Marc Cuniberti The consumer is hopping mad about inflation. Prices increases are the worst in half a century. The raging inflationary fires started right about the time Biden stepped into the big chair, but it’s not his fault.
Inflation is a long time in the making with decades of deficit spending by Washington bureaucrats who believed economic theory didn’t apply to the great Uncle Sam.
It did, it just took a while to do so, and now the wildfires of raging price increases burn hot with little containment.
There are other contributing factors to inflation of course, such as the war in Ukraine, decades of oil company trashing by political parties causing a reduction in production, and a puzzling workforce that defies historical precedent as to the number of jobs available versus the number of people out of work, and other miscellaneous reasons.
Put it all together and it puts the Federal Reserve (the FED), the entity that has the unenviable job of harnessing the inflation problem, in a box of its own making.
Much like a forest fire, inflation has to be stopped early on or it can rage out of control like it is doing now.
Gas had peaked locally at an eye-popping seven bucks a gallon, but has backed off in recent weeks, thank goodness. I paid about four fifty last week. Few dispute the FED should have addressed the rise in prices when it first started a few years back by increasing interest rates and telling Washington to stop handing out money.
Apparently asleep at the switch, the inflation train is now careening off the tracks and the FED is scrambling to slow it down before it slams into the wall of hyperinflation (severe inflation that causes prices to rise daily if not hourly). Waiting too long means stronger medicine is necessary, which translates to more pain for the consumer through higher interest rates.
In other news, stock analysts are split as to the next move on Wall Street. With the Dow off its 2022 lows, many are saying it’s up and away from here, while others argue it’s the proverbial bear market rally that is the traditional head fake. Although the recent earnings releases from publically traded companies were not horrendous, one could make the argument that with credit card use on the rise and debt defaults starting to rise, the real story will show up in the November earnings reports.
We shall see.
The real estate market is witnessing an alarming drop in home applications and sales as interest rates on mortgages are rising to the highest in years. Bottoming out below 3%, 30-year fixed rates are now pushing seven. Although home prices themselves remain elevated, that’s the next shoe to drop. In my opinion, the gears that is the real estate market are about to slam into hard reverse as rates are likely to go even higher. This will likely finally bring down housing prices.
What the FED giveth, the FED taketh away.
Maverick Elon Musk continues to skirt the boundaries of what is considered proper and legal as he continues to tweet both bizarre and confusing comments about his business endeavors. The Steve Jobs of the 21st century, he is no doubt one of the smartest businessmen alive.
He is also the richest man alive.
Dollars are simply votes by the public and apparently, the consumer loves what he does and throws lots of those dollar votes his way.
Speaking of tweets, Musk was planning to buy the social media company Twitter, but backed out of the deal for reasons only he knows. Twitter has something to say about the reneging by Musk, however, and a fierce and costly court battle will soon ensue. Meanwhile, the Musk car company Tesla continues to crank out arguably the best electric cars in the world and his space company SpaceX has its sights on another moon landing followed up by plans to invade Mars at some point.
I can’t wait to see how this all works out. We indeed live in interesting times.
“Watching the markets so you don’t have to”
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This article expresses the opinion of Marc Cuniberti and is not meant as investment advice, or a recommendation to buy or sell any securities, nor represents the opinion of any bank, investment firm or RIA, nor this media outlet, its staff, members or underwriters. Mr. Cuniberti holds a B.A. in Economics with honors, 1979, SDSU, and California Insurance License #0L34249. His website is moneymanagementradio.com, and was recently voted Best Financial Advisor in Nevada County. 530-559-1214
