Here are the latest news items and commentary on current economics news, market trends, stocks, investing opportunities, and the precious metals markets. We also cover hedges, derivatives, and obscura. Most of these items are from the “tangibles heavy” contrarian perspective of SurvivalBlog’s Founder and Senior Editor, JWR. Today, an examination of how inflation is changing the lives of Americans, and how people are coping and hedging. Here is a roundup of articles on inflation published in 2022, with a brief fair-use excerpt from each:
“Last year, goods inflation was incredibly high, services inflation was surprisingly low, and the net effect was high inflation. So there was a story that was told that as the pandemic’s behavioral impact eases, as people shift back from goods to services, as people return to the labor force, as things normalize, inflation will go away. Well, all of those things are basically happening, sort of roughly according to plan. Goods inflation is falling, but now service inflation is picking up. So the fact that we’re seeing the normalization, and core inflation, which was running at 7 percent last year and is running at six and half percent now over the last three months, has barely changed, I think should make us very nervous.”
At Investopedia: Timeless Ways to Protect Yourself From Inflation.
“Inflation is often referred to as the “worst tax” because its effects go unnoticed by most people. Hypothetically, earning 4% in a savings account while inflation grows at 7% makes many feel 4% richer. In fact, they are 3% poorer.
That’s why it’s important for households and investors alike to understand the causes and effects of inflation, and how to plan so as to ensure that their assets maintain their purchasing power.”
From The Economic Times (of India): 10 Strategies for Combating Inflation.
“Sale is a small word that can be a big opportunity for the careful spender. Many hypermarkets offer heavy discounts on different items almost throughout the year. While you cannot buy too much of foodstuff, you can stock up on non-perishables when there is a sale. Paper towels, soaps, detergents and many such items can be easily stored for months.”
From the leftist NPR: Inflation soars to an over 40-year high. These are the ways Americans are coping.
“The Labor Department said Friday that consumer prices in May were 8.6% higher than a year ago — the largest increase since December of 1981. Prices rose 1% between April and May, led by jumps in the price of gasoline, groceries and rent.
Shoppers who swallowed price increases for much of the pandemic without batting an eye are starting to blink now that gasoline prices have topped $5 a gallon in much of the country and grocery prices continue to climb at a rapid rate.”
“Avoiding the effects of inflation might be impossible, but it’s important to know where it’s having the largest impact, so you know what categories of spending you may want to scale back on. While you might be feeling the squeeze when it comes to buying everything, inflation hasn’t impacted all categories of goods and services equally.
Gasoline and cars (both new and used) have seen dramatic price increases. From November 2020 to November 2021, the average price of gasoline increased nearly 60%. In the same time period, prices for used cars increased more than 30% while the cost of a new vehicle rose by 11%. So if you’re looking to purchase a car, you might want to hold off on buying one if you can.”
“The so-called “forward-buying” that characterizes the wage-price spiral is seen mostly in items that can be stockpiled, such as certain kinds of food items. But just how much do consumers accelerate their purchasing during inflationary periods?”
“Gold is another tangible asset and an alternative investment that acts as an excellent inflation hedge because as inflation rises, the price of gold does too.
This means if the dollar loses value because of inflation, gold is likely to become more expensive.
Investors view gold as a store of value during tough economic times, and many consider it an alternative currency.”
From the CNBC Perpetual Cheering Section: Here’s where experts recommend you should put your money during an inflation surge.
“TIPS stands for Treasury Inflation-Protected Securities. While the term may seem like a mouthful, TIPS are actually quite simple to understand.
TIPS are government bonds that mirror the rise and fall of inflation. So, when inflation goes up, the interest rate paid does, too. And when deflation occurs, interest rates fall.”
“All these scenarios are consistent with the data available at the end of 2021, and any of them could begin with CPI reports continuing to show high inflation into early 2022—even higher than we see today. The interplay between the evolving pandemic, the varied responses of Central Banks around the world and their near-term impacts, the evolution of public perception, and the possibility of other, yet-unknown shocks, makes it far too soon to presume the most likely course for inflation in 12, 24, or 36 months.”
Some McKinsey & Company advice for business executives: How to mitigate the effects of inflation.
“Immediate commercial opportunities to mitigate volatility typically include maximizing spend on existing contracts whose prices aren’t indexed for inflation and requesting clawbacks on unindexed contracts that covered periods when commodity prices fell. Digital and analytics solutions can enhance cleansheet analysis to uncover how much purchases should cost for large parts of company spending, which lets managers quantify the extent to which inflationary pressure should affect supplier prices. To improve future resilience, supplier collaboration can drive joint efficiencies and potentially help the organization look beyond price and at changes to quality or specifications or at finding ways to use less. Finally, companies can consider ramping up collaboration between pricing and procurement teams to weigh inflation’s possible effects on the prices the company charges its own customers.”
“A few quick tips for cutting costs without using scissors:
- Switching to more store brands is one of the easiest ways I save money. For example, I’ve replaced Nabisco Wheat Thins with Aldi’s Thin Wheat crackers and save around 75% on a box.
- Buying in bulk: I load up the cart at wholesale clubs Costco, Sam’s Club and BJ’s Wholesale so I can shop less often and lock in today’s prices to save myself upcoming price increases. I also save on gas and buy rotisserie chicken, which is one of the only things not hit by inflation.
- Monitor weekly sales: For my grocery store runs, I look at the store circulars (usually digitally) to figure out where I’ll shop.
- Clip digital coupons: Most grocery store chains — think Publix and Kroger — have digital coupons and I check the apps and websites to clip them before shopping.”
At InvestorJunkie: Inflation-Proof Investments: 8 Ways to Protect Your Portfolio in 2022.
“Inflation Is Usually Kind to Real Estate. Over the long term, real estate is also usually an excellent investment response to inflation. Real estate is actually the ultimate hard asset and often sees its greatest price appreciation during periods of high inflation. This is especially true because, as rents rise, people become increasingly interested in owning as a way of getting the tax benefits that help offset the general level of inflation.”
Over at the Mary’s Nest blog: Five Steps to Inflation Proof Your Prepper Pantry.
“If you haven’t heard of a Prepper Pantry before, this term refers to the part of your pantry where you store your backup supplies. This area is also referred to as an Extended Pantry. Your Extended or Prepper Pantry is part of what is known as the Four Corners Pantry, which includes your:
- Working Pantry (what you access every day)
- Extended Pantry or Prepper Pantry
You can use your Prepper Pantry to restock your Working Pantry and as a fallback for supplies in an emergency. The backup supplies you can buy on sale or in bulk and store in your Prepper Pantry will help you stay ahead of inflation as food prices start to rise.”
“We suggest starting by planning your meals (breakfast, lunch and dinner) and snacks for the week to reduce food waste. During this process, make sure to plan two or more plant-based meals. As you saw above, plant proteins are typically less expensive than animal proteins making them a great addition or substitute to meals. Utilize the List of Inexpensive and Nutritious Foods above and choose in-season foods while planning your meals to help reduce the costs. Additionally, consider items that can be used in multiple meals e.g. kale in your smoothie and in your soup, or chicken in your salad and in your whole grain sandwiches. This will avoid waste and feeling like you are eating the same thing again and again because you bought a larger amount to save.”
And at Joyful Thriving: How to Prepare for Inflation on Groceries in 2022.
“There are a couple simple ways to prepare for inflation with food prices. I think it is wise to prepare now and start buying things before you need them. This is what I have been focused on lately. In simplest terms, that is what a stockpile is.
Say that toilet paper goes up by 15% this year. That means that package of toilet paper you pay $10 for every month will soon cost $11.50. That works out to an extra $18 a year, just to buy the same toilet paper you were already buying. Multiple that scenario by multiple items increasing in price and you will quickly feel the impact on your budget.
If inflation doesn’t happen? Then, you will still be prepared and won’t have to buy some of these items for some time. You won’t be out anything because costs aren’t going to go down. They just not might increase at the higher rates some are predicting. If the hyperinflation predictions are true, then you will have saved your family money by buying things ahead of time, as we wait for the inflation to settle into more typical levels.”
A Closing Note From JWR: Please take the time to read (or re-read) a book by the late John Pugsley that dates back to America’s last major round of inflation. It is titled The Alpha Strategy. It was a best-seller, so used copies are widely available quite inexpensively through eBay and various used book dealers.