원문 보기
Well, we finally got it. We received the headline news that inflation last month was 8.3%. Here is the result. Whether this is good or bad is a debatable question. It was quite ambiguous. This is not the best report. Of course, it could have been better, but it could have been worse. Last night I went to bed hoping that inflation would n't reach 9% or higher.
And not just because of my portfolio. I mean, every technology portfolio is suffering right now, but more so because of the overall economy. Inflation is terrible for almost every sector of the economy. The Fed needs to get this under control. So, there is both good and bad in this report. The figure of 8.3% was lower than last month.
This is good news. In fact, it was a lower number in the first 8 months compared to the previous month. So it went down a little bit. This is a positive, " glass half full" view. The bad news is that the result is higher than expected, and there is reason to believe that inflation will rise again. So let's look at more negative points.
We have the Wall Street Journal, and they point out that inflation is still very high. 8.3%—that's an incredible amount, and there are signs that the pressure will continue to grow. So, what is it ? What are these signs? They note that the Labor Department's consumer price index last month showed an annual rate of 8.5%.
Again, less than last month but higher than forecasts, they say the decline was mainly due to a small decrease in gasoline prices in April. So what helped with this report was that gasoline prices actually went down a little bit in April. This significantly reduced inflation. But if you've stopped at a gas station recently, any day this month, gas prices are back to historic highs.
I was filling up one of my cars and it cost $70 at Costco. It was about $4.50— probably the highest price I've ever paid for gas in my life. So, gasoline prices are at peak levels again. And if we look at next month, that means we could see record inflation again. This is the main problem. There are also more disturbing moments.
They say that prices for groceries, eating out, air travel and other services have increased. So, now the 40% price increase applies not only to buying houses or used cars. Now this has spread to all service areas. Inflation has already spread to the services sector, where it is more difficult to contain and harder to get rid of.
Prices in grocery stores have increased significantly. When I buy groceries for my family, I pay a lot more than I used to. Eating out also costs much more. I keep an eye on different restaurants. I own shares in several different restaurant companies . I own shares of Starbucks, Domino's, and Texas Roadhouse.
I was reading Texas Roadhouse's earnings report recently and they raised their prices by 3%. It wasn't a significant increase, they are focusing on affordability. They try to keep prices low, but they have to deal with inflation like everyone else. Beef prices have increased. Texas Roadhouse is forced to raise its prices a bit.
And most other restaurants raise prices even more. They say restaurant prices rose 0.9%—the biggest jump since October. This happened in just one month . Almost a whole percent. But here's the most disturbing part of this report. They say that inflation is no longer limited to the supply chain. So all the talk about the main cause of inflation being a shortage of goods, right?
China, logistics, and supplies to the US are no longer the main problem. It has now taken root in many different sectors of the economy. That is the main concern . It also notes that the Fed will have to do much more to get us back to 2% inflation. And, of course, that's true. We are very far from the 2% target.
The 8.3% figure is a slight improvement over the previous month. I think the Fed will view this positively. But the Fed also wants to raise interest rates without throwing us into a recession. This is exactly what they are trying to achieve. So, overcoming inflation is not their only goal. They also don't want to trigger a serious recession.
If I had to guess, given the distance to the target and the rates they can choose, I would assume another half a percentage point—a 50 basis point increase . They can raise them by 75 basis points. I don't think they will go up 100 basis points, that is, a whole percentage. If I were to guess, it would be another half percent increase.
By the way, another interesting point: consumers do not seem to feel pressure due to rising costs. For example, they say, and I quote: " We are still at a stage where consumer and business resistance to higher prices has significantly diminished, because no one is sure that by waiting they will find the better prices they expect in the future." So, this gives businesses more pricing power, but it's likely a temporary phenomenon.
This is another way of saying that consumers are now paying full price. They lay out the cash. They go and do what they want. They pay higher prices for products because they need them. They pay higher prices for gasoline because they need it. But they also go on vacation, paying 20-30% more for airline tickets.
It's not something they necessarily need, but they do it anyway. And consumers have a lot of spending power right now, but I agree that this will be a temporary phenomenon. I think this won't last long. I have already seen many, in my opinion, quite disturbing reports. Amazon says they have excess staff in their warehouses.
They no longer organize mass hiring, trying to hire everyone who wants to work. Facebook has implemented a kind of temporary freeze on developer hiring. So even high-paying positions are reporting a hiring slowdown. We don't need to hire so many people. Netflix says the same thing . They froze hiring.
Moreover, they are actually cutting costs and laying off some of their employees. So, many big tech companies are doing the exact opposite of the massive hiring they did last year. And in addition to these big tech companies, I also have a number of contacts in various tech companies around me. I know a lot of people in this industry and many of them have mentioned the same thing.
Recently, at least before, they had big ambitious plans for expanding the state, right? Hire thousands of people, and many of them have somewhat revised this goal. They don't hire as many people as they used to. Overall, I think companies are starting to realize that things might move a little slower in the future, and they are cutting budgets a little bit .
And I think consumers will be the last to understand this. Consumers are spending money like crazy right now. They are going to Disneyland. They go on vacation. They spend a lot of money on gas, groceries, and, you know, eating out at restaurants. Texas Roadhouse recently said it hasn't seen a slowdown in demand even after raising prices by 4%.
So, consumers continue to spend money left and right. They haven't gotten the hint yet, and I think they'll be the last to get it . I realized that consumers received a large amount of money due to the capitalization that occurred through incentives. So this big jump in US household savings wasn't because they were budgeting well and saving money.
That's because they were given stimulus checks. And then these second and third jumps were the result of additional stimulus measures, increased unemployment benefits, and stimulus checks. This is what caused a significant part of that inflation. But, as you can see, without additional capital provided to consumers, their savings rate falls.
In the US, we don't know how to save money. Most people spend every penny they have. And ultimately, the amount of money they received from pandemic measures to keep us out of recession will eventually end up in the hands of consumers. When that will happen, and I don't know exactly when, but I assume that soon, I think we will see consumers curb spending.
This is just my opinion. I look at this data and see that the savings rate is decreasing. I don't think consumers can continue spending at this level forever, but who knows? Trying to predict such things is difficult. This is just my opinion. Now, as for what I do with my portfolio, with the fund, the answer is not much.
I don't do much. And in fact, while I look at all this economic data and find it interesting, in reality I'm doing a bottom-up analysis. That means I look at companies, their fundamentals , management, balance sheets, and valuations, right? On the price/earnings ratio, on the price- to-sales ratio. I look at that and then I just glance at the global economy, right?
I'm not doing it in reverse. So that's my approach. I am not a top- down macro investor. I am a bottom-up investor . And I see these companies as fundamentally very sound that will continue to grow their free cash flow for a long time. I think they have a reasonable valuation now. A reasonable valuation doesn't mean their price can't fall even lower.
I fully expect them to trade at a lower price. And I know it seems crazy to hold companies that I think will fall in value, but I'm not confident in my ability to hit that "bottom." I just don't have confidence in this. Since I don't know where the bottom is and how many more days we will see a 2-3% drop, I won't try to guess the timing.
So I fully understand that I have no real ability to guess the timing of the market or the bottom of this sell-off. I don't know when it will happen. I don't think anyone knows. But my plan, my strategy, given the huge negative momentum in the market and the many obstacles—is to simply be patient. I have additional funds that I will invest, but I will do it gradually.
So at the end of this month I will be making new purchases. I will probably buy Amazon and Facebook shares. I'll see how things develop between now and the end of the month. I will evaluate which companies, in my opinion, have fallen the most to the most attractive prices , and simply buy more shares at the valuations that I consider profitable.
I know the next few months will be tough to watch the market and hold on to, but I understand that it won't fall for six, seven or eight weeks in a row indefinitely. Sooner or later, the market reaches a bottom. Here's a quick overview of the inflation report and my portfolio. See you in the next video.
Comments 0