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Monday, November 15, 2021
Full disclosure: I have never bought a turkey for Thanksgiving before.
Hang with me here because it's not as weird as it sounds.
For the past 15 years I haven't really had any Thanksgivings (don't pity me, I bring this stuff on myself). Most of the time I was out in stores on Thanksgiving day either channel-checking for clients (when I was an analyst covering retailers) or reporting on the start of Black Friday (as seen here sitting in a Subway inside Walmart back in 2016 — timestamped!). Five years ago, I treated myself to a Thanksgiving in my car at a Kmart parking lot around midnight — it was a McDonald's chicken sandwich (no timestamped Instagram post here, you will just have to trust me).
Prior to the age of 21, my parents bought the bird and I ate the bird. So bottom line is that I am no turkey-buying expert.
But, that doesn't mean I can't spot a horrible inflationary deal. Case in point: this 18.12-pound Bell & Evans $72.30 turkey I spotted (below) this past weekend ($78 turkey pictured behind it) that I came across at my local supermarket. One Twitter follower told me Bell & Evans is the "Ferrari of turkeys." Yahoo Finance's Ethan Wolff-Mann appeared to echo that hot take in a tweet to me as well. Others told me Butterball turkeys were cheaper.
I don't care if this turkey comes with a side of Dogecoins and car keys to a free one-day rental of a new Ferrari, this bird is just the latest example of the rapid inflationary environment we are entering. Note, we're ENTERING one, not necessarily already in it.
The price increases by corporate America are about to rain down on all of us in a way many have not seen before in our lifetimes (if you are under the age of 50). Gas prices are breaking through $5 a gallon in many parts of the country, as CNN anchor Wolf Blitzer tweeted. One lodging CEO told me last week hourly wages are soaring 15% to 20%, and even then they are having trouble securing talent (notably in housekeeping). Another retail CEO told me after their earnings call their prices are going up more than 10% this holiday season mostly due to supply chain bottlenecks.
Someone has to bear the brunt of this inflation and it ain't gonna be corporate America, whose singular goal is to drive profits and their stock prices higher. It will be poor schlubs like you and me, and not just via a hit to the digital wallet come Thanksgiving.
Inflation's ugliness also stands to hurt your portfolio if it's not positioned to withstand an earlier than expected pace of interest rate hikes from the Federal Reserve within the next 18 months as a means to kneecap inflationary forces. Goldman Sachs is one of the few teams on the Street sounding the alarm on quicker rate hikes due to inflation.
This is what Goldman said in a weekend note:
"The U.S. economy largely followed the rapid road to recovery that we expected this year and is on track to round out the recovery next year as most of the remaining effects of the pandemic fade. But this year also brought a major surprise: a surge in inflation that has already reached a 30-year high and still has further to go. Mainly for this reason, we recently pulled forward our forecast of the timing of the Fed’s first rate hike to July 2022, shortly after tapering ends."
Goldman added the rise in inflation has been "startling," and outlined another rate hike in November 2022 after the one anticipated for July.
Hat tip to Jefferies for getting out in front of this inflation reality as well:
"With inflation pressures mounting, we expect the Fed to respond by accelerating the taper at the December meeting, and finishing in March. This will make room for two hikes next year, most likely in September and December."
In the meantime, enjoy your inflationary Thanksgiving. Maybe I will have one this year for a change.
Odds and ends
Building back better: The Street still hasn't arrived at a consensus thesis on whether the Biden administration's infrastructure plan will only add to the inflationary pressures the economy is experiencing. The majority of folks I have chatted up believe that with the plan spread out over a number of years, it will unlikely be gas on the currently raging inflationary fire. Tune into Yahoo Finance Live around 10 a.m. ET when we dive into the infrastructure package — and its potential economic effects — with Transportation Secretary Pete Buttigieg.
Meta: Perhaps it was because earnings season bordered on insane last week and it got overlooked, but shares of Meta are beginning to perk up. The stock popped 4% on Friday on a generally muted day for markets. Shares are about 4% higher in November, relatively in line with the Nasdaq Composite. The stock is the second best-performing FAANG component month-to-date, trailing only Amazon with a 4.5% gain.
Walmart and Target earnings: My brother texted me a photo of $6 gas prices in California this past weekend. That reminded me about that dreadful consumer sentiment report from Friday and to pay careful attention this week to commentary on earnings reports from Walmart and Target on the consumer impact from higher gas and heating oil prices. This isn't something retail analysts have had to watch too closely for well over a year, but it could play a factor in more cautious than expected holiday quarter outlooks from both retailers (more so Walmart, given its lower income customer base).
