The guest commentary below was written by written by Mitchel Krause. This piece does not necessarily reflect the opinions of Hedgeye.
“The war on inflation is over. We won, at very little cost.” – Economist Paul Krugman
He attached those words to the below chart showing … “CPI EX - FOOD, ENERGY, SHELTER and USED CARS.”
Please, take a brief moment and think about that statement. The mouthpiece economist for the “elites” of our society just wanted the plebians to know that the brilliant world of academia and their steadfast policy stance, which can only be attributed to a superior intellect, have slayed the beast that is inflation … “VICTORY IS OURS,” they trumpet … “at very little cost,” no less!
So long as you exclude most everything Americans need DAILY TO LIVE!
Best not worry, the prices for live cattle (up nearly 20% Y/Y), feeder cattle (up 33%) and sugar (up 50%) will have no bearing on your food costs, nor would the price increase of orange juice (up 86% Y/Y), cocoa (up 59%) or rubber (up 18%) impact daily living in any way shape or form. Moreover, I can’t think of anyone whose day-to-day activities could be hampered by the 36% increase in oil from July (palm meet forehead)!
Fear not, I’m certain I glossed over a footnote in Krugman’s analysis where he assures us that we can, in fact EAT his CPI data exclusions; his numbers are equally as nutritious as that steak one would love to put on their dinner plates this evening but can’t. I’m sorry I’m not sorry if you sense a little more snark and sarcasm within today’s note … though, our society is riddled with smug “experts” who are constantly wrong yet remain in the spotlight, most frequently misleading, misrepresenting or outright lying to the American people.
While some humans may choose to eat bugs, the vast majority of Americans would prefer a steak, they drink orange juice, bake with sugar, or make chocolate milk or chocolate chip cookies. They also fill their cars with gas to travel to work and many chauffer their kids around from activity to activity on rubber tires that need to be replaced after a certain number of miles driven.
So, while energy (being one of the larger CPI inputs) has been marching higher since July (as can be seen through the lens of oil, diesel fuel and natural gas, to name a few) … they’re not the only commodities to do so.
Look, we’re well aware that inflation, by measure of CPI has fallen; with the help of Hedgeye, we’ve literally mapped out both the acceleration and deceleration in inflation (well before it’s happened, as can be read in our previous notes dating back years now), while Wall Street, Federal Reserve officials and linear econs like Krugman screamed “no inflation” only to flip to the infamous “transitory” when their “no inflation” narrative was too massively wrong to ignore; they then completely missed the deceleration by months, raising rates are the worst possible time.
The only thing they’ve been consistent with is being unapologetically bullish last year as the majority of investors got crushed … as well as being wrong with everything from the directionality of the data to earnings growth estimates which continue to be too high, to the strength of the consumer, and on!
We’ve done our best to educate readers that markets are NOT linear, they aren’t about the “average of things,” they are discounting mechanisms, measuring and mapping the rate of change accelerations and decelerations in all global economic data.
Click here to read Mitchel's note in its entirety on the Other Side Asset Management website.
This is a Hedgeye guest contributor piece written by Mitchel Krause and reposted from his most recent monthly report. Krause is an industry veteran of nearly 28 years, where he’s seen the industry from the inside out. Nearly a decade of private wealth service, followed by just under seven years with an institutional group focused on banks and thrift stocks. He’s been managing discretionary money since 2015. His career began at, Ryan, Beck & Company in 1996, a boutique firm specializing in financials and municipal bonds, which was later bought by Stifel Financial Corp in 2007. He opened the doors to Other Side Asset Management in 2018 in an effort to tell the “other side” of the investing story to those willing to listen. He continues to manage discretionary assets while publishing these notes monthly. His archives are open to the public. Currently, he both works and resides in Raleigh, North Carolina.
Twitter handle: @OtherSide_AM
LinkedIn: Mitchel Krause