Our inboxes routinely get inundated with emails from subscribers who agree with us or disagree with us. It is human nature to react to either support your thesis, or to counteract a point that is contrary to your thesis. Inflation is probably the most debated topic at the moment.
Is it just easy comps?
CPI and PPI are still low on a relative basis, no?
Commodities are signaling serious inflation.
What about low wages, they are indicating deflation?
Both the inflation bulls and the inflation bears can point to great arguments on both sides of the argument; we try our best to point to facts. As the facts change, so shall we.
But, as the chart below highlights, in many important categories, we are seeing real inflation. Food input prices are up meaningfully year-to-date, and are in inflationary mode.
Remember, food and gasoline combine to almost 20% of the average consumer’s annual spending. Even if the government tells you differently, when those prices go up, it is inflationary.
As it relates to specific equities, though, as our Restaurant Guru Howard Penney recently said to me, “Energy and food costs are accelerating and restaurant valuations are at near all time highs . . .something is not sustainable.” Indeed.
Daryl G. Jones