Why Cutting Back on Spending is the Stupidest Thing You Can Do During Rising Inflation

by Fred Fuld III

I’ve been seeing so-called experts on TV explaining about ways to survive during these inflationary times. They recommend such things as spending only the bare minimum when you go to the supermarket, buy just enough gas to get you through the next few days, and avoid going on vacation.

This is about the stupidest thing you could possibly due during a rising inflationary environment.

The best thing you can do is the exact opposite. When you shop for groceries, stock up on as many non-perishable as you can, such as canned goods (soup, vegetables, fruit, seafood), peanut butter, dried fruit, protein bars, oatmeal, honey, syrup, salt, sugar, spices, and bottled water.

Why? Because prices will continue to rise. You might as well pay lower prices now and have plenty to last you for a long while, instead of buying a little now and paying higher prices a few weeks or months from now.

You may have seen a previous post, called The Amazon Inflation Rate is Running at 68% Per Year, which showed that in a recent one-year period, the average price increases from items I ordered through Amazon increased by 68%, and even if you excluded the outliers, the items that more than doubled in price, the overall average increase was still an outrageously high 38%!!!

Inflation cannot be stopped immediately. It is not a light switch that can be turned off at any moment. It is more like turning around a giant ship, which can take a long time.

So, the same situation exists with buying gas for your car. Fill it to the maximum that the gas station has set for your credit card. (I keep hearing about people saying the pump stopped at $100 or $120.) You might as well fill your tank now instead of waiting a week, and paying 25 cents a gallon more.

As for vacations, why wait? Prices for flying will continue to rise. Airlines use petroleum fuel for their jets, and since the price of oil has been rising significantly in price, the airlines have to pass that cost along to their customers, along with all the other costs related to running an airline.

Plus, if you were considering traveling overseas, there is an additional reason to take your vacation now. The U.S. dollar is very strong compared to other currencies, so your spending will go a long way in many European and Asian countries.

Therefore, you should have no guilt about spending your money now. As a matter of fact, you would be doing yourself a financial favor.

Items Hit the Worst by Inflation

by Fred Fuld III

I’m sure you have noticed prices increasing, not just at the pump. But do you know what items have had the biggest price increases?

The following is a list of items with the biggest price increases according the the U.S. Bureau of Labor Statistics. These are the ones with a price boost of greater than 20%. year-over-year.

Fuel oil	43.6%
Gasoline, unleaded regular	38.7%
Gasoline, unleaded midgrade	35.6%
Gasoline, unleaded premium	33.3%
Other motor fuels	40.5%
Utility (piped) gas service	23.8%
Used cars and trucks	41.2%
Lodging away from home	25.1%
Other lodging away including hotels and motels	29%
Car and truck rental	24.3%
Admission to sporting events	20.9%
Private transportation	22.1%
New and used motor vehicles	23.5%

You will notice that average prices of used cars and trucks is up an incredible 41.2%. Admission to sporting events was up “only” 20.9%.

Hang on. These increases are only the beginning.

By the way, the picture shown with this article is way out of date. It is from four months ago. Prices in California are much higher now.

Top Inflation Hedge Gold Mining Stocks

by Fred Fuld III

It was just back in September when I wrote the article Top Gold Mining Stocks, almost six months to the day. In the article, I listed seven gold mining companies. The following shows the returns for those stocks.

Stock	Symbol	9/13/22	3/10/22	Gain/Loss
AngloGold Ashanti Limited	AU	15.5	25.73	66%
Caledonia Mining Corporation Plc	CMCL	12.36	13.49	9%
DRDGOLD Limited	DRD	9.15	10.14	11%
Gold Fields Limited	GFI	8.64	16.69	93%
Harmony Gold Mining Company	HMY	3.28	5.41	65%
Kinross Gold Corporation	KGC	5.75	5.66	-2%
Sibanye Stillwater Limited	SBSW	13.61	18.32	35%
AVERAGE				40%

As you can see, there was only one loser in the bunch, Kinross Gold (KGC) which was down 2%. However, all the others were up substantially. One, Gold Fields (GFT), almost doubled. The overall average return was 40%; not too shabby for a six month period.

Gold an Inflation Hedge & Recession Hedge?

Some studies have shown that gold may not track inflation during short time frames, but over long periods of time, gold has been considered an inflation hedge and a hedge against a downturn in the economy.

According to the U.S. Bureau of Labor Statistics, “gold prices can act as an indicator of the health of the economy. A rise in the price of gold may be a signal that the economy is struggling. As a result, in times of either a crisis or inflation, many investors turn to gold to protect their principal. By contrast, in times of economic stability, investors are more likely to turn to more speculative investments, such as stocks, bonds, and real estate. During these times, the price for gold often declines.”

(What is surprising about this statement is that stocks, bonds, and real estate are considered “speculative investments”. Does that make gold a “safe investment”?)

Top Gold Mining Stocks

So now that gold has started to move up, and recently broke the $2000 an ounce price barrier, what gold mining stocks have solid ratios now.

There are currently four gold mining companies that have trailing price to earnings ratios of less than 25, forward price to earnings ratios of less than 25, and yields above 2%. You will notice that only one stock from the old list, Agnico, made the cut for the new list.

Agnico Eagle Mines Limited (AEM)

Agnico Eagle is a Canadian based mining company with mines in Canada, Sweden, and Finland. The stock has a trailing P/E ratio of 23.3, a forward P/E ratio of 24.33, and pays a yield of 2.28%. Annual earnings per share growth for the last five years is 79%.

AngloGold Ashanti Limited (AU)

AngloGold, based in Johannesburg, South Africa, has mines in Africa, North America, South America, and Australia. The stock trades at 16.9 times trailing earnings and 12 times forward earnings. The dividend payout rate is 2.11%. Annual earnings per share growth for the last five years is 97%.

B2Gold Corp. (BTG)

The Canada based company, B2Gold, has three operating mines in Mali, the Philippines, and Namibia. The stock has a very favorable P/E ratio of 10.7 and forward P/E of 10.4. Even the price to earnings growth ratio is a commendable 0.53. Annual earnings per share growth for the last five years is 33%.

Sibanye Stillwater Limited (SBSW)

Sibanye is a South African company that has mines in South Africa, the United States, Zimbabwe, Canada, and Argentina. The stock has an excellent price to earnings ratio of 6.2, with a forward P/E of 12.2. Annual earnings per share growth for the last five years is 41%.

Maybe one of these mining stocks can provide your portfolio with a pot of gold.

Disclosure: Author owns BTG

The Amazon Inflation Rate is Running at 68% Per Year

by Fred Fuld III

You might have noticed price increases at the pump. In California, if you can find gas for less than $5 a gallon, even regular, it’s a bargain.

Or maybe when you checkout at the supermarket, you noticed that your bill is a bit higher than normal.

If you have noticed these things, then you are starting to feel the effects of inflation.

According to the United States Government Bureau of Labor Statistics, in October, the Consumer Price Index for All Urban Consumers rose by 6.2 percent over the last 12 months.

I personally think that that rate may be a bit too low. Why? I did my own analysis of a random sample of purchases made through Amazon (AMZN) over the last twelve months, comparing what I paid in the past to what the current price is now, and the results were shocking.

These items included such things as office supplies, food, vitamins, toothpaste, book, disposable masks, garden hose, and even a robot vacuum.

The lowest increase in price was for a 40 ounce bag of raw whole natural Blue Diamond almonds, which increased in price by only 5%.

The next lowest increase had a substantially higher price rise. Scotch Heavy Duty Shipping Packaging Tape went up by 15%.

Now for the big increases. Surprisingly, snack foods had the greatest rise in prices. Crunchmaster Multi-Seed Crackers almost tripled in price by rising 194% and Sensible Portions Garden Veggie Chips spiked by 173%.

Both BROOKSIDE Dark Chocolate Candy with Acai & Blueberry, and a 21 Ounce Bag Dulzura Borincana Sesame Seed with Honey and Almonds doubled in price. (I guess now you can see the kinds of snacks that I like.)

However, what is most interesting is the overall average of the price increases. Based on the rate of increase in cost over the last year for more than 25 different items purchased on Amazon, the average of those percentage increases is 68%!!!

Even if you exclude the high increase outliers, the ones that more than doubled, the overall average price increase of the remaining items is 38%, still extraordinarily high, and way above what the government reported.

Here is a list of the items below:

Anycolor Compatible Label Tape Replacement for Brother M Tape	39%
Blue Diamond Almonds, Raw Whole Natural, 40 Oz	5%
BROOKSIDE Dark Chocolate Candy , Acai & Blueberry, 21 Ounce Bag	148%
BUMBLE BEE Premium Light Tuna in Water, Ready to Eat Tuna Fish	21%
Columbian Clasp Envelopes, 10 x 13 Inches, Brown Kraft, 100 Per Box	44%
Crunchmaster Multi-Seed Crackers, Artisan Cheesy Garlic Bread, 4 Ounce	194%
Disposable Filter Masks, Eventronic 3 Ply Face Masks, For Home & Office (50 Pcs)	20%
Dulzura Borincana Sesame Seed with Honey and Almonds	134%
FIJI Water Artesian Water, 16.9 Fl Oz (Pack of 6)	34%
Filexec, 93630, Art Presentation Book, 24 Pocket, 11″ x 14″, 1 Each Black	25%
Hammermill Paper, Copy Plus Paper, 8.5 x 11 Paper, Letter Size, 20lb Paper, 1 Ream	53%
Hermard 50ft Expandable Garden Hose with 9 Function Nozzl	32%
KIND Bars, Dark Chocolate Mocha Almond, Gluten Free, 1.4 Ounce, 12 Count	26%
Krazy Glue Home and Office Brush-On Glue, 0.18 oz	74%
NOW Supplements, Vitamin D-3 5,000 IU, High Potency, 240 Softgels	32%
Polysporin First Aid Topical Antibiotic Ointment with Bacitracin Zinc	54%
Puritans Pride Lutein 20 mg with Zeaxanthin Softgels, 120 Count	94%
Samsung POWERbot R7040 Robot Vacuum	159%
Scotch Tape Heavy Duty Shipping Packaging Tape, 1.88 Inches x 800 Inches, 1 Pack	15%
Sensible Portions – 30357 Garden Veggie Straws, Sea Salt, 1 oz. (Pack of 8)	20%
Sensible Portions Garden Veggie Chips, Sea Salt, 7 oz.	173%
Sensodyne Pronamel Intensive Enamel Repair Toothpaste for Sensitive Teeth	62%
Seresto Flea and Tick Collar for Dogs, 8-Month Flea and Tick Collar for Large Dogs Over 18 Pounds	38%
The Family Upstairs: A Novel	114%
Triple Leaf Tea Jasmine Green Tea, Decaffeinated, 20 Count	25%
V8 Juice, Original 100% Vegetable Juice, 11.5 Ounce Can (Pack of 24)	138%
AVERAGE RATE OF INCREASE	68%
AVERAGE RATE OF INCREASE excluding doubling outliers	38%

If you are an avid Amazon shopper like me, you can do your own analysis. Just click on the Orders link, choose 2020, click on View Order Details to get the price you paid, then click on the Order Again button to see what the current price is. Once you have that, subtract the price paid from the current price, then divide that result by the price paid, and that is your percentage increase.

Of course, maybe I have a tendency to only buy things that happen to have a way of significantly rising in price. Or maybe not.

This increase in prices certainly doesn’t come close to Zimbabwe’s previous hyperinflation, whereby $100 trillion dollar bills were issued. However, it is a wake-up call.

Let me know what your Amazon inflation rate is.

Disclosure: Author owns AMZN and also has a short vertical call position in AMZN.