Hard Times
14th September 2022
ZMan tightens the belt.
The American stock exchanges dropped sharply yesterday when it was announced that the inflation reduction act had not reduced inflation. The consumer price index came in higher than expected. This triggered the robots to sell on the expectation that the Federal Reserve will keep tightening the money supply. The DOW dropped 3.94% bringing the decline for the year to 14.4%. Luckily, they have changed the definition of a bear market so this is still a bull market.
The inflation report was all bad news. Gasoline prices declined ten percent, but all other energy increased for the period. That probably means two things. One is the gas price decline is due to less driving. In other words, people are adjusting their spending because inflation is not starting to take a bite out of their budgets. Instead of a weekend car trip, people are staying home. According to AAA, over all sales of gasoline declined in August to levels last seen during the lockdowns.
Another piece of the gasoline puzzle is the dumping of cheap crude on the domestic refineries by the Biden administration. They panicked when gasoline hit five bucks a gallon nationally so they started releasing crude from the SPR. This drives down the price of gasoline a little. The taps run dry at the end of next month, just before the election, so prices will tick back up. In other words, some of the bad news has been pushed out to after the November elections.