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| By Sean Brodrick |
This morning, I shared my favorite way to make sure your “keep safe” money growing faster than inflation.
I decided to follow up on that with some even more disturbing stats about how hot inflation is right now.
Since the war with Iran began on Feb. 28, higher energy prices have picked Americans’ pockets.
Iran’s blockade of the Strait of Hormuz is throwing a wrench into flows of crude oil, natural gas and refined products.
Prices of fertilizer, aluminum and other commodities are also increasing.
I want to focus on energy because this is firing up inflation across the board.
Higher crude prices are pumping up gasoline, diesel, home-heating fuel, air travel, freight and more.
Here’s a chart of how much prices of select items have gone up on average since the war began …
Brown University’s cost tracker estimated that Americans had paid an additional $100.9 billion for gasoline and diesel since the conflict began as of early September, equal to about $770 per U.S. household on average.
Sure, individual results will vary. A truck driver is getting hit a lot harder than a housebound retiree in Florida.
Here are some things that are particularly feeling the pinch …
Airline tickets have risen materially. The BLS airline-fare index increased 2.7% in August alone and was 23.4% higher than a year earlier.
Higher jet-fuel costs are a major transmission channel: Jet fuel in the U.S. nearly doubled over the first two months of the war, while airlines also faced airspace disruptions, longer routings, flight cancellations and constrained capacity.
Fuel costs don't flow through to fares instantly.
Airlines often buy or hedge fuel in advance, schedule aircraft and crews months ahead and set ticket prices based on both costs and demand.
So, we may yet see higher prices in the not-so-friendly skies.
Restaurant meals are also up. The CPI measure for “food away from home” — restaurant, takeout and similar meals — rose 3.5% since February.
This is happening because higher gasoline and diesel costs raise the expense of transporting food, packaging, beverages and supplies.
Fuel costs can also raise delivery and waste-hauling expenses.
Also, food production itself is energy-intensive, and fertilizer flows through the Strait of Hormuz, too.
But that kind of inflation pass-through takes months to play out.
Again, a lot depends on where you eat, and the rise individuals experience can vary wildly.
Restaurants’ menu prices also reflect wages, rent, insurance, food commodities and local demand.
Non-alcoholic beverages are up thanks to fuel costs. Higher gasoline and diesel costs raise the expense of hauling water, sugar, corn syrup, coffee, tea, fruit concentrates, cans, bottles and so on.
Since the start of the war, diesel prices have added about $350 to $410 per thousand miles to the fuel cost of operating a typical long-haul tractor-trailer.
That cost gets passed through to you, the consumer. Otherwise, truckers and retailers alike would go broke.
What we’re seeing in beverages is a good proxy for just about everything hauled by truck. And that’s just about everything.
When does all this end? When the war ends.
We don’t know when that is. But according to a Sept. 9 report in The Wall Street Journal, senior White House advisers told President Trump that the war with Iran could last beyond the next inauguration in January 20291
So what should investors do?
I’ve recently given you two inflation-fighting ideas.
For more speculative bets: In the Sept. 17 Weiss Ratings Daily, I told you about the Alerian MLP ETF (AMLP), and how that can beat inflation. You can read that column here.
For more conservative investors: This morning, I went into some detail on how Treasury Inflation-Protected Securities — TIPS — can be a good investment in inflationary times. You can read that again here.
It’s likely that Iran will keep sticking it to your wallet, as the war drags on and inflation sticks around.
The time to adjust your investments is NOW.
All the best,
Sean
