Today’s HOT ‘Consumer Price Index’ (CPI) reading caught many by surprise, off guard and flat-footed. Not I. I expected it to be high. I know we still have inflation out there. I see it everyday.
I never bought into the rate cuts in March 2024 fallacy.
I have always been in the ‘higher for longer’ camp when it comes to interest rates.
But, the whole point of this post is that I predicted this HIGHER INFLATION scenario 2-years ago. SMILE. No wonder I do OK when it comes to investing. SMILE.
U.S. food prices, & with that U.S. core INFLATION, is bound to go up this Fall.
Think what this EXTREME WEATHER is doing to farming & crop production. I am surprised that we haven’t started seeing some price increases already. Some farms are scorched by the intense heat, others are under water. Either way it is not good for us consumers. FOOD PRICES HAVE TO GO UP. To think otherwise is to bury your head in the sand.
Then we have the never-ending Ukraine war & Russia’s latest ban on crop export. That too will hike up food prices.
So, those that think U.S. inflation is under control & on the way down are going to be in for a very rude awakening. Yes, it will take some time for these price increases to show up on inflation gauges such as ‘CPI’. It might take till nearly year end. Then we will AGAIN suddenly see a SPIKE in inflation & interest rates will AGAIN go up.
Click image to access excellent ‘forexlive.com‘ post that explains it all.
Yes, I thought the ‘jobs report’, i.e., the ‘non-farm payrolls’ to be precise, came out on the first Friday of each new month. I was WRONG.
I am not shocked, upset or embarrassed because until a year ago, when the Feds started hiking up interests in anger to fight the brutal inflation, I didn’t pay much attention to ‘CPI’ or the ‘jobs number’. We hadn’t had any interest rates hikes in years. I was not concerned. But, these days I am hugely interested — & of course, one way or another INVESTED — in Fed interest rates & what will happen to them. So, I eagerly await, each month CPI, jobs numbers, Fed Minutes, Fed statement etc. etc.
So, I was waiting to see the jobs number tomorrow.
Then, to my amazement, I heard on ‘CNBC‘ this morning that it will be NEXT Friday, March 10. I thought it was mistake. Then I heard it again. Then I Googled to make sure. Wow. It is next Friday, March 10, rather than tomorrow, March 3.
I, of course, had to know WHY? Come on. Cats have nothing on me when it comes to curiosity. That is how I found the above article. Glad I did. Check it out.
According to it: ” … Bureau of Labor Statistics releases non-farm payrolls on the fourth Friday following the week containing the 12th of a given month …“. Wow. Who knew.
While I was at it, I checked when we get the March CPI — Tuesday, March 14, 2023, at 8.30 am (Eastern).
I can’t really gloat (let alone take much credit) since this was SO, SO ELEMENTARY.
IF CPI ran hot, even slightly, the market was going to go down. That is obvious. Inflation is still running high. You can see it all around us. So, I had a fairly good hunch that CPI will come in slightly higher than estimates. It did. The market tanked. QED.
It is good that AMZN has gone down, this much, since Monday’s split. The newbies to AMZN that piled in after the split have to learn their lessons. AMZN stock is volatile & it does not defy gravity.
I suspect that quite a few got caught in a margin squeeze. They borrowed against margin to buy AMZN and with stocks going down they are being asked to repay some of the margin they borrowed. So, they have to sell stock, in a hurry, including their new purchased AMZN shares to raise the cash. That sends AMZN prices even lower.
I will now NOT be surprised if we see AMZN trading BELOW $100 in the next month. SMILE. [Don’t worry about me. Thanks. I am OK. I am an options trader. SMILE.]
Click to ENLARGE. Base chart (as ever) is from ‘MarketWatch.com‘ (with thanks). Click to ENLARGE.
It is NOT down much, just in the 1% range, BUT this is GOOD.
Why?
1/ It is a salutary lesson to all the NEWBIES piling into the stock, now that they can finally afford it, that AMZN is volatile. It goes up, down & sideways. You get into AMZN for the long-haul. So, this is not much of a drop, but it will make the newbies appreciate that they are not going to see AMZN going up each day.
There is a good chance that AMZN might go down even further, into the $115 range, if Friday’s CPI (Consumer Product Index) number shows that inflation is NOT abating. The market could go down taking AMZN with it. So, it is good to realize that the SPLIT price of $122.35 was NOT, & is NOT, a firm bottom.
Prior to the end of the year we can see AMZN both BELOW $116 & ABOVE $150.
This time next year I expect it to be sniffing at $200. (SMILE).
2/ This small drop gives some a chance to get in WITHOUT thinking they missed the boat. That is good. But, now they will get in understanding that AMZN will go down as well as up.
Chance for folks like us, long-term holders, to NIBBLE. SMILE.
3/ It is GREAT for option traders (like I). SMILE. When you trade options (cannily) it doesn’t matter if the underlying stock goes up or down! You just want it to move in one direction or the other. SMILE.
