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Forum Post: Is Hidden Inflation Choking the Recovery?

Posted 1 year ago on Nov. 14, 2012, 9:42 a.m. EST by GNAT (150)
This content is user submitted and not an official statement

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A good friend of mine recently left the U.S., which was a very difficult decision for him to make. We were discussing the state of the economy, and when I said, “Well, at least inflation has been contained,” he laughed. Loudly. “Amigo, inflation is rampant. The powers that be just keep hiding it.” I thought this might be approaching tinfoil-hat territory, so I thought I’d look into it.

Turns out he’s right. And that could mean bad things for the economy and the stock market going forward.

The CPI has been running at 3% to 4% over the past year and a half. Backing out food and energy costs, the CPI has been remarkably stable, at around 2.5% for much of the past decade. But there are many problems in this quick and dirty analysis. Even 2.5% annualized inflation is a killer if wages are stagnant, which by many accounts, they are. So every year, an average employee earns the same amount of money, and that money’s buying power is reduced by 2.5%.

The other problem is that the so-called “core CPI’ eliminates food and energy. But do you know anyone who doesn’t buy food or energy? Of course not. You must include those sectors because those stagnant wages are buying less and less food and energy.

Moreover, food price increases outstrip increases in all other products except gasoline. That means that the 46 million people that are now on food stamps are also seeing that entitlement buying less and less food.

My friend also told me to visit my grocery stores and pay careful attention at the container volumes of things I buy every day. Wouldn’t you know it — that 64oz carton of orange juice I thought I was buying is down to 59 oz. That 16oz bag of chips is now 13 oz. How did that slip past me?

The losers here are working- and middle-class Americans. The other loser may be the stock market.

If food stamps don’t buy as much as they used to, then consumer staples revenues will decline. If wages are stagnant and money is worth less, then less revenue will be generated.

If that happens, earnings get affected. Even if companies subsequently decrease the size of their products, while that will reduce costs, it still means less is being consumed. And if gas prices remain high, this inflation will also impact travel.

All this just adds more obstacles to a recovery that’s already weak and nearly jobless.

So how do you play this trend?

For starters, understand that because inflation is in reality higher than reported, if you’re using dividends as an inflation hedge, you’ll need to move into higher-yielding stocks. So instead of 3% yielders, look for 5% or more.

These might include AT&T (NYSE:T), Altria Group (NYSE:MO), pipeline plays such as Kinder Morgan Partners (NYSE:KMP) and preferred stocks, such as the D or E series of Ashford Hospitality Trust (NYSE:AHT), which goes ex-dividend at the end of this month.

You might also think about shorting consumer staples, which can be risky since staples, by definition, are always needed, so do it with Vanguard Consumer Staples ETF (NYSE:VDC).

A safer bet would be to short consumer discretionary, such as Vanguard Consumer Discretionary ETF (NYSE:VCR). I think it’s always a safe bet to short any of the airline stocks, except for Southwest Airlines (NYSE:LUV), which, as a low-cost provider, will be the go-to airline for many people.

Lawrence Meyers is long shares of Ashford Hospitality Trust and its Preferred D series.


...and you can expect those who seek to save face for the Dems are going to refute and downplay this to the end as some have already shown.

56 Comments

56 Comments


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[-] 4 points by TrevorMnemonic (5827) 1 year ago

Inflation is kicking my ass.

I'm only 25 and I can already remember back in the day when things used to be cheaper. I thought you had to be old before that was supposed to happen.

[-] 3 points by gnomunny (6287) from St Louis, MO 1 year ago

When I was younger, things like groceries used to go up maybe a nickle or a dime a year, if that. Now you see price jumps like 30% or 50% a year. Every fucking year! It's literally highway robbery. Part of the fault lies with the consumer, though, by continuing to put up with it without protest.

[-] 1 points by MattLHolck (16833) from San Diego, CA 1 year ago

it never goes down , it only goes up

[-] -1 points by TrevorMnemonic (5827) 1 year ago

I've noticed. They said making everything in China was supposed to make things cheaper. But prices are way up since back in the day. It's almost like 1% are pocketing all the money.

[-] 0 points by MattLHolck (16833) from San Diego, CA 1 year ago

yep

got all those numbers on their side

[-] 0 points by richardkentgates (3269) from Fort Walton Beach, FL 1 year ago

It is startling that even after the election that there has been no action on the economic front to fix the inflation/wage gap. I'm sure if they ever do get around to it, it will only be a bandaid solution. BIG money seems to be like crack for these people and nothing aside from total personal self destruction will force them to admit there is a problem.

[Removed]

[-] 3 points by MattLHolck (16833) from San Diego, CA 1 year ago

milk priced out at Vons this morning at $3.50 a gallon

I did not buy any

will check other stores

[-] 1 points by richardkentgates (3269) from Fort Walton Beach, FL 1 year ago

$4.35 here

[-] 2 points by MattLHolck (16833) from San Diego, CA 1 year ago

found milk for $3.00/Gallon at ralphs

[-] 1 points by TrevorMnemonic (5827) 1 year ago

meat is super expensive now. deli counters have gone up about 100% since I was younger. You can get the water based for 2.99 but the goods that are now 6.69 used to be 2.99

[-] 1 points by richardkentgates (3269) from Fort Walton Beach, FL 1 year ago

It is bad and getting worse, no doubt.

[-] 1 points by MattLHolck (16833) from San Diego, CA 1 year ago

dang

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[-] 3 points by MattLHolck (16833) from San Diego, CA 1 year ago

not in San Diego but I'll look around

[-] 1 points by TrevorMnemonic (5827) 1 year ago

Crisis averted? Then what's all this Occupy Wall Street stuff about?

[+] -5 points by VQkag2 (16478) 1 year ago

OWS stands with the 99% for economic equity, Against the banksters and corp 1% oligarchs who have poisoned our planet, food, who have bought our govt and rigged the system against.

OWS stands for the 99% and for progressive solutions to resolve the conservative policy debacle that we have been subjected to for decades.

Perhaps your lack of knowledge regarding what OWS stands for has been the problem all along?

We stand against all pols and the corrupt system, not just one politician (like you seem to be).

I hope that clarifies things for you.

[-] 2 points by TrevorMnemonic (5827) 1 year ago

You're acting like all the problems are solved. They are not. Action is still needed.

You brush off inflation... why?

"Crisis averted... whew" - that was you in regards to inflation.

You do the same thing in regards to war and drones. You act like the problem is solved. It's not.

[+] -5 points by VQkag2 (16478) 1 year ago

I've never said theses problems are solved. That's you lying about my position.

In regards to high prices I've said clearly, repeatedly that the answer is fighting for job creation, cutting taxes/debt of working class, and for higher wages. Inflation was 2% in sept! I'd rather talk jobs, wages, cutting tax/debt.

In regards to drones/war on terror, I have said we must protest all pols against all acts of war, sign petitions, write letters, pursued people. And that is what I DO & have done for more than 30 years.

I also urge all to recognize that we must denounce, disregard, dismiss the fear mongering propaganda that has been used since the exploitation of the 9/11 attacks to scare the people into supporting these acts of war.

My personal efforts are fine. Why can't you focus on the issues? What's with this preoccupation with me & my personal positions.

[-] 6 points by Builder (4202) 1 year ago

You're a shill kag. No questions. ==

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[-] 3 points by Builder (4202) 1 year ago

You're raison detre is one percent.

Isn't that enough?

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[-] 3 points by Builder (4202) 1 year ago

Mainly because I think that most of what you add to conversations here is not backed up with any kind of evidence, and when I provide evidence to back up my point of view, you either deny it, or ignore it.

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[-] 3 points by frovikleka (2563) from Island Heights, NJ 1 year ago

Still playing 'victim', eh VQ? Although tiring, it's kind of amusing too. It may be time to think about "manning up'...don't ya think.

~Odin~

[-] 1 points by flip (6369) 1 year ago

you do realize that he does not have to work for a living anymore and considers those who do suckers. he does not since he is smarter than most of us suckers - that was the conversation i had with him and that is what he said to me straight out - and he is pretending to be an ows supporter - maybe he doesn't know what ows really is.

[Deleted]

[-] 5 points by frovikleka (2563) from Island Heights, NJ 1 year ago

You're memory does not serve you well VQkag. We have had many discussions with each other from the time that you arrived here in late May to conduct your intensive partisan campaign. I have learned a long time ago, the devious, insincere, foul-mouthed, accusatory way that you operate. There are people here whom i diasagree with, but nevertheless I respect them. You however are in a class by yourself. And please don't consider that a compliment.

~Odin~

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[-] 4 points by frovikleka (2563) from Island Heights, NJ 1 year ago

We agree on something!! Yaaah! I am more 'direct,' with the exception of course, the time you told me to "fuck off" on a PM. You have an important role on this forum VQkag. You supply an amusing relief to us with your partisan BS, while most of the rest of us are more concerned with the problems, and the potential 'real' solutions to them.

~Odin~

[Deleted]

[-] 3 points by frovikleka (2563) from Island Heights, NJ 1 year ago

The only difference between us is, your denigration of people on here is well known, although a bit less conspicuous...mine is more direct. lol

~Odin~

[-] 3 points by Builder (4202) 1 year ago

You keep harping on about how attacking Libya was good for that country, and you continually ignore evidence to the contrary. I've shown you this evidence before, and you ended the "debate" immediately.

Where's your usual good wishes and goodbye speech?

[Deleted]

[-] 1 points by Builder (4202) 1 year ago

So they get a puppet govt?

I wonder who got all that gold?

[-] 2 points by corazonroto (7) 1 year ago

Implementation Errors and Fraud in the Federal Emergency Unemployment Compensation Program (EUC08) have been choking the recovery. Waste, harm, denial and fraud in a program that has spent $97 billion dollars on more than 29 million claims should get more attention than what has been going on in the general's underpants....but here we are not talking about or dealing with this problem I have been battling for the past year:

http://occupywallst.org/forum/unemployed-man-woman-and-child-have-been-ignored/

[-] 0 points by richardkentgates (3269) from Fort Walton Beach, FL 1 year ago

Lots of stuff is being ignored but the Left seems too intent on patting their own backs to face the fact that it's their shift and they are doing no better than the conservatives they criticize.

[-] 1 points by jrhirsch (4714) from Sun City, CA 1 year ago

The number one problem with inflation is that it blurs the value of money. The people who see it's true value clearly have a tremendous advantage over those who don't.

Example: The minimum wage in 1968 adjusted for inflation was about $10 an hour, now it's just $7.25 an hour. Walmart, Target, McDonalds, and thousands of other businesses understand inflation completely, making billions of dollars by underpaying wages, and get away with it because their employees still don't understand the real value of money.

http://en.wikipedia.org/wiki/File:History_of_US_federal_minimum_wage_increases.svg

[-] 1 points by ShowRealHist (60) 1 year ago

Look at home prices and stock prices inflation-adjusted: http://www.showrealhist.com/RHandRD.html These track records are "The public be suckered". Keeping them rarely shown is also "The public be suckered".

[-] 1 points by jrhirsch (4714) from Sun City, CA 1 year ago

Good point. If not adjusted for inflation, figures and charts lie.

[-] 1 points by ShowRealHist (60) 1 year ago

Thanks, here's my latest: http://patrick.net/forum/?p=1219038 My efforts seem to amount to about 'talking to myself'. If you have any thoughts for being effective, be glad to hear!

[-] 1 points by jrhirsch (4714) from Sun City, CA 1 year ago

The stock chart shows that the market is fueled by speculation because it's so far above the trend line. Very profitable but a very risky bubble ready to burst.

I wish there was a way to educate people about economic bubbles. It's been just 5 years since the last one and judging by the Dow, they haven't learned a thing.

[-] 1 points by ShowRealHist (60) 1 year ago

You write "I wish there was a way ...". I think that the real price histories need to be ongoingly apparent to the people. I imagine that the news media would do this ... IF they 'had to' do it once because 'somebody with a pulpit' did it -- like a politician, a Treasury Secretary, a Fed Chair, a bunch of prominent academics, etc. Maybe a foreign government?

[-] 1 points by jrhirsch (4714) from Sun City, CA 1 year ago

I don't think the average person can read a graph and understand it like you and I can. All of those people in the pulpit are the beneficiaries of the present system. They're not going to bite the hand that feeds them.

Here's the best graph I've seen showing true wealth inequality. Not just earned income.

http://desertbeacon.files.wordpress.com/2012/07/top-income-composition.jpg

The graph above shows all income sources, salaries, capital gains, dividends, and business income for the top 1 out of a thousand individuals. As you can probably see, during the 50's the top 0.1% made 3 1/2% to 4% of total U.S. income. Today their share has tripled to 12%.

[-] 1 points by ShowRealHist (60) 1 year ago

Must be one stand-up, intellectually honest person with a pulpit SOMEWHERE!?

[-] 1 points by jrhirsch (4714) from Sun City, CA 1 year ago

The closest I've seen is Chris Hedges. He may be too far to the left to attract large numbers of people.

Also like Rocky Anderson. He ran for President but only got .01% of the vote.

[-] 1 points by ShowRealHist (60) 1 year ago

In my strong opinion: the MAIN ENABLER of sizable asset price bubbles (very harmful) is keeping the real price histories out of sight. I figure that the 'establishment' AGREES, which is why these real histories are nearly never seen!

[-] 1 points by jrhirsch (4714) from Sun City, CA 1 year ago

I'm not sure people really want to know the truth about economics. As long as they feel like they're doing the right thing by following the crowd, why spoil it? Where did you get the graphs?

The house price graph is a real eye opener. All of those people who thought they made hundreds of thousands on the sale of their house after 20 or 30 years and gladly paid the capital gains tax would be shocked to find out they really had a net loss after adding property taxes and repairs.

[-] 1 points by ShowRealHist (60) 1 year ago

Along the way I wrote at least once: I am certain that it is a far, far better thing for our nation if the people have their heads OUT of their fuming darknesses.

[-] -3 points by ftrp (-95) 1 year ago

you just realized this? have you been living in a cave? the cost of food and energy are not even put into the inflation rate. wait until all the obamacare taxes kick in , the govt will have you ( the citizenry) where they want you, dependent on them and getting nothing .

[-] 1 points by Buttercup (1067) 1 year ago

You mean alva/DogBone won't get any more free pizzas from Papa Johns? Gasp! The horrors!! Surely this will send the country straight into a nosedive it will never recover from!

http://www.mediaite.com/tv/jon-stewart-tears-into-melodramatic-post-election-whining-about-obamas-second-term/

[+] -4 points by DogBone (-201) 1 year ago

I bet you do not need any more pizza and it probably requires a crane to get you off the couch.

[-] 0 points by richardkentgates (3269) from Fort Walton Beach, FL 1 year ago

the ACA has no language about taxes. If you're calling responsibility to those who make you wealthy, I have no sympathy. Living in luxury for nothing more than pushing a pen is a privileged, not a right.

[-] -3 points by ftrp (-95) 1 year ago

obamacare will taking over 700 b from medicare.

[-] 0 points by richardkentgates (3269) from Fort Walton Beach, FL 1 year ago

700 m not b. The price controls added to medicare in the ACA not only left that amount available to be cut but added 8 years of solvency after the 700 m cut, which isn't actually cut because it is still available through medicare in preventive care. Your numbers are wrong and facts missing. Or is this just a test?

[-] -3 points by ftrp (-95) 1 year ago

its over 700 BILLION, not million taken out of medicare. do your own search. i'm right. you are wrong.

[-] 1 points by richardkentgates (3269) from Fort Walton Beach, FL 1 year ago

You're right. Wow, price controls really are effective. Thanks for driving that point home.

[+] -4 points by ftrp (-95) 1 year ago

price controls are the tool of a dictatorship

[-] 2 points by richardkentgates (3269) from Fort Walton Beach, FL 1 year ago

price gouging on basic life sustaining items is the practice of extortionists, common criminals. I think my angle has more room.

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[-] -1 points by ftrp (-95) 1 year ago

taking over 700 bil from medicare reduces medical help for the elderly.

[Deleted]

[-] 0 points by ftrp (-95) 1 year ago

the 700 bil is directly taken from medicare services for the seniors.under medicare there were no co-pays.

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[-] 0 points by ftrp (-95) 1 year ago

the usa as founded lost. progressive solutions? no thank you. progressive = socialism. 0ver 700 bil taken directly from medicare to fund obamcare. more and more docs not accepting medicare . seniors lose.

[-] 1 points by NVPHIL (664) 1 year ago

You do realize medicare and SS are socialist programs. I'm against the handout thr ACA gives insurance companies but to say no thank you to socialist programs while complaining about taking money out of a socialist program doesn't make sense.

[-] -2 points by VQkag2 (16478) 1 year ago

I disagree!