Summary

The article discusses the acceleration of inflation in the United States, reaching 8.5% over the last 12 months, and provides strategies for individuals to mitigate the impact of rising prices.

Abstract

The U.S. Bureau of Labor Statistics reported that inflation has climbed to 8.5% over the past year, marking the seventh consecutive month of increase. This rise is primarily driven by surging fuel and used car prices, with food prices also up by 10%. The article suggests that if the current monthly inflation rate continues, the annual rate could soar to 15.4%. In response to these developments, the author, Mark R. Hake, CFA, offers practical advice for consumers and investors to protect against inflation, including buying in bulk, purchasing a home, reducing expenses, and investing in stocks over bonds. Hake also promotes his Medium membership and ZAI.chat AI service as resources for readers.

Opinions

The author believes that inflation is out of control and will continue to rise, potentially reaching an annual rate of 15.4% if the current trend persists.
Hake predicts that consumers and investors should expect at least a 10% inflation rate moving forward.
The article suggests that the official inflation figures may understate the true increase in housing costs, implying that the "Shelter" index does not reflect the actual rise in rent and home prices.
The author advises readers to take proactive steps to combat inflation, such as selling unused assets, finding additional income sources, and developing passive income streams.
Hake emphasizes the importance of zero-based budgeting and considering job changes if necessary to match income with rising expenses.
The author promotes investment in stocks over bonds, even as interest rates rise, to counteract the effects of inflation.
Hake discloses that he benefits financially from referrals to Medium membership through his provided link.

Inflation

Inflation Hits 8.5% and It’s Accelerating

Don’t believe pundits who’ve been saying it will slow down — and what you should do about it

Today, April 12, the Bureau of Labor Statistics announced that inflation hit 8.5% in the last 12 months.

This is now the 7th month in a row that inflation has risen. In other words, it’s accelerating. You can see this in the chart I have prepared below.

This shows that since Aug. 2021 when CPI was at an annual rate of 5.3%, it has now accelerated 16% to reach 8.5% over the last 12 months.

Granted, most of the huge increase this past month came from rising fuel costs. Here are the monthly figures with the major items:

Gasoline is up 48% in the last year and used car prices are up over 35%. This is what is driving a good of the last 12 months (LTM) inflation.

Nevertheless, you can also see that food prices are up 10% as well. Further down on the report it says that “Shelter” was up 5.0% in the LTM. This is not reality. Rent and home prices are way up, likely much higher than this.

In short, inflation is now officially out of control.

In fact, at this pace, we can now say that if month costs average 1.2%, it will reach 15.4% in the next 12 months. Here is why:

This math equation shows that if we compound out the 1.2% monthly rate for 12 months we get 15.4%. It’s not 12.144% (i.e., 1.2% x 12).

If we average the past 6 months, the average monthly increase has been 0.80%. That works out to an annual compound rate of 10%:

So, as I predicted last month, investors and consumers should now expect at least a 10% inflation going forward.

Expect to See Inflation Over 10%

The latest CPI of 7.9% actually translates into higher inflation going forward

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What to Do About Inflation From a Practical Standpoint

Here are 10 things you can do now to help protect against spiraling inflation.

1. Start buying in bulk — Prices are rising now, so it’s better to buy in bulk before they rise.

2. Buy your house now — don’t wait too much longer. — Prices are skyrocketing everywhere.

3. Rent for longer — Sign a minimum year-long lease or longer if you can.

4. Sell unused assets — any asset, including cars, clothes, electronics, etc. should be sold for cash

5. Find extra income — side hustles, even if is it just transcribing online, add to extra income

6. Ask for a pay raise — to match your income with expenses. If you don’t get it, switch jobs.

7. Reduce expenses — cut the extra vacation, extra channels, recurring expenses on your card

8. Get on a budget — Zero-based budgeting, as Dave Ramsey teaches, helps you plan everything

9. Develop passive income — research ways to develop passive income, including from investments

10. Invest in stocks, not bonds — stay away from fixed-income investments, even if their rates rise

The bottom line here is that if inflation continues skyrocketing, you have to act now to counteract it.

If you want to read all my Medium stories and have access to all of Medium’s articles, click on this link to join Medium and become a member.

Join Medium with my referral link - Mark Hake

As a Medium member, a portion of your membership fee goes to writers you read, and you get full access to every story…

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Full disclosure: shamelessly, as you might suspect, I refer you to Medium in order to share in your monthly or annual fee.

This is not financial advice and you should not rely on my analysis to buy or sell any stock, bond, REIT, crypto, home, or insurance product as I am not undertaking to induce you to buy or sell any securities or financial assets or home products.

I am relying on the “publisher’s exclusion” in the Investment Advisers Act of 1940 to provide this information without any personalized or individualized investment advice.

Mark Hake writes articles on InvestorPlace.com, Barchart.com, Medium.com, and Newsbreak.com on stocks and cryptos.