Expect The Financial Press to Protect Biden Like They Did Obama
Today, inflation was unexpectedly higher. The consumer price index printed a number higher than the number Wall Street thought it would print. Does it surprise a soul on the planet?
The thing is markets trade on expectations. They price them in. That’s why you hear the old traders' adage, “buy the rumor sell the fact”. Here is a chart of the market when the news came out.
So, in fact, we have had a “sell the rumor sell the fact market”. We aren’t at the bottom yet and stocks are not cheap. But, risky assets like cryptocurrency are getting cheap or just becoming worthless. The sector leader, Bitcoin, is down. My guess is it goes to $16,000.
Today, the market is trading lower but not significantly lower……yet. The Wall Street Journal is spinning the number. “Inflation Edged Down…” is their headline. The rest of it is, “To 8.3%”.
Are you getting an 8.5% raise this year to cover it? Walk in, ask your boss for an 8.5% raise today and see what they say. You know, to beat inflation. Better yet, raise prices by that to your customers and see what they do.
This is the first decline in 8 months. Inflation was running at 8.5%. Believe me, the average American outside the Beltway isn’t going to be crowing about seeing inflation temper by .2%. It’s like moving a gallon of gas down from $5.50/gallon to $5.48/gallon. Just so you know, inflation is still at a 40-year high.
The Joe Biden Economy yesterday offered up some solutions. What are they?
None of these will “cure” inflation. All will make it worse. It’s throwing a few cans of gasoline into a dumpster fire.
I drive a diesel SUV, so this part of the WSJ opinion article I linked to is salient.
Speaking of which, diesel prices have increased by $2.40 a gallon in the last year, a buck more than gasoline prices, amid increased demand from freight and reduced refining capacity. Higher diesel prices filter through to food prices as ships, trains, trucks, tractors and other farm equipment rely on the fuel.
Biofuel mandates and subsidies have spurred refineries to shut down or shift to producing smaller amounts of “renewable” diesel from cooking oils. This is also a large reason soybean oil prices have more than doubled from pre-pandemic levels and why the American Bakers Association has urged the Administration to ease renewable fuel mandates.
Poultry producers say the ethanol mandate is driving up the cost of their feedstock. At the same time, surging corn and soy prices are discouraging farmers from planting wheat to compensate for lost exports from Ukraine. Yet the Administration wants to increase renewable fuel mandates and subsidies.
Inflation isn’t about Russia, Ukraine, or anything like that. It’s about the government spending period and the lack of supply. Biden totally destroyed the supply curve in the oil industry. Yes, he did that.
Meanwhile, Americans are getting poorer by the day.
Expect the financial press to do all they can to protect Biden by spinning numbers and the news. They always did it for the Golden Boy Obama. Virtually every miss of a financial growth number was led by the word “Unexpectedly” followed by a spun description of it.
Even the 2022 midterms won’t stop inflation. I will vote for Republicans and won’t stay home and encourage you to do the same. But, the data is clear. Republicans are better when it comes to government spending than Democrats because of what they choose to spend money on, and because they increase the rate of spending at a slower rate, they never seem to actually cut it. Republicans do cut regulation though. Especially when Trump was President.
I watched 2000 Mules last night and I recommend watching it if you don’t know what goes on behind the scenes in elections. I don’t necessarily agree with some of the points of the movie. I’ll save that for another blog post. I will say this, even if Trump was President we’d still have inflation. The response to Covid was way way way way overdone and combined with the actions of the Fed and government spending from 2009-2020, we weren’t going to see GDP growth ahead of inflation.
But, it would have been less bad than it is and Trump’s intellect and actions can do thousands of circles around Biden’s intellect before he even has his first trip to the bathroom in the morning. Biden is not an intelligent guy.
The Federal Reserve still believes that this inflationary event is transitory. You can tell by their statements that they think it will ebb. Over the past few days, I have heard statements like this from Wall Street analysts.
“Yes, the market is down but we think by the end of the year, it will still sustain a loss but less of a loss than we are seeing today. We think inflation will go lower by the end of the year.”
That is bullshit corporate happy talk. It sounds good on business television.
What that really means is we are headed for a recession and I think we are already in one. Recessions cause demand to shut down and then supply curves can catch up. This will be true for some industries. But, for industries where a large part of their cost is based on the price of diesel fuel, inflation won’t temper because the idiots inside the Beltway think they need to save the planet.
What I’d like to see is how prop groups inside investment banks are positioning themselves. I doubt they are positioned for a much lower inflationary environment.
Meanwhile, the Northwest had the coldest April on record, ski resorts in Colorado stayed open longer and it’s windy and cold in Las Vegas. No golf today.
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The spin spins.