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The S&P 500 Hits a New Record High Despite a Concern Over Oreos

On Monday, stocks plunged with the DOW leading the way. The Dow fell 1,000 points allegedly over Covid and inflation concerns. Today stocks hit new highs.
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How Much More Will Your Oreos Cost

Concern Over Oreos (and Other Food Items)

The WSJ asks How Much More Will Your Oreos Cost? 

Faced with rising costs for materials, transportation and workers, companies are charging more for products from metal fasteners to Oreo cookies, helping fuel inflation like the U.S. hasn’t seen in more than a decade.

As customers accept the price hikes, some big companies said they expect to raise prices even more. Others are more cautious, unsure if U.S. consumers have the appetite to absorb additional increases.

What companies decide will go a long way to answering a question that has surged to the top of executives’ and economists’ agendas this year: Is the recent jump in inflation transitory, as the Federal Reserve predicts, or persistent, as some executives warn?

How hard companies continue to push to raise prices, and how well they succeed, is at the heart of the current concern about inflation. The more companies succeed, the more traction price inflation is likely to gain, keeping prices high and rising. If the price increases falter, inflation is likely to ease as labor and supply shortages diminish and the pandemic’s economic effects recede.

Of about a dozen large U.S. companies examined by The Wall Street Journal, most said they have succeeded in raising at least some prices but are unsure whether they can continue to do so. Several said they plan or hope to push additional price increases through.

Rising Prices Beget Rising Prices?

That's the implied sentiment expressed above. But if that was the case, inflation would never stop. 

In reality, demand would give, expansion would end, and prices fall unless there was an additional measure forcing prices higher regardless. 

I don’t think anyone knows what the word transitory is really going to turn out to mean,” said Julien Mininberg, who heads consumer-products company Helen of Troy Ltd.

I echo that sentiment. For starters no one can say what will happen to various bills in Congress right now. 

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Is Powell Delusional?

Professor Steve Hanke calls Powell delusional over "transitory inflation". He believes it will be sustained.

I discussed his concerns in A Monetary Debate: Is Sustained Inflation Coming? Is Powell Delusional?

Lacy Hunt has a completely different take in the Hoisington Management second quarter review.

For Hunt's take, please see Lacy Hunt On Debt and Friedman's Famous Quote Regarding Inflation and Money

I side with Hunt but am willing to change my mind (and so is he) depending on certain events. 

I will elaborate at length in follow up post.

Meanwhile, recall my Monday post Bond Yields Dive and Stocks Tank Supposedly on Growth and Covid Fears.

Concern over growth, Covid, and the price of Oreos lasted precisely one day.