The Ugly Truth About Inflation

Well, we got December’s CPI number yesterday.

It came in as expected at 6.5% year over year. That’s down from November’s 7.1% increase.

But it still means things are getting more expensive every day. They are not getting cheaper…

That is, except for used cars. That is the only thing that got meaningfully cheaper in December.

You see, the number you’ll hear on TV is the top-line number. It’s an average of a lot of other numbers.

Daily Expenses Balloon

You really have to drill down to see what is getting more expensive and what, if anything, is getting cheaper.

And like I said, the ONLY thing that got meaningfully cheaper is used cars, which doesn’t really help you on a daily basis.

Nobody I know buys a used car every day. But everyone I know uses energy on a daily basis.

That got more expensive, despite the much-publicized drop in the cost of a gallon of gas for your car (which was only 1.5% less than in December 2021)…

But if you’re talking about the energy we use to heat our homes, keep the lights on, and keep our food from going bad, then that got a lot more expensive:

And if you’re one of those people who likes to eat food every day, well, then your costs went up a lot too.

Both food at home and food away from home got way more expensive over the course of the year.

Literally every food category in your fridge or pantry that’s measured went up more than the top-line number of 6.5%:

Rotten to the Core

But you might also hear another number being tossed around in the coming weeks. That’s 5.7%, or the “core” CPI that excludes food and energy (because who uses those, anyway?)…

But don’t be fooled by that either. It’s not as pretty a picture as it seems once you drill down into the numbers.

Every single service in that measurement now costs more than it did the previous year:

The Bottom Line

Inflation is still raging hard and it’s not going away anytime soon.

It’s starting to look like the 3% we’ve shaved to get down from that high of 9.1% last June was the “easy” part.

Now, we’ve got 4% more to get down to the Fed’s target rate of 2%. And that’s going to take a lot of work.

So my message to investors today is to strap in and brace yourselves.

Jerome Powell and his band of misfits at the Federal Reserve are not ready to pivot yet. They’re not even ready to pause rate hikes.

I mean, the three things we use the most on a daily basis — food, electricity, and shelter — are at all-time highs and still rising:

That means there’s still a very good argument hidden in this most recent CPI report for the Fed to keep those hikes big. So don’t be surprised if the next rate hike is another 50 basis points.

Don’t Give Up

But there’s a silver lining to all this, and it’s the generational buying opportunities it will create as the market adjusts to higher rates and prices continue to fall.

We haven’t hit bottom yet. But we will. It’s just not going to happen as quickly as we all hoped.

So remember, if you’re a long-term investor, ignore all the noise. Markets will recover in time and the highs we saw in 2021 will eventually look like great places to have bought stocks.

And if you’re a trader, get ready for a lot of volatility as bears and bulls keep battling it out and the market keeps trying to figure out if the Fed really “has what it’ll take.”

But if you’re an investor of any kind, keep your eyes out for my emails and those from my colleagues here at Wealth Daily and our sister publications, Energy and Capital and Outsider Club.

We’ve collectively seen just about every situation the markets can offer. And we’re here to help guide you thorough the mess that’s all but guaranteed to unfold in the coming months.

To your wealth,

Jason Williams

@TheReal_JayDubs

Angel Research on Youtube

After graduating Cum Laude in finance and economics, Jason designed and analyzed complex projects for the U.S. Army. He made the jump to the private sector as an investment banking analyst at Morgan Stanley, where he eventually led his own team responsible for billions of dollars in daily trading. Jason left Wall Street to found his own investment office and now shares the strategies he used and the network he built with you. Jason is the founder of Main Street Ventures, a pre-IPO investment newsletter; the founder of Future Giants, a nano cap investing service; the editor of Alpha Profit Machine, an algorithmic trading service designed specifically for retail investors; and authors The Wealth Advisory income stock newsletter. He is also the managing editor of Wealth Daily. To learn more about Jason, click here.