Morning Note: Inflation’s Here — And — Beware the Uber-Confident Expert

Like I keep saying, the hot debate (in my geeky world) is whether the inflation that we’re seeing (vs what’s showing up [or not showing up] in CPI) is cyclical (short-term) or structural (long-term).

Presently, for reasons I’ve expressed herein, my view is that there’s serious risk that this time we’re talking structural.

Coca Cola announced earlier this week that it’s raising prices, as did Kimberly Clark recently, as are the majority of the respondents in the business surveys we’ve highlighted herein.

So, what shouldn’t be open for debate, unless you actually believe the CPI read, as opposed to what price-creators and your grocery bills are telling you, is that well-above-average inflation — be it merely cyclical or seriously structural — has arrived.

Oh, and Proctor and Gamble is another. Here’s from yesterday’s earnings call (h/t Peter Boockvar): emphasis mine…

“Commodities are now forecast to be a headwind of approximately $125mm after tax. This is a $400mm swing to the negative since our initial guidance for the year with much of this impact affecting our fiscal fourth quarter….The commodity cost challenges we face this year will, obviously, be larger next fiscal year. We will offset a portion of this impact with price increases…The exact timing and amount of increases vary by brand and sub-brand in the range of mid to high single digits…We are analyzing raw material and FX impacts on other categories and markets, and we are assessing the need for additional pricing moves.”

“The commodity cost challenge we face this year will, obviously, be larger next fiscal year” of course speaks to our bullish commodities positioning going forward… 


Asian equities continue to struggle this week, with all but 2 of the 16 markets we track closing lower overnight.

Europe, on the other hand, is rebounding this morning, with all but 2 of the 19 bourses we follow trading higher, as I type.

U.S. major averages are looking better as well: Dow up 143 points (0.42%), SP500 up 0.49%, SP500 Equal Weight up 0.72%, Nasdaq 100 up 0.35%, Nasdaq Comp up 0.55%, Russell 2000 up 1.12%.

The VIX (SP500 implied volatility) is down 4.28%. VXN (Nasdaq 100 i.v.) is down 4.64%.

Oil futures are down 1.32%, gold’s up 0.83%, silver’s up 2.34%, copper futures are up 1.47% and the ag complex is up 0.23%.

The 10-year treasury is down (yield up) and the dollar is down 0.14%.

Led by MP (rare earth miner), silver, uranium miners, metals miners and ALB (lithium miner) — while being dragged by utility stocks, oil services stocks, Verizon and India — our core mix is up 0.56% to start the day.


As I suspect you’ve noticed, there’s no undersupply of experts these days. Whether we’re talking stocks, inflation, cryptocurrencies, yada yada… 

Per economist/psychologist Daniel Kahneman, quoted in Tetlock and Gardner’s book Superforecasting, beware the outspoken uber-confident expert:

“…declarations of high confidence mainly tell you that an individual has constructed a coherent story in his mind, not necessarily that the story is true.”


Have a great day!
Marty

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