrooge would be proud of.

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