Chief Investment Strategist, The Freeport Society
It might not sound like much, but it was worse than expected. Now, it’s not all that certain the Fed’s rate hikes have inflation under control after all.
December inflation rose 0.3% over November and 3.4% over the previous December.
As a reader of The Freeport Navigator, you won’t be at all surprised to see what’s driving the inflation. It’s services. As you can see in the chart, services inflation is still clocking in at 5.3% rate.
Meanwhile, inflation in most tangible “stuff” is low and getting lower.
Inflation in food at home was just 1.3%, and inflation in clothing and apparel was just 1%. We even had deflation in some items. Prices fell 4.3% in furniture and bedding and 4% in appliances.
I wrote about this back in December in “The Inflation the Fed Can’t Fix.” The problem with services isn’t monetary. It’s demographic. As I wrote last month…
The biggest cost in the service industry is the workforce. When workers are in short supply, you must pay them more to get or keep them… which means you must raise your prices to maintain profitability.
The size of the American working-age population has been flat since about 2016, as Millennials and Gen Z entering the workforce have just barely replaced Baby Boomers aging out.
But it’s also not just a matter of body count. The Boomers leaving are experienced and highly productive, whereas the fresh blood coming into the workforce is still learning on the job.
Fed Chair Jerome Powell can tinker with interest rates to reduce demand. But he can’t wave his magic wand and make new workers materialize out of the ether.
The Fed can’t fix this problem, but there is someone who can…
Coming to Our Rescue
The private sector is already working on fixing the problem Jerome Powell and his posse can’t. This is what the big fuss over artificial intelligence (AI) was about last year and the reason why I’m wildly bullish on the companies in the robotics and automation space.
Technology can and will replace human labor. It’s been doing so since the dawn of the Industrial Revolution.
But it takes time… so don’t expect to see services inflation drop to a tolerable rate any time soon.
Still, as we wait, we can grab the investment opportunities that present themselves. We already have three companies in our Freeport Investor model portfolio that I believe are perfectly positioned to help us profit from robotics, automation, AI… exponential progress. Watch this special presentation from our friend Louis Navellier to find out why you can’t afford to miss these opportunities, and how to gain access to our full portfolio of recommendations.
We can also roll our eyes at the spineless group of presidential hopefuls making promises they have no intention or ability to keep.
What Did They Say… and What Does it Mean?
Wednesday night, Florida Governor Ron DeSantis and former UN Ambassador and South Carolina Governor Nikki Haley squared off for a debate in Iowa, the last one before that state’s primary caucus on Monday.
Given former President Donald Trump’s myriad legal issues, there’s a decent chance one of these two gets the Republican nomination. And given President Joe Biden’s abysmal approval ratings, there’s also a good chance that one of the two will be the next president of the United States.
There is, of course, still the shadow candidate who will only reveal themselves on August 19. Louis Navellier explains who we believe this to be in this special presentation.
Both Haley’s and DeSantis’ comments on China were disturbing.
The U.S. and China have been “frenemies” for the past two decades. We’ve depended on each other economically, but it’s been a loveless marriage. Relations took a hard break during the Trump years, and then the COVID pandemic incentivized much of Corporate America to reconsider the wisdom of any dependence on China.
One of the more interesting aspects of Biden’s presidency is that he made no effort to reverse Trump’s China decoupling policies. If anything, Biden pushed them further via his Inflation Reduction Act. It didn’t do much to reduce inflation, but it did jumpstart America’s reshoring efforts.
During Wednesday’s Comedy Hour… er… debate… Haley and DeSantis were tripping over each other to sound the toughest on China.
Separate Fiction From Reality
Haley wants to “end all normal trade relations” with China and criticized Trump for being too soft on them. DeSantis essentially said the same thing, promising he would “decouple” the United States from China.
Some of this is campaign talk. Take it with a pinch of salt. Taking trade with China to zero is impossible and in no one’s best interest.
But the trend here is clear: The rift between China and the U.S. isn’t healing. It’s widening.
This is part of the broader trend of deglobalization, which is one we follow closely here at The Freeport Society. It adds momentum to the economic and societal metamorphosis underway in this Age of Chaos.
With chaos comes opportunity. We’re here to help you identify those opportunities so you can thrive financially and in all other ways.
Haley and DeSantis also addressed the elephant in the room: The $34 trillion national debt.
To be fair, they didn’t do what politicians usually do and blame the other party. Both acknowledged the last Republican administration allowed debt to spiral out of control as well.
Regardless, it’s cute that they think they’ll contain it.
We’re already paying over a trillion dollars a year in interest alone on existing debts. Even if we were to balance the budget tomorrow, the interest payments would still increase due to the debts being rolled over at higher interest rates.
Our leaders have been so incompetent over the past decade that not only did they spend us all into poverty, but they also didn’t have the good sense to at least refinance the debt at 1% for 30 years when they had the opportunity.
Now, all we can do is strive to maintain our independence, reject the decline into a 1984 dystopia, seek out the truth, and find like-minded people to navigate this Age of Chaos. That’s us – The Freeport Society – and we’ve got your back.
To life, liberty, and the pursuit of wealth.