Good morning. La, la, la, la … boom! Stocks seemed to be chugging along quite nicely in recent days, and business news stories were filled with Fed-appointee-wannabees calling for deep rate cuts, clamoring to get the President’s affection. Now, suddenly, the measure of wholesale prices for July (“PPI”) came out and … well … headlines are pointing out the number is “much hotter than expected” (CNBC) and one organization (Associated Press) … has labeled it a “surge” with tariffs the cause. And the immediate “official” reaction? Bloomberg reports Treasury Secretary Bessent, two minutes after the release, said he isn’t calling for rate cuts … as I wonder why we would ever think that … just one day after Barron’s produced the headline of “Bessent calls for big rate cuts.” But it might be important to note it is the evil Bureau of Labor Statistics putting out the PPI number … so we’ll wait to see how this is re-presented by Washington in the hours ahead. A reader complained yesterday (okay, it was more of a mild discussion) about my view that tariffs would boost inflation and gave the view that tariffs are like taxes and result in “one time price changes.” Sure … but if I am paying $10 for a basket of goods that now have a 15% “tariff” … instead of paying $100 over the next 10 years (assuming no other increase), I am paying $1000. Taking the tariff into consideration, I would be paying $1150. It is not a “one-time change” by any means … as the permanent tariff digs into my pocket every single year … no matter how much some mathematician wants to play with the numbers and try to convince me otherwise. The old adage is, “if you torture statistics long enough, they will confess.” And right now, these numbers are firmly positioned on the rack. Meanwhile, a friend from South Africa … a distinguished professor at a university there … just sent a note saying the graduate unemployment there is quite high … and questions if others in our multi-national group are seeing the same thing. Well PBS posted an article just the other day with the headline, “… new college graduates are facing one of the toughest job markets in a decade.” And while unemployment issues for young people has not reached the level it has in China … where Fortune Magazine reports some GenZers are paying $7 a day “to pretend to work in an office” … it is becoming a bit more worrisome. With unemployment and inflation both on the rise at the moment … especially with this morning’s number and continuing White House pressure …the Fed suddenly finds itself in for a challenging time ahead. And for anyone seeking the upcoming appointment(s) to join the Fed? I have some bad news. The price of Tylenol is going up. Have a great day, Joseph G. Witthohn, CFA Have any questions? Please contact info@teamemerald.com
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