US Inflation still rages

[james03]

8.3% based on the new-and-improved calculations.

Energy dropped 5%.  Unfortunately this benefit will be gone after Biden stops pulling oil from the SPR emergency stockpile, which has to be down to half capacity at this point.  He'll keep it going until the November elections.

Fed will keep raising, so the US recession will continue.

On the good side, look for good deals on cars in a few months.  Also lock in home heating oil soon, definitely before the November election.  I do think the strong dollar will continue to keep oil under control and maybe a little lower until the SPR is cut off.

[james03]

Market bloodbath today.  Down 4%.  3,000 target on S&P.  I still like 2700, with 2200 potential.

Get a list of good blue chip stocks with high dividends you want to buy on sale.  Also check out dividend funds in your 401(k).  Too early to buy, but now is the time to do some research.

[King Wenceslas]

S&P500   -177.7  (Surprised it didn't end up -400)

The wheels are starting to come off the bus.

This will be chaos to the end of October. Expect S&P to go down to somewhere in the 2000's. Market doesn't bottom until late next year below 1000.

Looking as if Biden will be the last president elected(?) by democratic vote. A despot shows up in the next few years.

[james03]

https://oilprice.com/Latest-Energy-News/World-News/Congress-Rushes-To-Prevent-Railway-Strike.html

Inflation secondary effects.  Wages will be increased.

Other commodities are at risk, such as coal and crude product transports that could interrupt pre-winter stockpiling by utilities, triggering an increase in natural gas demand by power plant generators. Some estimates show railroads account for about a third or more of all US freight, meaning a strike would worsen supply chain snarls that could send inflation higher.

Railroads will have to increase freight rates as a result.  Their fuel costs are already about double after Biden was elected.  More pain.  Not as bad as Europe however.

[james03]

Strike averted:

The Association of American Railroads, which represents freight railroads, said the new contracts negotiated with three unions representing 60,000 workers will include a 24 percent wage increase during the five-year period from 2020 through 2024. This retroactive pay hike will include a one-time payout that will average $11,000 per worker upon ratification.

That's about a 5% raise per year.  That's about break even for them.  But it will add to freight rates.  This is how you get the price spiral going.

I think the Fed is actually doing a good job and not bowing to political pressure.  Oil is already dropping.  I think they'll kill off the inflation.  However, the recession will continue.  Also the Fed can not fix a physical supply shortage like we'll see when Kamala stops the drawdown of the SPR emergency oil, which will happen after the election.  Hopefully a reduction in demand due to the world wide Ukraine sanctions depression coupled with US increased production will counter the effect.

We could see $40/bbl oil this time next year if the depression is deep enough, assuming nothing happens to supply.

[Heinrich]

My retirement is down 25%. I don't even look at it anymore.

[maryslittlegarden]

My retirement is down 25%. I don't even look at it anymore.

Pretty sure I will be working for the next 75 years..... not even going to try peaking at my retirement stuff. #brandon

[james03]

not even going to try peaking at my retirement stuff.

You're a woman.  You'll have to take a peak.  Just a little peak.

[Xavier]

"Wall Street strategists are torn on whether the stock market is about to crash or soar 20% ahead of next week's Fed meeting. Here's where 6 market experts stand.

Ahead of the Federal Reserve's highly anticipated 75 basis point interest rate hike next week, Wall Street is torn as to where the stock market is headed next."

https://www.businessinsider.in/stock-market/news/wall-street-strategists-are-torn-on-whether-the-stock-market-is-about-to-crash-or-soar-20-ahead-of-next-weeks-fed-meeting-heres-where-6-market-experts-stand-/articleshow/94269818.cms

This crash is caused by the Fed's wrong decision to raise interest rates. There's a reasonable way to minimize Market crashes.

(1) Implement Permazero: The Fed publicly declares interest rates will remain at 0 for the next 10 years. The Market will soar.

No, this will not cause inflation. The idea that interest rates and inflation are negatively correlated is common but mistaken.

"' This shift in the intcrest rate-inflation relationship is illustr.lted on line 13 of Tahle 1, which presents r~Slllt,~ from :1 regression of inflation on lagged infl:lliol1 and sever.1 1 intl.!L'e ~t rate measures over the period from the first quartl.!r of 1980 through thl.' second quarter of 1991. Note that over this later sample period , none of the interest rate measures help to explain movements in inflation." https://www.dallasfed.org/~/media/documents/research/er/1992/er9204a.pdf

(2) Ensure Stable Money Supply linked to GDP Growth. Money Supply should be equalized to GDP in a base year. After that, it should grow (or fall, rarely) exactly corresponding to GDP increase (or rare decrease). This will tame inflation. If successfully implemented, inflation will virtually never cross 2%, except perhaps in times of grave scarcity of supply, which is not a monetary factor. The people who control the central banks do not have the best interests of the people or humanity at heart.

God Bless.

[james03]

(2) Ensure Stable Money Supply linked to GDP Growth. Money Supply should be equalized to GDP in a base year. After that, it should grow (or fall, rarely) exactly corresponding to GDP increase (or rare decrease). This will tame inflation.

The US economy is contracting.  So according to your logic the Fed should shrink the money supply.  That would raise interest rates.

The massive money printing and zero interest rates caused the inflation.  The Fed has slowly cut back on money supply growth and we are seeing signs that inflation is taming, especially in energy.  As the Fed continues to tighten, inflation will drop.

This will continue the recession, but that's the price you pay when you print up the Biden bucks and hand them out.

[james03]

On the global inflation scope:

A German bakery was slapped with a €330,000 gas bill after a new energy company suddenly terminated their contract which guaranteed pricing until the end of 2023, Junge Freiheit reported, citing Bild.

"Are they crazy?" said owner Eckehard Vatter, who says he has 14 days to pay the bill. "A year ago, we paid €5,856 per month in gas costs for our large furnaces and heating," he added. Vatter said his new energy supplier hasn't given him a reason for the 1,200% price increase.

Italy is at risk of losing up to 582,000 jobs due to the energy crisis and the resulting economic downturn, national media reported on Sunday, citing a study by the Confindustria Association of Industrialists. According to the findings, if the gas price stays at its current level (the August average was €235 per megawatt-hour), Italy's economy will shrink 2.2% next year and the country will lose up to 383,000 jobs in 2022-2023. However, if the price hits €298 per megawatt-hour, which is the predicted level based on current gas futures, Italy may suffer a 3.2% decline in GDP and lose hundreds of thousands of jobs.

A bit strange.  For context, the gas price in the US is around $8/dekatherm, or $25/megawatt-hour.  So for simplicity Europe is running 10X.  Our prices have about doubled.  So if a European reported a 20X increase, that would be "reasonable", conservative to the upside.

The baker paid €6,000, and now pays €330,000.  It should be €120,000.  Possible reasons, the bill is for multiple months, the German government is hitting German business harder to hide the disaster from the homeowners and renters (voters), or maybe the utility got burned with hedging losses.

Don't know the reason.  What I do know is that Europe has been destroyed due to the insane Ukraine policies.  And it only gets worse as people switch on their heaters.

In other news more fertilizer plants are shutting down in Europe.  A secondary effect is it is causing a shortage of CO2 for beer production.

[Greg]

Madeline porsat made a prophecy of the whole world going bankrupt

[Heinrich]

water and sewag bill: up 75%. Frau H said gals at work reporting same.

[Jmartyr]

water and sewag bill: up 75%. Frau H said gals at work reporting same.

Here in the north, ours is about the same. But it is  controlled by the city, if that makes a difference?

[Kaesekopf]

German producer price post record jump, adding to inflation woes

German producer prices rose in August at the fastest rate since records began in 1949, data released by the Federal Statistical Office showed today, pointing to a further increase in consumer prices.

Producer prices of industrial products rose by 45.8 percent compared to the same month of last year. Compared to July 2022, prices rose 7.9 percent.

Good thing the Germans "stand for Ukraine"