Here's what it is not: the most dangerous time for investing ever. The fate of the western world's capitalist forces are not at stake because of the current bout of inflation. The U.S. government's debt isn't going to cause the stock market to tumble. A soft landing from this sonic booming economy is more likely than not once supply chains are resolved and unemployment benefits recede. The Fed hasn't tied its hands by making any projections. Only the journalists think that Jay Powell must be held to his amorphous words.
Yet the worries keep piling on. This kind of inflation is part of the reason: it's at the pump, the supermarket, the restaurant, the car dealer and the house hunt. It does feel 360.
The Republicans, whether to re-elect Donald Trump or discombobulate President Biden, make us feel that the infrastructure bill is the tipping point and we will soon need wheel barrows to tote our money around.
The subtext of everything from the serious Bitcoin to the made up Dogecoin is that all currencies, even comical ones, are stronger than the U.S. dollar even as those enterprises that had championed them and taking them as if by currency, have retreated in rapid and wounded fashion.
So, what makes me so certain that these woes are simply something to do about nothing and not much more?
First, Bank of America (BAC) CEO Brian Moynihan's comments on Mad Money about the state of the consumer seem to go unheralded. They shouldn't be. The American consumer is both saving at a record rate and spending at a record rate. It seems that the former is more robust than the latter, so even with prices escalating the consumer as told to us by the one that touches one out of every two households in America, is more sound than anytime anyone can recall. An extended, indebted, defaulting consumer is a dangerous one. This one isn't. The savings rate also tells you that the Baby Boomers, who were supposed to be pulling money out of the market, haven't done so to any real stretch. Again, very good for the market.
Second, anyone studying the retailers this week recognizes that the consumer is acclimating to the new world rather well. Sure there's car shortages. But I think that the buying at the mall and at the big box retailers so far is indicative of what we want: good, wise spending mostly to be ready to go back to work or to fix up a house given that the housing stock is the oldest most can recall. Again, this is normal behavior.
Third, I know the employee is making more money. Is that inflationary or is it rational? Yes it is hard to recruit labor at a small or medium sized business. But think about this: two years ago, with unemployment much much lower, wages were lower. Two things have changed: 150,000 restaurants have gone under -- although, Sysco (SYY) , the food service company, indicated that figure was off and they should know given their omnipresence -- and unemployment benefits exceed minimum wage by a huge amount. Even if Sysco is totally right there should be a time soon when employers won't be hanging out so many help wanted signs.
Finally, the big one: commodity inflation. We all know there's bad inflation, chiefly in steel, aluminum and lumber. But all three are mandated inflation: tariffs meant to protect American workers. What can a rate hike do about that? They are going to hurt Ford (F) and GM's (GM) earnings which means shareholders get dinged, not something the Fed should worry about.
The semiconductor shortage will get resolved. We got an inkling of that when we heard that wafer fabrication will be boosted by Applied Materials (AMAT) for all but DRAMs. We can't tell what kind of semi-machinery AMAT will make, most likely not those needed for auto chips, but AMAT is signaling that everyone is boosting production, so don't bet on the shortage to continue through this year, something that Cisco (CSCO) asserted on Mad Money earlier last week.
We've been so worried about the West Coast ports and delays and higher costs from them but did you catch that Foot Locker (FL) said delays are beginning to ease and will get better as time goes on?
Oh and grains. Have you ever known farmers not to spend money to expand plantings? Isn't that what Deere (DE) told us just last week?
I am not saying that everything will resolve itself smoothly. On Friday we had a jarring call from Deere about rising commodity and freight costs. Deere told us that instead of a $500 million upward surprise that they predicted last quarter, it's now $1 billion. That's not going the right way. Still, though we recognize what could be done, or what is being done to cut back on shortages and improving supply lines. All in all, it was the first week in ages that I thought there was as much good inflation news as bad even as very few seemed to notice it.
(Ford is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells F? Learn more now.)
