Frederick J. Sheehan
The Producer Price Index for April was released May 14, 2014. The one-month change was +0.6%, after it rose 0.5% in March (revised to that figure in the April report). Foods rose 2.7% (+1.1% in March). In “All the Junk Food You Love is Pricier This Year,” Max Nisen writes on Quartz: “Chipotle’s [Grill – CMG: NYSE] food prices were up 34.5% last quarter in total, with big increases in [beef, cheese, avocado, and pork].”
Chipotle’s CFO John Hurtung laments: “While we want to remain accessible to our customers, we’re at a point where we need to pass along these rapidly rising costs.” Chipotle’s stock price was $505 at the close on May 14, 2014, up from $49 at the great liftoff on March 9, 2009
Nisen went on to report McDonald’s “has already boosted prices. McDonald’s CFO Peter Bensen suspects: “[Y]ou do see franchisees generally around the industry, not just McDonald’s, anticipating some of these higher input costs.”
Nisen also went on to discuss higher prices at Taco Bell, Pizza Hut, KFC (Kentucky Fried Chicken to those over 50: it was the Chipotle Grill or Facebook of the Go-Go Years) and Pepsi. Pepsi CEO Indra Noori discussed the situation as unintelligibly as possible: “The strength of our brands is clear in our ability to achieve consistent net price realization.” Whatever that means, family incomes are falling.
It seems doubtful Pepsi’ stock price will benefit, but analysts, accountants and public-relation experts are very well paid.
“Global bond rates dropped to their lowest levels of the year Wednesday, as central bankers signaled their determination to jolt the world’s largest economies out of their malaise. Investors piled into U.S., German, and British government bonds-used to price everything from mortgages to car loans-driving down their yields. The yield on the 10-year U.S. Treasury dropped to as low as 2.523%, its lowest level in more than six months. In Germany, 10-year bund yields fell to their lowest point in a year. The Journal‘s headline was “Nervous Investors Pile Into Bonds.”Note the “central bankers” comment. Only 9% of Americans knew who the Federal Reserve chairman was in 1979. These temporary celebrities’ [redundant – ed.] determination for the masses to believe “inflation is too low” knows no limits. They are determined to prevent “deflation.” Whether they believe that or not, all of the tendencies: among central bankers, the media, and Wall Street, will foster this myth. Martin Wolf wrote another irresponsible mandate in the Financial Times on May 14, 2014 with the headline: “Time for Draghi to Open the Sluice.” The top of the front page of the same edition drew readers to the column: “Time for Draghi to Pull Out Another Bazooka,” Martin Wolf, page 9.”