Inflation Post Mortem
Yesterday’s “lower than expected” CPI of 3.5% made the monkeys and the machines excited. Today’s PPI headline on CNBC bragged that “Wholesale prices unexpectedly declined in June on a big drop in gasoline.”
I have two questions: How is it good news that prices rise only 3.5% per annum - at this pace, prices double in just 20 years - and why was it a shocker (to the experts) when oil and gas were the two categories that were “surprised” on the downside? Beware the headlines!
CPI and PCE are backward looking. Oil prices have risen 14% in less than a month since the last period as Iran calls Donald Trump’s bluff and his tweets aren’t enough to matter now that bombs are flying again. July’s CPI number will reverse to the upside and the headlines will bleat again. Ignore them. Inflation is a problem for the citizens, Kevin Warsh, Scott Bessent and the Republicans in the midterm elections. All of this was unnecessary. Tariffs, war and soaring government debt are all inflationary. There is an economics lesson here.
Trump the Stock Picker
It seems like Donald Trump is a better stock picker with his money than ours. Just a month and a half ago, he gave $1b of our money to IBM. Well, there is deflation after all: yesterday, IBM stock lost $68b in market cap because they missed analysts’ expectations. IBM is a relic of a company of course that sells mainframe computers and the software that runs them. If you haven’t heard, mainframes are dinosaurs.
Reminder: the government should not be picking winners and losers.
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