TECH - 5 Things To Know In Investing This Week - The Stagflation And Doom Issue | Benzinga
This wasn’t a good week for the "pivot” people and asset gatherers who have been begging the Federal Reserve for lower rates. We got a higher-than-expected CPI and PPI. Making things worse, the short-term monthly numbers have started to accelerate meaning the disinflation story might be dead for now. Retail sales and manufacturing numbers were also a disappointment, but Congressional spending will keep us out of an "official” recession despite a weakening "real” economy as experienced by most Americans. Laks Ganapathi provides a guest "Thing” focused on her concern about the EV business. We explain in more detail the meaning behind the all-time highs in gold and Bitcoin. Finally, we express concern about commercial real estate based on what we’re seeing in the warehousing business.
This week, we’ll address the following topics:
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The CPI comes in hot. Should we panic about inflation?
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The PPI comes in hot. Should we panic about inflation?
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Retail sales come in weak and manufacturing is down. Should we panic about a recession?
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EV companies already heading for bankruptcy (NYSE: FSR). Guest post by Unicus Research which called this one well in advance.
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Gold and Bitcoin at/around all-time highs. We do a better job explaining the implication.
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A decline in warehouse employment is a negative economic signal for commercial real estate.
Nice work this week by DKI Intern, Andrew Brown, who continues to contribute graphs and ideas for the weekly 5 Things. In under two months, he’s become a real contributor which we’re happy (but not surprised) to see.
Ready for a new week of horrifying economic data? Let’s dive in:
- The CPI Comes in Hot:
This week we got the February CPI (Consumer Price Index) which came in at 3.2% vs last year and 0.4% vs last month. Both of these are 0.1% above last month and above expectations of 3.1% for the year. The Core number, which excludes food and energy, was up 3.8% for the year and up 0.4% vs last month. This was also above expectations and almost double the 2% target largely due to continued high services inflation.
The disinflation story has faded for now.
DKI Takeaway: Last year, people were excited about disinflation and using that as the reason to scream that the Federal Reserve should pivot to lower interest rates. Disinflation is not lower prices; but rather, a slowing in the inflationary increase in prices. It’s a change in the rate of change. For those of you without fond memories of your high school calculus class, it means we still have inflation. A quick look at the chart above makes it clear that the Fed is having trouble making further progress. The obvious conclusion: "higher for longer”.
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The PPI Comes in Hot:
The February producer price index (PPI) came in at 1.6% vs last year which is a pretty good number. The problem is the monthly increase was 0.6% which was double the expected 0.3% rise. A 0.6% increase might not seem like much, but it annualizes to 7.4%. If this continues, we’re about to see an acceleration of producer price inflation. As usual, the Core PPI remains above the all-items version of the index.
Like the CPI, the disinflation story is stalling.
That’s a big acceleration at the end.
DKI Takeaway: The reason the PPI matters is it is intended to be a forward-looking measure of inflation. As producers and manufacturers experience increases in the prices of their raw materials and labor costs, we can expect ...