Hi All,

Due to travel plans and this month’s CPI report being moved to Friday, I will not be in a position to do the full CPI report writeup today. I’ll be able to read the report and relay to you anything different from expectations or that affects the portfolio, but the usual 10 page multi-image writeup will need to wait until next month.

Here’s what I expect to see:

– Overall inflation will be up on much higher energy prices.

– Goods inflation has been much lower than services, but recent PCE data indicates goods prices might be rising.

– Auto prices have plateaued above the pre-covid levels, but have been stable for months.

– Shelter inflation remains an issue and housing is unaffordable for much of the country. Pricing increases/decreases in housing are highly market-dependent.

– I still think food at home is understated and we’re starting to see restaurant price inflation reflected in the official numbers. On an anecdotal basis, I’m seeing more angry posts from waiters insisting that if we’re not prepared to tip 40% on the after-tax amount, we don’t deserve to eat in a restaurant. These waiters might get their wish and regret it as they’d make more money will full tables tipping 20% than they do with empty tables.

– Commentary will indicate that most expect the Fed to keep rates unchanged this month and express concern regarding previously expected rate cuts later this year. This is consistent with what everyone (including me) expected last month.

I could have written all of the above last month and did so in last month’s CPI report. I don’t think we’ll see anything significant that contradicts this, but if there is, I’ll relay my thoughts in a weekend blog post.

 

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