Anecdotal evidence is not irrelevant. If your own experiences are telling you something different than what others are saying, then you probably shouldn’t listen to what the others are saying.
In 2020, the television news was running a ticker on the screen of COVID deaths. We had lockdowns and mass hysteria. Yet, by the end of 2020, I didn’t personally know a single person who had died of (or with) COVID. That’s not to say that people weren’t dying at all. But based on my own experience, it was obviously not the horrible and deadly “pandemic” that was being claimed.
It doesn’t mean that things might not get really bad in the future. It doesn’t mean that some people won’t die of the latest virus. It’s just that the reality on the ground for me wasn’t matching the disproportionate hysteria.
The same thing goes for climate change. I have no idea what the climate will do in the future, and I don’t think anybody knows. But what the climate hysterics are saying is not lining up with reality. Beachfront property is extremely expensive, and sometimes the rich climate hysterics themselves are buying it. If the oceans are rising and are going to put a lot of land underwater, then why would anyone want to own real estate at or near the beach?
Sometimes observing the world around you can give you a better reality than what you are hearing from the so-called experts or hearing on the news.
A Trip to the Grocery Store
And so it is with prices. I recently went to the grocery store. I sometimes get a specific kind of organic peanut butter. A few years ago, it was about $3.99. It went above $4, but was still well under $5 for most of 2023. In my latest trip, it was $6.89. I don’t know the exact percentage, but it went up something like 50% from my last visit where I bought it, which was maybe three weeks before.
Maybe there’s a shortage of peanut butter. I really don’t know. I also noticed that jugs of bottled water had gone up a lot. It was 86 cents probably about a year ago. Now it is over $1.20. Something like 40 cents doesn’t sound like a big deal until you figure out the percentage. The price of the water has gone up nearly 50% in around a year.
This is ridiculous. To be sure, some prices haven’t gone up much in the last year. But I don’t know of anything that’s gone down except during sales or fruit when it is in season.
There is one thing I do know just from my own personal experience. Price inflation at the grocery store is not around 3% per annum these days. It is higher. Most people I speak to agree.
The Latest Numbers
The latest CPI report was released showing the data for December 2023. The CPI was up 0.3% for the month. The year-over-year CPI now stands at 3.4%. This was a little higher than expected.
The median CPI was up 0.4% for the month. The year-over-year median CPI is now 5.1%.
I have long said that I don’t think the CPI numbers are useless. I think they may be understated a bit. Of course, it is impossible to measure it perfectly because different people buy different things in different amounts. Quality and quantities change as well.
Still, I think the CPI is useful in looking at the trend. The trend for 2023 had generally shown the rate of price inflation decelerating.
Despite the wording of some people, prices haven’t gone down at all. The rate of price inflation has gone down. But now, even that has stopped going down. The CPI has now ticked upwards.
This doesn’t surprise me based on my own experiences. It seems like almost everything just continues to get more expensive.
What Will the Fed Do?
Investors have shown great optimism because they saw a soft landing and a Fed that would begin lowering rates in 2024. I don’t think the Fed is going to hike rates in 2024 unless the CPI really jumps higher. But this latest reading could delay rate cuts by the Fed.
The markets haven’t seemed too bothered by the latest numbers, but who can figure the logic or illogic of moves in the stock market these days?
I think some people in the financial press got ahead of themselves and had already called the inflation threat as over. Well, apparently the fat lady hasn’t sung yet.
This just puts the Fed in a harder position, especially if and when some kind of financial crisis/ recession hits. If price inflation is still running high, it makes it harder for them to lower rates and create money like crazy.
It will be interesting to see the report that comes out in February for the January 2024 numbers. Maybe this past month was just a blip. But if the CPI numbers come in even higher for January, then the Fed is really going to have a tough situation to deal with.
I don’t know when this market is going to blow, but I don’t want to be participating in it when it does.