'Peak Inflation' Is Still Up for Debate
Hope is not a good strategy... The latest 'official' inflation number... 'Peak inflation' is still up for debate... Taking issue with the data... Why it still matters... This inflation hedge is positioned to shoot higher... A few simple ways to buy gold today...
Everyone is paying attention to inflation now...
Unlike most of the past two years, every "official" inflation number that comes out now is headline news in the mainstream financial media. And for a good reason...
Prices across all sorts of industries haven't grown this much, this fast in four decades.
People are hoping prices go down soon. But as we had said before, hope is not a strategy – or at least, it's not one we're comfortable using.
Instead, with inflation, I (Corey McLaughlin) have stressed to prepare for the worst... while hoping for the best, but not relying on it to happen.
The same goes for today, even as the key monthly inflation number published this morning seems to be "better than feared" to Wall Street, as our colleague and Stansberry NewsWire editor C. Scott Garliss told us today.
The U.S. Bureau of Labor Statistics ("BLS") published the latest Consumer Price Index ("CPI") reading – which measures a basket of consumer prices for things like food, rent, and gas... And it checked in at a year-over-year gain of 8.5% for March, the highest number since 1981.
This was again – like in previous months – a new multidecade high...
Yet, as Scott reported today, U.S. stocks rallied after the report.
That's because the number beat Wall Street's worst-case expectations. As Scott, who worked for 20 years on Wall Street before joining Stansberry Research, wrote this morning...
The headline number was better than the so-called "whisper" expectation for a double-digit percentage increase.
The S&P 500 Index is higher following the release, jumping 0.7% to 4,440 compared with last night's close at 4,409.
Before long, though, the major U.S. indexes gave up those gains. They traded near breakeven most of the day, before turning slightly negative in the afternoon. That doesn't surprise us...
You see, we're here today to say that the inflation numbers still don't look good. And actually, they're probably worse than any "official" numbers would lead you to believe.
First, inflation still hasn't peaked...
Coming into the year, before war broke out in Eastern Europe, many Wall Street analysts believed inflation could "peak" in the first few months of 2022 – at least when measured by year-over-year comparisons like the CPI.
But that hasn't happened yet...
March's headline number was higher than February's 7.9% annual gain... which was higher than January's 7.5% number... which was greater than December 2021's 7.0%... and you get the idea.
Anyone who has called a top in inflation over the past year has been incorrect so far. Now, as Scott wrote today...
Analysts and economists wonder how much more costs can rise on top of the metrics we've seen over the last year. In March 2020, inflation still hovered around 2.6%. But last April, the number exploded higher to 4.2% before finishing the year at 7%.
Maybe it's a sign that inflation has peaked now that it really is mainstream news (like on The Today Show). But we still won't bank on it...
We can see the case for declining prices in some sectors in the months ahead compared with what we saw a year ago. However, it doesn't take a lot of imagination to also see "official" inflation numbers not peaking for at least a few more months as well... or inflation remaining higher than we've seen in decades even if prices begin to ease from the highs.
The knock-on effects of the war in Ukraine – namely, the rerouting of the global oil supply and the likely disruption of major food supplies (like wheat) – are only now being reflected in backward-looking inflation numbers (and the forward-looking stock market).
And as we wrote yesterday, citing our colleague Dr. David "Doc" Eifrig's work, global supply chains are still weaker than many people realize (and not because of the war). The longer those problems linger, the longer it will take to "fix" them.
Keep in mind, I'm also talking about the 'official' numbers...
But we're only write about the CPI and the BLS's personal consumption expenditures ("PCE") index – the Federal Reserve's preferred inflation gauge – because they influence how the central bank reacts to inflation, by raising interest rates and by how much...
High inflation today means the Fed will stick with its plan to raise interest rates, to increase the cost of borrowing money. And for better and worse, that central bank decision matters a lot to the economy and markets (remember, Buffett's Law).
But as we've pointed out before, we also take issue with the official numbers...
I personally don't think they accurately reflect the "real" influence of inflation on most people. It's not like prices of every item have only gotten 8% more expensive for everyone.
We're not the only ones who find value in digging deeper...
Charlie Bilello is the founder and CEO of Compound Capital Advisors. And this morning, shortly after the March CPI report went live, he posted this chart on Twitter...
Then, Bilello noted the wonkiness of the calculation...
Shelter is the single biggest component of CPI (33% of Index) and is still being wildly understated (@ +5% YoY) with rents up 17% over the last year and home prices up 19%. The actual inflation rate is much higher than 8.5%.
Macroeconomic analyst Lyn Alden, a recent interview guest of our editor-at-large Daniela Cambone, also noted today that inflation numbers would be higher "if measured the old way." John Williams of the Shadow Government Statistics website agrees.
Additionally, one of our least favorite facts to point out is that CPI doesn't include some major household expenses for many folks – like childcare costs or tuition. Throw those in and you'd have a drastically different number, too.
But again, what we think about this point doesn't necessarily matter...
What's important is that these are the numbers the Fed and other government agencies use to justify decisions, like interest rate moves or, eventually, printing more money... And these are the things that Wall Street and balance sheets react to.
Plus, to be fair, I haven't come across a "perfect" inflation indicator yet. After all, the best indicator for you is how the price differences impact your income and expenses and your investment portfolio.
That goes for the stocks of the businesses you own and their growth prospects... the prices of bonds (still falling, with rising yields still not keeping pace with inflation)... and the value of inflation hedges like gold, which could see a boost from sustained high prices.
Hey, there's some good news. And we found one more piece of positivity as well...
At this point, it might serve the stock market well if the BLS packed it in and stopped reporting any kind of inflation numbers at all. But on the other hand, at least we still get them...
You see, even if you disagree with the way inflation is measured, we can at least see a "directional" trend – whether inflation is slowing, accelerating, or staying the same. Like today...
Even though the latest inflation number could've been worse, it's still not good. And as long as that remains the case, we'll keep hoping for the best... and preparing for the worst.
Moving on to a 'best wishes' note – and a new beginning...
Stansberry Alliance member Gary H. wrote in with a message for our now former colleague Ben Morris, who signed off from DailyWealth Trader (DWT) on Friday. As Gary wrote...
Good luck to Ben Morris in future endeavors. Have followed, profited and enjoyed his advice in DWT for years. Sorry to see him go.
For those of you who didn't see Ben's parting message, here's an excerpt from Friday's DailyWealth Trader...
I (Ben) started working on DWT in January 2013, less than a year after it launched... And I've been writing it – almost always with excellent help – since 2015. Today is the last day you'll see my name on DWT. After nearly 10 years at Stansberry Research, I'm moving on.
You won't find me at another financial newsletter firm. As far as I'm concerned, Stansberry Research is the best in the business. Instead, I'm taking a mini retirement (I'm 39 now) to take classes, wander, and pursue other interests.
Whether you're new to DWT or a longtime subscriber, I hope you've learned a lot, improved your trading and investing, and enjoyed the journey. I know I have. I've grown both professionally and personally during my time here...
As Ben also mentioned, our colleague Chris Igou will be taking the reins of DWT moving forward. Of course, Digest readers are already familiar with Chris... He has written many guest essays in these pages.
Chris has worked directly with Steve Sjuggerud and Brett Eversole of the True Wealth team for the past six years. As Ben said...
He's well-versed in the markets... He has a great team supporting him on DWT... And I know he'll guide you well.
In Chris' first issue yesterday, he noted that gold's price is due for a breakout...
DWT subscribers have two open trades on gold today. In the interest of fairness, we can't share the details of those recommendations in the Digest, but we do want to talk about gold's price in general...
And as Chris explained yesterday, after a 5% drop from its previous highs and weeks of sideways action, gold could be getting ready to rally...
Specifically, gold is closer to its 50-day moving average ("50-DMA") – a good, simple technical measure of a short-term trend – following the 14% spike its price saw in February and March. This is a bullish sign, according to Chris...
When gold's 50-DMA is moving higher, that signals gold is in an uptrend. And if it is moving lower, the trend is down.
Importantly, when gold's price falls back to its 50-DMA, it typically acts as support. Today, gold is trading pretty close to its short-term trend. And it is holding above that level. Take a look...
Now that gold has spent time digesting its gains, it has given its 50-DMA time to catch up. And that support will be a tailwind if it holds.
Put simply, Chris says all of this data points to gold's pullback ending soon. And it could be gearing up for another move to the upside. Today, gold was up roughly 1% to $1,970.
We could get into all kinds of fundamental reasons why this might be – namely that high inflation remains in place. But sometimes, it's refreshing to simply look at what price behavior is telling you...
Today, it's saying now is not a bad time to "buy" if you're interested in adding gold exposure to your portfolio, at least – through gold stocks or physical gold.
If you're looking for a few simple ways to buy gold today...
We have just the advice for you.
The first module in our new Stansberry's Financial Survival Program features tips on how to "get defensive" and make money in today's market environment. And as part of that plan, Doc details several ways to invest in gold right now. As he wrote...
While gold is a fairly well-known choice for protection, few investors know the best way to utilize it.
I could not agree more.
In the first lesson of our Financial Survival Program, Doc explains why gold is such a great "chaos hedge" against inflation or a debt collapse... And he gives simple, step-by-step guidance on how to buy everything from gold coins to his favorite gold stock today.
Click here for more details on how to access the first module from us right now.
As we've been saying in recent days, our team has designed this Financial Survival Program specifically for this moment. And while Doc's first lesson is terrific on its own, it's just the start of the program...
Over the next six weeks, our team will publish another new module every Friday.
Overall, you'll receive seven information-packed modules that will arm you with fresh, actionable ideas to protect and grow your portfolio in the months and years ahead. And it all comes at a very reasonable price.
A Contrarian View on 'Peak Inflation'
Puru Saxena, a retired money manager based in Hong Kong and noted contrarian investor, tells our editor-at-large Daniela Cambone that "peak inflation" hasn't arrived yet – but will later in 2022... and that will cause the Fed to stop its rate hike plans...
Click here to watch this video right now. For more free video content, subscribe to our Stansberry Research YouTube channel... and don't forget to follow us on Facebook, Instagram, LinkedIn, and Twitter.
New 52-week highs (as of 4/11/22): Black Stone Minerals (BSM), Cameco (CCJ), General Mills (GIS), Hershey (HSY), Altria (MO), Mosaic (MOS), Rayonier (RYN), and Wheaton Precious Metals (WPM).
In today's mailbag, we received a "seconded" on a note from yesterday. Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.
"I [Stansberry Alliance member James E.] just want to say DITTO to Gene N. who wrote:
Once again Stansberry has 'backed up' their word to make the 'Alliance Membership' the BEST investment I have ever made, not just financially but in financial education.
I am a BETTER person because of my Alliance Membership, and I continue to be thankful for your commitment to 'EXCELLENCE'! Keep up the good work!"
All the best,
Corey McLaughlin
Baltimore, Maryland
April 12, 2022