U.S. Inflation Data

By Patrick Moorhead - April 17, 2024

The Six Five team discusses U.S. Inflation Data

If you are interested in watching the full episode you can check it out here.

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Transcript:

Patrick Moorhead: US inflation data. Dan, you consider yourself somewhat of a junior economist. You like this stuff, so.

Daniel Newman: Look, everything’s inextricably linked. Okay. The economy,-

Patrick Moorhead: Okay. You got me there. I’m listening.

Daniel Newman: The economy and the performance, things like inflation drive the valuation and the innovation that comes out of tech companies, okay? When the dollar’s inflated, that means it gets you less. It takes you less of the way, and it means that goods cost more and it ends up trickling through the economy and it causes, I think it causes stagflation over time. It causes a slowdown of investment and growth. And here’s the thing is I think a lot of people just don’t understand what’s going on. This doesn’t take an economist, but I think taking a moment to just explain like, we have not actually tamed inflation at all since the peak of inflation. We’ve slowed inflation, meaning inflation has not gone down at all in any area. It’s gone up slower. So quarter after quarter, when you hear these numbers at 3.5, it’s still inflating after these huge inflation numbers, another 3% it’s going up, another 3.4, another…

And Pat this to me, and I think I shared this and I think you glommed onto it a little bit too, was that things that we actually spend money on and buy, most of us as the average citizen over three years have gone up an amazing amount, absorbent, like transportation is up 35% in the last three years. Oil, gas 31%, homes 31%, utilities 24%, gasoline 23%, food away from home, restaurants are up 21%. So I could do the whole list. Wages though, 15%. So it means that things are going up in cost at twice the rate in which people are getting paid. And so right now, people are hurting. I think like, I kind of said this, Pat, it’s been the quietest recession that nobody’s heard about, and it’s been backed by a couple of areas of strength. One, strength in jobs, which is all kind of BS right now.

We have tons and tons of jobs that are part-time and low paying that are being created, and we’re somehow continuing to float this really strong jobs number, which is total horse crap. And then the other thing about it is, is that we aren’t acknowledging the fact that with all these things going up by this much, that three and a half percent isn’t tamed, and you feel it when you go out. Pat, I go to the grocery store, my wife’s like, it was $450 for groceries this week. I’m like, what do we get? It’s like nothing. We got nothing. And this, by the way, is worse in other parts of the world. So we’re kind of delivering to the markets and the markets are reacting to this lower number, but in reality, the average household is feeling this. People aren’t being paid enough. And it’s all just this kind of house of cards that we’re built up on right now, Pat.

And in my take in the tech world, the AI moment has been the fuel of keeping markets alive. So this is probably the most interesting thing I’ll say here is while inflation is up, the one reason the markets continue to roar is that full self-drive or the future of AI and autonomy, you’ve got NVIDIA and you’ve got the AI boom there. I mean, how much has NVIDIA’s valuation brought the market up single-handedly? Microsoft, Google, Amazon, all up. Google just hit record or all time highs again. You’ve got a small number of companies that are cashing in on this AI moment. People are pouring money into these small number of things, Pat, and all the while it’s covering for the fact that jobs aren’t paying enough and everything we buy is too expensive, and we’re just all kind of like, eh, something going on? Nah, I’m just going to turn the ballgame on.

Patrick Moorhead: Well, I’ll tell you what, a big degree of the population is frustrated, shown by all of the data out there, but it doesn’t get covered a lot in the press, and it’s super disappointing. It’s kind of like a dangling chat, right, and something that doesn’t, that listen, I grew up in the 70s where we had a thing called stagflation, which was inflation in prices and no growth. That’s thankfully what we’re not here. But the fact that, think of somebody who makes an average of $50,000 a year, their homes where they live, apartments, houses, cars, food, gas, electricity has gone up 20 to 30%.

And I just don’t know how we sustain that. And we’re not even willing to have the real conversation about what we’re spending as a government. And everybody in DC I think is just failing us there, and we need to get that figured out. I mean, economically, there are no free lunches. There’s a train of school of thought that says, hey, if everybody is doing this globally, there really isn’t any impact. Right. I think the interest on our debt is essentially nearing in on GDP. Correct me if I’m wrong.

Daniel Newman: A trillion in deficit every three months, Pat. I mean, how the heck do we think we’re going to lower rates? And by the way, I want us to lower rates because I want my assets to explode in value, but how do you lower rates when we’re actually not slowing inflation?

Patrick Moorhead: I don’t know, buddy. I don’t know.

Daniel Newman: That’s why we’re not economists. We don’t have the answer. But modern monetary policy, can you imagine if we could run our businesses this way? Let’s just borrow $2 billion now of extra money and we’ll just run our companies. We’ll just run them to a deficit of billions,-

Patrick Moorhead: You know what? I don’t know if I’ll ever pay it back.

Daniel Newman: I’m never paying that back. By the way, when we run out of this 2 billion, we’ll borrow three.

Patrick Moorhead: No, that’s good. Yeah.

Daniel Newman: I don’t need to go to college for that, by the way, Pat. I can do that without any real formal education.

Patrick Moorhead: Maybe AI is the fix here. It’s the grand efficiency adder that’s going to get us out of this hole. And generative AI robotics is going to bring manufacturing back to the United States. By the way, you saw the how many robots China has versus the United States meme? It’s like 20 times the United States.

Patrick Moorhead
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Patrick founded the firm based on his real-world world technology experiences with the understanding of what he wasn’t getting from analysts and consultants. Ten years later, Patrick is ranked #1 among technology industry analysts in terms of “power” (ARInsights)  in “press citations” (Apollo Research). Moorhead is a contributor at Forbes and frequently appears on CNBC. He is a broad-based analyst covering a wide variety of topics including the cloud, enterprise SaaS, collaboration, client computing, and semiconductors. He has 30 years of experience including 15 years of executive experience at high tech companies (NCR, AT&T, Compaq, now HP, and AMD) leading strategy, product management, product marketing, and corporate marketing, including three industry board appointments.