They’re lying, inflation is out of control and it’s bullish for gold and silver.

Exposing The Lies Is Easy…Just Use Math
February 10 (King World News) – Otavio Costa:  Let’s put this CPI number in perspective… Here are some price changes since January 2021:

Nat gas +81%
Oil +66%
Agricultural commodities +24%
Rent +13%
Used car prices +44%
Gasoline +36%
Cattle prices +20%
Lumber +15%
Coffee +92%
Hotel Prices +37% 

Then, today:

CPI: +7.5%

Peter Boockvar:
  CPI in January rose by .6% headline and core m/o/m and 7.5% and 6% y/o/y respectively.

The headline increase was two tenths more than expected and December was revised up by one tenth to also a .6% gain. The core rate was above the estimate by one tenth. Energy prices rose by .9% m/o/m and 27% y/o/y. Food prices also grew by .9% m/o/m and by 7% y/o/y.

On the services side ex energy, prices rose .4% m/o/m and 4.1% y/o/y and this is STILL with WAY under counting with respect to rents. Owners Equivalent Rent was up .4% m/o/m and 4.1% y/o/y. Rent of Primary Residence was higher by .5% m/o/m and 3.8% y/o/y. For perspective, Apartment List said new rents in 2021 were up 18% y/o/y for new rents. I’ve seen for lease renewals, they are up between 8-10%. Thus, expect services inflation to continue to rise in the coming quarters as the BLS catches up on this category. Medical care costs jumped by .7% m/o/m and by 2.5% y/o/y. As more people are putting off the purchase of inflated used cars and putting new money into their existing one via upkeep, ‘motor vehicle maintenance’ prices were up by .2% m/o/m and 4.8% y/o/y. Auto insurance prices rose by .9% m/o/m and 4.1% y/o/y. Airline fares spiked for a 3rd month in a row and by 2.3% in January from December. That’s up 4.9% y/o/y…

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quadruple their production 
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On the goods side, core goods prices rose by 1% in the month alone and by 11.7% y/o/y. New car prices were flat but only after rising by 1.2% in the two previous months and it’s still up 12.2% y/o/y. Used car prices jumped by 1.5% m/o/m after a 3.3% gain in December and 2.4% in November and by 41% y/o/y. Apparel prices were up by a sharp 1.1% m/o/m and by 5.3% y/o/y. Prices of anything related to the home jumped sharply. Household furnishings: up 1.6% m/o/m and 9.3% y/o/y, Floor coverings: up .8% m/o/m and 7.2% y/o/y, Window coverings: up 1.8% m/o/m and 16.2% y/o/y, Furniture/bedding: up 2.4% m/o/m and 17% y/o/y, Bedroom furniture: up 1.8% m/o/m and 13.7% y/o/y, Living room/kitchen/dining room furniture: up 2.2% and 20% y/o/y, and Appliances: up 1.5% m/o/m and 8.5% y/o/y.

Bottom line, if rents were accurately calculated, we’d have 10% inflation right now. Core goods prices are rising at the fastest pace since 1975. So it is really rising at the same extent as the 1970’s.

Yes today’s CPI was hotter than expected and February’s print could be as well but again, it’s to what extent does it slow from here that should matter for markets. That said, today’s number is just another reminder of the intense cost of living pressure that so many are under and the negative economic consequences of that. Also, to what extent do higher wages, in response to inflation and tight labor markets, then filter back into more price increases. Also, to what extent do higher energy prices filter into everything. On the other hand, with supply chains just beginning to ease, to what extent will goods prices calm down. I’ll repeat again my belief that inflation will ‘only’ slow to a 3-4% rate by yr end and that is well above a trend that we are used to.

At the same time the Fed is still buying bonds and debating whether they should hike 25 bps or 50 off ZERO. The April fed funds futures contract, which covers the March meeting, is now priced at .445%, up 4 bps in response to CPI and that implies a 54% chance of a 50 bps hike in March. As for year end, the December contract is jumping by 10 bps to 1.48% and the January 2023 one is at 1.55%. That means we are getting close to pricing in 6 hikes this year. That also means though that REAL rates will still be below zero.

The 2s/10s spread is narrower by 3 bps to 55 bps. The 5s/30s is tighter by 1.5 bps to just 41 bps.

Bullish On Gold & Silver
I’ll use this as another opportunity to express my bullishness on gold and silver. From here, either the Fed will tighten too much and growth slows that results in the Fed backtracking and that will be bullish for gold or the Fed will still be too slow in tightening, real rates will remain firmly negative and that will be positive for gold.

Initial claims totaled 223k, 7k less than expected and down from 239k last week. Continuing claims were 1.621mm, just above expectations but at their pre Covid pace. The bottom line stays the same, the pace of firing’s remains muted as there is more demand for labor than supply.

To listen to Peter Boockvar discuss what to expect in 2022 for gold, silver, real estate, interest rates, inflation and more CLICK HERE OR ON THE IMAGE BELOW.

To listen to Alasdair Macleod discuss $3,200 gold and more CLICK HERE OR ON THE IMAGE BELOW.

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