Don't Say I Didn't Warn You

For more than a year now I've been warning that inflationary pressures would run rampant.

In June 2020, I pointed out that the Fed was ignoring price increases that occurred throughout the pandemic...

A few months later I noted the revolutionary shift in its policy priorities, as it effectively abandoned the so-called "dual-mandate."

In February, I laid out a series of sectors whose rising prices contradicted the Fed's (and the mainstream media's) narrative.

And in April, I even explained how the government's measures of monetary debasement are flawed by design.

Now here we are in the hot summer months and I've been not-so-quietly cataloging the soaring price increases that are draining Americans' bank accounts.

But I don't really have to do that, do I?

You know.

You've seen it yourself.

If you've been trying to buy a house or a car you've undoubtedly experienced some sort of sticker shock.

I know I have.

U.S. home prices soared 15% in April - the fastest pace since 2005 - up from a 13.4% annual gain in March, according to the S&P CoreLogic Case-Shiller 20-city home price index.

Each of the 20 cities that comprise the index reported higher year-over-year price gains and five (Charlotte, Cleveland, Dallas, Denver, and Seattle) had the largest 12-month price increases on records dating back 30 years.

Meanwhile, the National Association of Realtors reported the median existing-home sales price rose almost 24% in May, topping $350,000 for the first time.

Of course, everyone knows the housing sector is on fire but it's not some outlier. Prices for everyday goods are surging, too.

The Commerce Department reported on Friday that its personal consumption expenditure price index climbed 0.4% in May. It's now up 3.9% over the last 12 months, nearly double the Fed's annual target of 2%.

Labor Department data showed a 0.6% increase in May, pushing the annual inflation rate to 5% over the last year.

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And the U.S. Department of Commerce said consumer prices jumped by 0.6% for the month - or at a 7.2% annualized rate. They've surged 5% in the past 12 months, the highest reading since August 2008.

In that time, the cost of dining out has climbed by 4%, apparel by 5.6%, electricity by 6.2%, and transportation by 11.2%.

Used cars and trucks have really gotten out of hand, jumping 56%.

Again, Jerome Powell is quick to point out that the prices for some of these goods were suppressed by the pandemic, making year-over-year comparisons appear more drastic.

But we also know that's not true of most sectors.

Despite a small stumble at the pandemic's onset home prices actually rose 10.4% in 2020 - their fastest pace in seven years.

Food prices rose during the pandemic, too. And they're still rising.

"Why have meat and poultry prices surged 11% since May? Why is pork up 8.5% in that time?" I asked last August (in the midst of our national emergency).

"Beef and veal are up 20%. Egg prices are up 10%," I noted at the time.

As it stands today, corn and soybean prices have vaulted 70% and 40% respectively since the close of 2019 to reach multiyear highs.

So don't tell me prices were depressed a year ago. They positively weren't. This has little to do with year-over-year comparisons.

No, these price increases we're seeing aren't a mirage.

And they aren't likely to be "transitory," either.

The increases we've seen in housing, stocks, food, industrial commodities, etc. are more probably permanent.

And it's going to take the Fed months, if not years, to reach that conclusion on its own.

Which is why prices will only march higher from here on out.

So I hope the heat hasn't been too much for you. Because we're not just in the middle of summer; we're smack dab in the middle of this inflationary cycle.

Just like I predicted we would be.

Fight on,

Jason Simpkins

@OCSimpkins on Twitter

Jason Simpkins is Assistant Managing Editor of the Outsider Club and Investment Director of Wall Street's Proving Ground, a financial advisory focused on security companies and defense contractors. For more on Jason, check out his editor's page.

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