Inflation Jumps to 6.2%… Consumer prices rose 0.9% last month and are 6.2% higher than at this time last year, the highest reading in 31 years. Core inflation rose 0.6% last month and 4.6% over the last year.
What it means— Well, that’s going to leave a mark! “Transitory” has just become a four-letter word. Disruption by the pandemic cannot be blamed for the inflation as it spread into more segments of the economy. Prices rose in almost every category, with energy up 4.8% for just the month and 30% over the last year and used cars and trucks up 2.5% for the month and 26.4% for the year. Consumer expectations for more inflation is at a new high with forecasts for a rise to 7%.
In numbers not surprising to anyone who shops for groceries, the index for meats, poultry, fish, and eggs rose 11.9% over last year and the beef index was up 20.1%. Food prices are expected to rise even more as weather has hurt global production of corn, wheat and soy. This is particularly difficult for young families dealing with limited budgets for food and clothing.
The report sent the markets lower, as investors questioned how long inflation at this level could last. Rising prices take a bite out of growth stocks, because all their returns are in the form of capital gains when they are sold. Citi Bank analysts suggest “transitory” will be evident in a few months. Fed Chair Powell is still holding to “transitory” and unlikely to make any change in policy without knowing if the Administration is keeping him next year.
Dividend stocks provide a little cushion along the way, making them more inflation friendly. Bond yields rose a bit, with the 10-year Treasury yield around 1.56%. That’s better than below 1.5%, but it still makes the real yield, the current yield minus inflation, negative 4.64%. Expect bond yields to walk higher as bond traders are not convinced the Fed is correct.
House of Representatives Passes H.R. 3684, the Infrastructure Investment and Jobs Act… House Speaker Nancy Pelosi persuaded enough House Republicans to join her cause to offset the Progressive Caucus members who refused to vote for the bill.
What it means— The trillion-dollar bill calls for repurposing some unspent funds, so the true addition to the budget is roughly $550 billion. That’s a significant sum, but don’t look for construction signs anytime soon. Before we can renovate bridges, roads, airports, and other things that desperately need attention, the projects must go through the permitting process. That’s
where anyone opposed to the efforts can hang them up for years in court through environmental challenges. The money will be spent. Our infrastructure will be renovated, but it will take years, not months, to get most projects started. The boost to employment seems optimistic. Wherever you look, companies don’t have a line of applicants seeking employment.
Electric Truck Maker Rivian Goes Public at $100 Billion Valuation… Rivian (Nasdaq: RIVN) shares soared on their debut, jumping from $78 per share to more than $100.
What it means— The share price values Rivian higher than General Motors and Ford, which are worth $87 billion and $78 billion, respectively. Rivian’s market cap is closing in on that of Volkswagen at $140 billion, even though Volkswagen produced nine million vehicles last year and so far, Rivian has delivered 156 vehicles… not 156,000, just 156. Most of those were to employees. For comparison, GM and Ford produced 6.8 million and 1.8 million vehicles last year, respectively, as well. But Rivian has aspirations. The company wants to produce a whopping 11,000 vehicles in 2022, ramping up to a massive 50,000 per year by 2024. This is what a bubble looks like.
Government and Business Leaders Discuss Climate Change at COP26… The 26th annual Conference of the Parties to the UNFCCC (the UN Climate Change Conference) is underway in Glasgow, Scotland, but so far, few concrete commitments have been made.
What it means— Developing nations are making their Christmas lists and checking them twice. They aren’t sure how many zeroes they want from developed nations to address the effects of climate change and to help them establish renewable energy, but they know it’s a lot. At the Paris conference in 2015, developed nations agreed to provide $100 billion per year to developing countries, but they haven’t forked over much of the cash. Some
corporate leaders have pledged net zero carbon emissions by 2040 or 2050, but the details are still fuzzy.
Global warming warnings are, in part, based on a growing global population ignoring falling fertility rates. Not to be confused with facts, coal must be banned disregarding that it’s essential for steel which is required for windmill towers and solar panels.
One thing that is certain is the number of attendees. Roughly 40,000 people descended on Glasgow to discuss climate change, which is a bit ironic. In a day and age where Zoom meetings are the norm. It would seem logical to forgo 118 private jets traveling in the name of saving the environment.
In the “Believe it or Not” category: Austrian Brothel Offers Services in Exchange for Vaccinations… The Austrian government imposed what are called 2G restrictions following a recent spike in COVID cases. The 2G rule bans unvaccinated people from restaurants, cafes, and other indoor spaces, including bordellos. Christoph Lielacher, director of the Fun Palast, an Austrian brothel, noted a 50% decline in business due to 2G, so he came up with a novel response. The establishment set up a vaccination site in house and offered patrons who get vaccinated 30 minutes with “a lady of their choice” for free. The program has been a huge success. So, socialism still has a capitalist twist.
Data supplied by HS Dent Research
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