You're Being Robbed So Slowly You Don't Notice

Imagine getting shot.

You go to the hospital, bleeding out, and the surgeon says this:

"Welp. The rate at which you're bleeding appears to be slowing, which confirms my suspicion that this wound is likely transitory."

That's basically what's been going on with inflation for the past year and half.

Americans are hemorrhaging value. Their spending power is being rapidly diluted.

And the Fed and the chattering class of journalists that carry its water are still telling you it's not a problem.

Even though we can all see that it is.

Consumer prices rose another 5.4% in July, the same pace as in June and the highest 12-month rate since 2008, the Labor Department reported Wednesday.

And yet the same voices that denied inflation's mere existence just months ago looked at this and took a victory lap - loudly proclaiming that inflation is finally starting to "wane," to "moderate," and to "cool."

What a relief! Jerome Powell was right all along. Everything is fine!

Just look: Used car prices only rose 0.2% month-over-month, and airline fares fell 0.1% (coincidentally around the same time that panic around the Delta variant took off).

Nevermind that grocery prices climbed 0.7%, led by pork roasts and ribs soaring 4.4%, and prepared salads rising 4.1%.

Restaurant prices surged 0.8% in July, the biggest monthly increase since February 1981, and another notch higher than the 0.7% increase in June and the 0.6% gain in May.

Gasoline prices jumped another 2.4%.

Meanwhile the cost of things that aren't even included in the CPI - important things like rent and housing - are positively on fire.

Rents for one-bedroom apartments are up 7% year-over-year and they're up 8.7% for two-bedroom apartments. This after posting respective gains of 5% and 6.5% in June. And rent for single-family rental homes is up 6.6%.

It's no secret where this demand is coming from. Prospective homebuyers are being priced out of the market. Now, they're settling for rent hoping to wait out the market.

They may be waiting a long time.

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The median price for an existing home in June hit an all-time high of $363,300, up 23% over last year, marking 112 straight months of year-over-year gains.

Don't worry though. As with inflation, "experts" continue to assert that these price increases will "moderate."

Of course, that doesn't mean they'll actually go back down.

Think of these price increases like a fever. The thermometer right now says 102, and we've got people out there celebrating because that's slightly lower than 103.

As with the bullet wound, Jerome Powell is sitting bedside telling everyone things will get better on their own.

But there's no telling how long that might take, or if it's even true at all.

And in the meantime, we're the ones suffering.

Indeed, despite everything you've been told about rising wages, the reality is that inflation is outpacing wage growth.

Average hourly earnings of private-sector workers, adjusted for inflation, fell 0.1% in July from June on a seasonally adjusted basis.

In fact, even as compensation rose at a 2.8% annual rate in the second quarter, prices rose faster - leaving inflation-adjusted compensation lower than it was in December 2019.

We're going backwards.

We're legitimately being robbed. It's just tough to notice because it's happening so slowly.

It's like taking $100 a day from a millionaire. They may not notice, but at the end of the year you're talking about $36,000.

It's still stealing, and it adds up.

Economists surveyed by The Wall Street Journal estimated on average that annual inflation will slow to 4.1% in December.

Okay, let's say it does. That may be better than 5.4% in July, but it's still bad, especially when compared to 1.4% in 2020 and 1.8% in 2019.

That's why I spend so much time talking about inflation and ways to guard against it.

Ways to profit from it even.

Investors have to take precautions.

Fight on,

Jason SimpkinsEditor, Wall Street's Proving Ground

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