Thursday nights are a big night for the Castagna family. It’s Costco night.
My wife drops off our oldest daughter at gymnastics, and then heads over to Costco with the other two kids.
In the past, I would make this my late night at the office.
But recently, I’ve started to join them on the Costco trip.
Partly because it’s nice family time, but mostly because it makes sense financially.
I’m able to save far more money on the Costco bill (by being there to monitor Jackie) than I was able to make in income by staying at work late.
Kinda joking, but kinda serious. Our Costco bills are insane.
I recently saw a video that went viral, of a lady at a Costco in Canada pointing out how crazy prices have become. She held up a pre-cooked package of chicken drumsticks that cost $220…?!?!
Now, personally, I haven’t seen anything that crazy yet, and I have a hard time believing that’s true… but maybe we’re not that far off from that.
Did anybody listen to the most recent Federal Reserve (“FED”) announcement?
The FED is the USA’s equivalent of our Bank of Canada. But a whole lot more powerful.
It’s argued that the Bank of Canada just does whatever the FED does.
One of the FED’s primary jobs is to control inflation through monetary policy (i.e. mechanisms at their disposal to help bring inflation up or down).
Their most powerful tool is their ability to control interest rates.
Most recently, they have kept interest rates high to bring down inflation.
For over a year now, they have been saying that they will do whatever it takes to bring inflation back down to their target of 2% per year.
Well, the Fed just made a huge admission during its most recent meeting.
They basically said that inflation is here to stay. They are now fine with higher inflation.
Their primary concern now is to bring down interest rates.
And even though inflation is not coming down as much and as fast as they hoped, they are still suggesting at least three interest rate cuts this year.
This is good news for assets and asset holders. As we’ve seen, lower interest rates drive higher inflation, which in turn drives up asset prices.
This is not good news for those who don’t hold assets.
Basically, this is an admission by the Feds that everyone will continue to experience higher prices for just about everything… groceries, rent, gas etc.
Those with assets should at least see the upside of this by way of the increased value of those assets.
But those who don’t have assets, only experience the downside.
And the Fed admitted that they are okay with that.
Pretty sad considering it was FED policies that helped create this crazy inflation in the first place…
And now they are basically throwing in the towel when it comes to “fighting inflation.”
I get the sense that the next several years will be a bit of roller coaster.
Rates will go up and inflation will come down.
Rates will go down and inflation will go up.
Rinse, wash, repeat…
But in the end, after all of the ups and downs, the overall trajectory of inflation over the long term, will likely be way up. Far greater than their target of 2% per year.
And if that is how it goes, then good, income producing hard assets should continue to be a pretty good bet.
All the best,
Vince
P.S. Happy Easter! Maybe purchase a few extra Cadbury eggs this year and save them… they will likely cost double next year! lol
