Dow Jones drops as U.S. inflation heats up

The Dow Jones Industrial Average dropped 200 points Wednesday, as a key U.S. inflation gauge came in higher than expected.

Dow Jones drops as u.s. inflation heats up

Scott Lehtonen for Investor’s Business Daily:

Consumer prices increased more than expected in September, the Labor Department reported Wednesday. The consumer price index rose 0.4% for the month and 5.4% year over year. Econoday estimates expected inflation to rise 5.3% in September from a year earlier and a seasonally adjusted 0.3% in September from August. The 10-year Treasury yield dropped 4 basis points, to 1.54%.

Among the top Dow Jones stocks, Apple sold off 1.3% Wednesday after Bloomberg reported the company will likely have to cut 2021 iPhone production goals of 90 million handsets by up to 10 million handsets due to extended chip shortages.

Apple stock is on pace to extend a losing streak to three sessions, falling further below its 50-day line.

MacDailyNews Take: Again, it’s best to get a handle on inflation, if you know how, while you still can.

Inflation is repudiation. — Calvin Coolidge

When a business or an individual spends more than it makes, it goes bankrupt. When government does it, it sends you the bill. And when government does it for 40 years, the bill comes in two ways: higher taxes and inflation. Make no mistake about it, inflation is a tax and not by accident. — Ronald Reagan

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10 Comments

  1. Overall, what we’re seeing is the logical consequence of a disruption to 20+ years of pursuing “Lean” manufacturing’s just-in-time supply chains as a means to save money: just like Southwest learned this past weekend, when one over-optimizes, you end up with a highly brittle supply chain that when it fails, results in widespread collapses.

    What no one today knows is just how long it will take to get the international supply system “unbroken”. Sure, we’ve been told it will be “quick”, but these chains have been growing in complexity for years, so its not trivial to fix: these international supply systems are highly interlocked and entangled, and you’re asking that this bird’s nest of a knot be cleared without cutting it to pieces or burning it al to the ground.

    But humans lust for immediate gratification & 24 hr news cycles means that they’ll scream and downvote anyone who tells them that even though this disruption will be “short term”, that term of “short” can’t be assumed to mean a few weeks or months.

    Will some of these price hikes stick? Of course…but that doesn’t mean all of them will.

    Likewise, just will supply chain disruptions come to an end? Never, because that’s the wrong question, plus that answer isn’t really knowable today beyond a broad handwave principles that it should be “short term”. That’s why one shouldn’t jump to assume that “short” is a few weeks or months, as well as to understand that inflation isn’t self-referencing, but based on other factors.

    1. Decent ideas, but not including is the Covid disruption and the added disruption created by govts trying to “keep us safe.”
      Energy also figures in significantly, though we are at the front end of the disruption. For many yrs, industry production and efforts to find more fuel has been hampered because of the “evil” associated with carbon-based energy. This will confuse things greatly going forward as the World tries to eliminate fossil fuels and pump renewables…when in actuality, they (renewables) aren’t ready for prime time.

      1. Thanks for the reply – it certainly beats those cowards who leave a 1-star “shoot the messenger” and are silent, just because they don’t like what news is being reported.

        Now regarding what you wrote…

        Overall, one can argue the pros/cons of any individual government’s response policy, but the reality is that there is no ideal solution: they all invoke some trade-off of some sort someplace which results in the difficult decision of who/what gets sacrificed. As much as people in the USA want to lament the “lockdown”, the facts are that it wasn’t actually as severe as lockdowns enacted elsewhere in the world, and the trade-off was basically money vs lives.

        FYI, from a cynical standpoint, I’d say that the main reason why we see so many folks advocating for less economic damage (and thus, more deaths) is because they’re not in the higher risk groups who are dying at 2x-5x higher rates than middle class whites and really the ones paying the price.

        Moving on, the simple summary is that regardless of what CoVid response was employed, there were going to be supply chain disruptions which were ultimately caused by CoVid – it really doesn’t matter which aspect we want to semantically break it down into, or what stage: the quite modest US masking restrictions vs China’s lockups of every apartment in entire cities, Australia’s weeks-long “stay at home”, India’s stonewalling of 4 million unexplained extra deaths above their official count, etc, etc: they each are having an effect in their own way, somewhere, because of just how crazy-interconnected everything has become in the world economy.

        Likewise regarding energy, that sector got walloped hard at the start of CoVid, where they were literally paying people to accept their product (negative commodity prices) for their material in the pipeline before they were able to cut off production. Those price shocks had huge effects on how the individual companies responded, basically to try to decide what & where to shut down to survive (conserve capital), and for the survivors, figure out what’s going to ramp back up & when and not get that wrong either. That’s a lot of “time compression” stress for an industry that’s not used to moving all that quickly. Nor is it built to be all that agile: historically, it takes roughly a decade go from a new field exploration lease to actual production into the retail pipeline…and its useful to note that when you hear people try to claim that US gas prices shot up because of the cancellation of the XL Pipeline (for a product that was never going to be sold in the USA, no less!).

        Finally, regarding carbon based energy, there’s really two salient points.

        The first one is to once again recognize that everything has trade-offs, so we need to recognize what the tradeoff’s have been for coal/oil/etc vs other energy alternatives: there never is a free lunch. As such, that chicken is going to come home to roost and we’re going to be stuck with paying that bill..somehow.

        The second point is the modern alternatives to carbon based energy, e.g., the “green” renewable stuff. They’ve been “not ready” for decades of R&D but have now reached the economic tipping point where they’re actually becoming cheaper than some traditional energies, even without applying any handicapping of the externalities of the carbon-based ones. That means that regardless of if one doesn’t believe in climate change or not, they’re going to be adopted & deployed … because that’s what Capitalism does when it finds the “better mousetrap”.

        We’re all going to be confronted with change, and our options are basically to adapt to it, or “die” (figuratively / literally): if you would have told me 30 years ago that my Apple products only came in a sealed case with no way to DIY add/change RAM/storage/etc, I would have been quite upset … until I asked the next question and found that it had vastly more RAM+Storage+capability than the cutting edge Mac Quadra 950 of the day (that I couldn’t afford) … oh, and it wasn’t ~40lbs, but small enough to fit in a pocket, & included a battery that lasts for hours, & had wireless data transfer that was ~1000x faster than my 9600 baud modem, etc, etc….and that wasn’t $7,000 but just the cheap $400 iPhone SE.

        1. ” As much as people in the USA want to lament the “lockdown”, the facts are that it wasn’t actually as severe as lockdowns enacted elsewhere in the world”

          Oh, how wonderful. The Leftist is trying to soothe us it wasn’t that bad in the U.S.as the rest of totalitarian lockdowns elsewhere in the world. Tell that to the hundreds of thousands of small businesses that lost their life savings and lifelong dreams laying off employees having to close for good, mainly in blue states and cities from Democrat dictator policies in the holy name of its good for you. Red states fared much, much better no comparison.

          “it takes roughly a decade go from a new field exploration lease to actual production into the retail pipeline…”

          Yeah, and it took less than 30 seconds with a stroke of a pen to shutdown the Keystone Xl pipeline ending energy independence established for the FIRST time by President Trump. Petty partisan spite work egged on the Green Deal radicals who think they can change and control the weather world… what egos.

          “US gas prices shot up because of the cancellation of the XL Pipeline (for a product that was never going to be sold in the USA, no less!).”

          NO, gas prices shot up as a DIRECT result of ending energy independence shutting down the pipeline, closing off federal lands to energy exploration, curtailing offshore drilling, begging Saudi Arabia to pump more oil because the extreme Leftists don’t like it here — I could go on. It is laughable you claim gas prices have nothing to do with the pipeline and the no energy policy of the clueless Biden administration bowing to the fantasy greens.

          The rest of your tedious Leftist preaching’s is one sided sophistry opinion and its obvious you do not know what you are talking about. Making tenuous cause and effect linked excuses for your team’s social engineering failures, is not worth discussing and will never cut it in the REAL WORLD…

          1. Gosh, where to begin.

            Okay, small businesses: in an average year, AdvisorSmith found that 22% of them fail within the first year, 32% fail within the first two years, and 40% fail within the first three years of business. So while there certainly were more, the real question is just how much more in what’s always been a high risk of failure industry segment?

            Next, those “dictatorial” Blue state restrictions and your claim that Red states faired “much much better”: got cite? Because if that were actually true, then why did Bloomberg on 26 Aug 2021 report that the Blue-Red economic divide has gotten bigger … and in favor of Blue?

            Specifically, Blue’s 64% of GDP in 2016 is now 71% of GDP. Yes, that means that Red’s share has slid by -7 percentage points in just the past five years.

            https://www.bloomberg.com/news/articles/2021-08-26/what-s-driving-america-s-economic-output-vaccinated-blue-counties-biden-won

            Okay, what’s your next Faux talking point: Oh, oil production? First, the XL pipeline was to carry heavy “bunker” oil for the Asian market – zero US consumption: it never operated so it never was being counted towards US “energy independence”, which means that the 2019 “energy independence” was accomplished through other means. And those means was Natural Gas and Renewables, not Canadian tar sand oil destined for Asian bunker oil applications…which by the way, is still flowing through other pipelines to the Pacific coast — XL wasn’t to enable production, but simply to make the existing production cheaper…ie, improve corporate profits.

            But no worries – your beatdown will continue …

            … as soon as you stop your lame dodge of vague, convenient-for-you “tedious Leftist preaching” claims and put up specific claims to be torn to shreds just like the above have.

            1. “Gosh, where to begin.”

              Gosh, can you be anymore elitist and condescending.

              “in an average year, AdvisorSmith found that 22% of them fail within the first year”

              Fairly certain we are ALL aware of small business failures in the startup years, this news to you? Not what I’m talking about.

              “how much more in what’s always been a high risk of failure industry segment?

              How much more, the genius does not know?

              Headline: “Covid-19’s Toll on U.S. Business? 200,000 Extra Closures in Pandemic’s First Year”

              That would be EXTRA for the clueless out there and much more information on the internet. Story here:

              https://www.wsj.com/articles/covid-19s-toll-on-u-s-business-200-000-extra-closures-in-pandemics-first-year-11618580619

              “Next, those “dictatorial” Blue state restrictions and your claim that Red states faired “much much better”: got cite?”

              I did your homework once (above), NOT doing it AGAIN.

              “Because if that were actually true, then why did Bloomberg on 26 Aug 2021 report that the Blue-Red economic divide has gotten bigger … and in favor of Blue?”

              My, my, my, a Leftist SIMPLETON is now projecting non-truth by association. First and read carefully, Bloomberg is BIASED and as FAR LEFT as they come in the business media shilling for the White House. Two, the story LIES BY OMISSION a well-known Leftist tactic that SKEWS the truth. Is this too difficult to wrap your head around?

              “Specifically, Blue’s 64% of GDP in 2016 is now 71% of GDP.”

              Where is most of the Covid Stimulus relief money going? Would that be Blue cities and states? More divisive politics? Washington manipulating numbers based on political favoritism.

              “Okay, what’s your next Faux talking point: Oh, oil production?”

              Okay, Mr. Snarky cheap imitation of Jen Psaki. DEFINE for the first time in U.S. history ENERGY INDEPENDENCE established by President Trump?

              Too painful, I know, its difficult to get away from all the biased media brainwashing that Leftists like you SWALLOW WHOLE reading on impact.

              “put up specific claims to be torn to shreds just like the above have.”

              LOL! The only thing torn to shreds is your tedious deflections; guilt by association; lying by omission and serious LACK OF CRTICAL THINKING SKILLS.

              Wake up lightweight, the truth is out there…

    1. And up again on Friday too…up +900 points since the article was published, before the week was out.

      Apparently, there’s things that the Market cares about more than just this headline… /s

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