Biden’s Revenge

If there’s one word to describe why Kamala Harris lost to Donald Trump, it’s inflation. 

Yes, distaste for California wokeness and Diversity, Equity, and Inclusion (DEI) initiatives played a part. 

And plenty of voters had issues that Trump championed, such as better crypto regulation. 

But none of that was enough to really move the needle. 

Let’s be clear… 

It was inflation that handed Trump his second term in office.

One exit poll after another tells a similar story: Americans are furious that their grocery bills have climbed nearly 30% over the past five years… and that a Chipotle burrito and a Coke now costs close to $15.

Voters blamed President Joe Biden for this mess… and by extension Vice President Harris. 

Unfortunately, this story doesn’t end with the changing of the guard.

In fact, we’re about to witness Biden’s Revenge. Trump is about to discover just how hard inflation is to kill… and how long its effects linger. 

“Core” Inflation Is Stubbornly High

This has nothing to do with Trump’s proposed tariffs. 

The conservative Peterson Institute think tank calculated that Trump’s proposed tariffs would add an extra 4% to 7% on top of the current inflation rate. 

But Trump hasn’t implemented those tariffs yet. It’s unclear to what extent he will even do so.

The thing is, even without the tariffs, inflation is going to be sticky. 

Consider the Fed’s preferred inflation measure – the Personal Consumption Expenditures (PCE) Price Index. 

It measures the average change in prices that households pay for goods and services, including healthcare. And it captures a broader scope of spending than the better-known Consumer Price Index (CPI).

This morning, the Bureau of Economic Analysis released the figures for the October PCE… 

Headline inflation came in at 2.3%. That sounds almost tolerable. But “core” inflation, which excludes more volatile food and energy prices, came in at 2.8%… higher than the 2.7% seen in September. 

That’s about one-third higher than the Fed’s target of 2%. 

It’s been stuck there since May.

And therein lies the danger for the new Trump administration.

Bigger Than Politics

Consider the following piece of cold, hard math… 

The U.S. working-age population hasn’t budged in about 10 years. Gen Z workers are just barely replacing the Baby Boomers who are retiring out of the workforce. 

Even this doesn’t tell you the full story because it’s not just a matter of body count. 

The outgoing Boomers are experienced and highly productive. The incoming fresh blood is still learning on the job.

A growing economy needs a growing workforce. But thanks to a shrinking birth rate, the new workers the economy needs weren’t born. So, we face a labor shortage with no practical solution. 

A president can’t snap his fingers and make millions of new, fully trained workers appear out of the ether.

This is why inflation in services – which tend to be labor intensive – is still running at an annual rate of about 5%. 

This ties into another hard-to-kill inflation driver – rising housing costs. 

Inflation in housing is also running at about 5%. This is because of a lack of supply, which is partly driven by the lack of affordable labor. 

You may be able to use an AI chatbot to replace a paralegal or a customer service representative. But ChatGPT can’t frame a house or nail sheetrock to the studs. 

But that’s not all…

Bye-Bye, Globalization

Trump’s proposed tariffs are garnering a lot of headlines 

And I get it… 

“200% Tariffs on Imported Cars From Mexico” makes for a clickable headline. 

But even without the tariffs, globalization is dead. And China – the great engine of globalization – is dying. 

Literally… 

China’s population began falling in 2022. The most recent estimates from the United Nations show the country’s population shrinking by 109 million by 2050. That’s roughly the populations of Germany, Belgium, and Sweden – combined.

And not only is the country’s population shrinking. It’s also aging. Already, about 2 in every 10 Chinese citizens are 60 or older. In about 10 years, it will be 1 in 3. 

Even in a world where China and the U.S. weren’t at each other’s throats, globalization would be falling apart. 

Globalization depended on China using its vast pool of cheap labor to export goods at rock-bottom prices. That doesn’t work anymore. China’s labor pool shrinks by the day. And it’s no longer cheap. 

Deglobalization, and the rebuilding of America’s industrial base in response to this megatrend, is a major investment theme here at The Freeport Society. 

It’s also a major contributor to sticky inflation. 

All those cheap Chinese goods that kept prices low are going away.

That’s not to say that Trump isn’t taking steps to tackle inflation.

Last Laugh

To much fanfare, the president-e lect has appointed Elon Musk and Vivek Ramaswamy to head an unofficial “Department of Government Efficiency” (DOGE).

The idea is to cut government to the bone and get rid of waste, much like Musk did at Twitter.

As believers in small government, that’s music to our ears here at The Freeport Society.

But DOGE isn’t a government department. It’s a think tank run by two smart tech bros. And it remains to be seen if it will have any real power. 

I’m betting DOGE comes up with some solid ideas. 

But I’ll eat my hat if Congress waves them through and allows Musk and Ramaswamy to implement them. 

Here’s where Biden gets the last laugh. 

In just four years, Biden presided over one of the biggest expansions of government spending in U.S. history. The national debt increased by $4.3 trillion in his first three and a half years in office. 

Reasonable people might agree that a lot of that money was wasted. But good luck cutting it out of future budgets. 

That dollar you and I consider waste looks critically important to whoever received it… and to the congressman who wedged it into an appropriations bill. 

Our budget deficit is now more than 6% of annual GDP. Budget deficits contribute to inflation by increasing the amount of money in the economy.

And good luck making a meaningful dent in Washington’s spending. 

The only way our $36 trillion debt gets serviced, let alone meaningfully cut, is in depreciated dollars. 

Inflation will be with us longer than Trump will. 

Protecting against dollar debasement is one of our key missions here. It’s why our paid-up The Freeport Investor members hold permanent positions in gold and Bitcoin. These “anti-dollars” are designed to preserve our wealth. 

Another of our missions is to help you incorporate a diversified array of investing and trading strategies into your wealth building arsenal. 

One such example is our Freeport Alpha trading service, where we follow the smart money using our algorithm-based MoneyFlow Indicator.

Another example is our Freeport Society friend and master trader Jonathan Rose’s new strategy that uses zero-day options. 

Yesterday, Jonathan hosted a free trading session to show viewers why adding these kinds of trades are so important… how to do them… how to trade them profitably… and how to trade them safely.

He recorded this session, and has kindly agreed to let me share it with you. I urge you to watch and learn here.

As you sit around the Thanksgiving table tomorrow, don’t grumble about how absurdly expensive the grocery bill was. Instead, add a little inflation protection to your portfolio via gold and Bitcoin. 

And add a little oomph by learning how to trade zero-day options.

Have a wonderful Thanksgiving with the ones you hold dear. 

To life, liberty, and the pursuit of wealth.