E Tuesday Talk: Inflation And Impatience

After closing out the week at new highs the stock market is exhibiting impatience and jitters closing down on Monday with today's futures currently in the red.

Chicken, Home Chicken, Brown Chicken

Pixabay

The Nasdaq took the hardest hit yesterday closing at 13,403, down 350 points or 2.5%, The S&P closed at 4,188, down 44 points or 1.4%. The Dow Jones Industrial Average closed at 34,743, down 35 points or .10%. Currently, Nasdaq futures are trading down 1.57%, S&P futures down .89% and Dow futures down .52%.

Source: The New York Times

Most actives as noted in the chart above were across sectors but top losers in the bunch were from the tech sector: Intel (INTC), Advanced Micro Devices (AMD) and Apple (AAPL); all three leaders were down sharply.

One of the fears running through the markets despite the solid recovery indicators is inflation. It is a word that seems to be on the minds of academics and pundits, alike. TalkMarkets contributor Brian Romanchuk  in Cost Of Living Versus Inflation says that people tend to think that they are one in the same. 

"Many people view inflation as a rising cost of living. There is a link between these two ideas, but they are not the same thing."

The article is a primer and a good resource for readers trying understand what exactly is meant by inflation. We have had little inflation for many years now, so it is may seem like a "new" concept for some. Romanchuk gives this (current) example:

"The COVID-19 pandemic that hit the world in 2020 disrupted the meat processing industry. When I go shopping, chicken and beef are considerably more expensive than they were before the pandemic, while the rise in pork prices was more moderate. The obvious reaction is to have more vegetarian meals and eat more pork. This then raises the question: how much did my “standard of living rise”? 

  • How much would it have cost if I kept my buying habits unchanged by the price rise?
  • How much my spending actually rose, keeping in mind that I switched away from chicken and beef?
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William K. 1 month ago Member's comment

Inflation is that thing that drives down the purchasing power of my money. Plain and simple, and does not take a Masters degree to understand that. Inflation is caused by the government (the Federal Reserve Bank) putting too much money into circulation, usually in the wrong hands.

And I understand that inflation benefits those seeking to get rich in the stock market, and that is evidently as far as those in the fed care to look. The fact is that there exists a lot more in the world than wall street, and that most people are not involved in the financial industry. Most people are far closer to the real world, Unfortunately the damage is the result of a long string of very deliberate actions by those individuals running the Federal Reserve bank. So when all the bubbles burst and the times get really rough we will know the names of those responsible. And perhaps things can be changed so that it will not happen again. Certainly this is a radical prediction, and I wish that it would be wrong. But I don't think so.