by Gary Alexander

December 21, 2021

“Inflation is always and everywhere a monetary phenomenon, in the sense that it can be produced only by a more rapid increase in the quantity of money ….”

–Milton Friedman, “The Counter-Revolution in Monetary Theory” (1970)

“Supply and demand imbalances related to the pandemic and the reopening of the economy have continued to contribute to elevated levels of inflation …. These problems have been larger and longer lasting than anticipated, exacerbated by waves of the virus. As a result, overall inflation is running well above our 2% long-run goal and will likely continue to do so well into next year.”

–Fed Chair Jerome Powell, December 15, 2021

Fed Chairman Jerome Powell finally retired the adjective “transitory” for inflation on November 30, but just before the Fed Chair threw in the towel on the “T” word, major political voices were still using it:

All of the economists that the President has been relying on suggest there iture to the inflation problem.” –Jennifer Granholm, U.S. Secretary of Energy, November 27, 2021

“This inflation that we’re experiencing is transitory. It is not going to be here for long.”

­–Representative Maxine Waters (D-Cal), November 28, 2021

Also, after months of denying that inflation exists, the Biden Administration now says inflation is good for the economy and his economists aver that inflation is “healthy” – and it doesn’t even hurt the poor!

In other words, “We didn’t create this new round of inflation – but if we did, it’s really a good thing.”

Now that inflation is with us, the establishment view is that inflation is good. The Fed always had a positive (+2%) “target” for inflation, as if losing two cents on a dollar each year (losing money at 1% interest) were a good thing. CNBC’s voice of the Establishment, Andrew Ross Sorkin, wrote in the New York Times last July that we should be grateful to have inflation – it is a “salve” on our economic wounds:

“Inflation has long been seen as the economic villain. That view is changing. For those who worry about growing inequality, inflation might be a salve, up to a point. A 2014 study of developed economies found that as inflation rose, income inequality tended to shrink. Inflation could be as high as 13 percent, the research found, and still act as an equalizer, shifting the benefits of economic growth toward lower-income individuals.”

–Andrew Ross Sorkin, New York Times, July 14, 2021

By his logic, if the rich lose money faster than the poor, that’s good because it promotes greater equality.

Nobel Prize winner Paul Krugman said the same thing – that inflation doesn’t really hurt the poor. As usual, he speaks in theory, not reality. In theory, debts are paid back in depreciating dollars. Big deal.

Instead, let’s look at a day in a lower-class worker’s life. For breakfast, cereals are up an average 45% (oats are up 95%, corn 22%, wheat 21%). The sugar on top is up 23%. Coffee is up 84%. That’s a bad start. The price of a used car is up by more than 30% in the last year. To fill that clunker’s gas tank, the gasoline at the pump is up over 50%. Here are sample food and energy price increases (year-to-date):

Alas, food and energy are subtracted from the “core” Consumer Price Index, so the poor are out of luck.

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Not only are food and energy subtracted to report “core” inflation, but the CPI only weights gasoline 4% in the CPI. That may be fine for an urban resident working from home, but for those with tough daily jobs commuting long hauls, a 4% fuel weighting is a joke. Same for food. Food and energy are half their costs.

The Consumer Price Index hit a 39-year high last month, but that’s not half the problem. In the real world, many necessities are rising faster. The CPI doesn’t fully measure skyrocketing housing costs. Rents in some parts of Southern California have tripled in a year. In Redlands, an $800 apartment now goes for $2,600. The median sales price of a single-family home in Austin, Texas is up 33.5% in the last year.

How the Inflation Genie Was Released from Ms. Yellen’s Lamp

“The ‘Build Back Better Act’ is a fully offset decade-long investment that will not add to near-term inflationary pressures.” –Treasury Secretary Janet Yellen in a memo to Senators, December 8, 2021

It’s hard to believe now, but before COVID struck America, in February of 2020, Fed Chair Jerome Powell said: “It’s not going to be easy to have inflation move up.” He told Congress, “Even with the very high level of accommodation that we’re providing… It will take time.” Back then, the Fed’s greater concern was that inflation would stay too low, below the Fed’s 2% target. Deflation was their bigger fear.

Then came COVID, after which the Fed released trillions of dollars into the economy, while the U.S. Treasury released other trillions in spending plans and “stimulus” funds – all in unprecedented amounts.

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

The first wave of monetary stimulus in the second quarter of 2020 was necessary, in my view, since we forcibly froze the economy, putting millions out of work. In the spirit of the Constitution and justice, we owed these workers and business owners some compensation for their forced losses beyond their control.

However, nearly all of the massive monetary creation and stimulus packages since mid-2020 have been politically motivated, untargeted, and excessive, in my view, causing a huge and powerful new round of inflation in every-day prices as well as most asset classes – stocks, real estate, energy, bitcoin – you name it. Checks were sent to over 80% of Americans rather than the truly needy; generous unemployment was added for 18+ months, even though jobs were going begging; renters were given a free pass on rent, even if they could afford it; and even the IRS postponed deadlines and required distributions – for everyone?!

Bitcoin has sagged lately, but it has still doubled from where it was a year ago (at $23,000). The boutique cryptos are up more: Etherium was $605 last Christmas and is $3,900 this weekend, up 545% in a year.

Even though Biden’s team now admits inflation is here, the White House and Congress are not convinced that all this “helicopter money” caused it. They point to ships at sea, or some other effect. Ed Yardeni tells it more like I see it, saying that inflation was unleashed by the $1.9 trillion American Rescue Plan (ARP), signed by President Biden on March 11, 2021. It was passed only by Democrats, with zero Republicans.

“The ARP, in combination with the Fed’s QE4, has been a textbook example of ‘helicopter money.’ The ARP package provided direct stimulus payments of $1,400 to individuals, extended unemployment compensation, continued eviction and foreclosure moratoriums, and increased the Child Tax Credit while making it fully refundable, plus $350 billion to state and local governments. The ARP was entirely deficit financed. The Fed added to the inflationary consequences of the ARP by monetizing $80 billion per month of the federal government’s debt during the first 10 months of the year. The Fed continues to do so but at a slower pace since November.” (Yardeni Research)

Last February 4, a leading Democratic Party economist – Larry Summers, top economist to both Clinton and Obama – opined in The Washington Post that Biden’s proposed ARP plan was too stimulative and too inflationary and included overly generous unemployment benefits that would “disincentivize the unemployed” from taking jobs. He was proven right, but it took Biden’s team 10 months to finally see it.

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

The price we pay is not just in food and gas, it’s in chronic worker shortages and supply shortages, since classic inflation involves “too much money chasing too few goods.” We have goods backed up while too much money is chasing those scarcer goods. The labor situation is similar. Employers are bidding up wages, but workers are saying, “No thanks, I’ve cobbled together benefits and earnings elsewhere.”

Larry Summers was right about the ARP’s negative effect on jobs and inflation. The extra $300 per week (above state and local benefits) kept many unemployed (especially with children) from taking jobs.

Now, we’re seeing the same arguments all over again. Treasury Secretary Janet Yellen recently sent the U.S. Senate a memo, “Fiscal Responsibility and the Build Back Better Act,” in which she assures us that the American Families Plan (AFP), if passed, “will leave our nation’s budget in an improved position” even if deficits rise (that’s Orwellian). Moreover, AFP “will not add to near-term inflationary pressures.”

Then again, she and the Biden team didn’t anticipate the inflationary outcome from “ARP” last March.

ARP/AFP? They look alike, sound alike, and may soon act alike: Big spending generates big inflation.

All content above represents the opinion of Gary Alexander of Navellier & Associates, Inc.

Please see important disclosures below.

Also In This Issue

Global Mail by Ivan Martchev
2022 Could Be “Like 2018 All Over Again”

Sector Spotlight by Jason Bodner
We’re Near “Oversold,” Ready for a Santa Claus Rally

View Full Archive
Read Past Issues Here

About The Author

Gary Alexander

Gary Alexander has been Senior Writer at Navellier since 2009.  He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks.  For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.

Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s.  He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division.  Before that, he covered the economics beat for news magazines. All content of “Growth Mail” represents the opinion of Gary Alexander

Important Disclosures:

Although information in these reports has been obtained from and is based upon sources that Navellier believes to be reliable, Navellier does not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute Navellier’s judgment as of the date the report was created and are subject to change without notice. These reports are for informational purposes only and are not a solicitation for the purchase or sale of a security. Any decision to purchase securities mentioned in these reports must take into account existing public information on such securities or any registered prospectus.To the extent permitted by law, neither Navellier & Associates, Inc., nor any of its affiliates, agents, or service providers assumes any liability or responsibility nor owes any duty of care for any consequences of any person acting or refraining to act in reliance on the information contained in this communication or for any decision based on it.

Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any securities recommendations made by Navellier. in the future will be profitable or equal the performance of securities made in this report. Dividend payments are not guaranteed. The amount of a dividend payment, if any, can vary over time and issuers may reduce dividends paid on securities in the event of a recession or adverse event affecting a specific industry or issuer.

None of the stock information, data, and company information presented herein constitutes a recommendation by Navellier or a solicitation to buy or sell any securities. Any specific securities identified and described do not represent all of the securities purchased, sold, or recommended for advisory clients. The holdings identified do not represent all of the securities purchased, sold, or recommended for advisory clients and the reader should not assume that investments in the securities identified and discussed were or will be profitable.

Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. Individual stocks presented may not be suitable for every investor. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. Investment in fixed income securities has the potential for the investment return and principal value of an investment to fluctuate so that an investor’s holdings, when redeemed, may be worth less than their original cost.

One cannot invest directly in an index. Index is unmanaged and index performance does not reflect deduction of fees, expenses, or taxes. Presentation of Index data does not reflect a belief by Navellier that any stock index constitutes an investment alternative to any Navellier equity strategy or is necessarily comparable to such strategies. Among the most important differences between the Indices and Navellier strategies are that the Navellier equity strategies may (1) incur material management fees, (2) concentrate its investments in relatively few stocks, industries, or sectors, (3) have significantly greater trading activity and related costs, and (4) be significantly more or less volatile than the Indices.

ETF Risk: We may invest in exchange traded funds (“ETFs”) and some of our investment strategies are generally fully invested in ETFs. Like traditional mutual funds, ETFs charge asset-based fees, but they generally do not charge initial sales charges or redemption fees and investors typically pay only customary brokerage fees to buy and sell ETF shares. The fees and costs charged by ETFs held in client accounts will not be deducted from the compensation the client pays Navellier. ETF prices can fluctuate up or down, and a client account could lose money investing in an ETF if the prices of the securities owned by the ETF go down. ETFs are subject to additional risks:

  • ETF shares may trade above or below their net asset value;
  • An active trading market for an ETF’s shares may not develop or be maintained;
  • The value of an ETF may be more volatile than the underlying portfolio of securities the ETF is designed to track;
  • The cost of owning shares of the ETF may exceed those a client would incur by directly investing in the underlying securities; and
  • Trading of an ETF’s shares may be halted if the listing exchange’s officials deem it appropriate, the shares are delisted from the exchange, or the activation of market-wide “circuit breakers” (which are tied to large decreases in stock prices) halts stock trading generally.

Grader Disclosures: Investment in equity strategies involves substantial risk and has the potential for partial or complete loss of funds invested. The sample portfolio and any accompanying charts are for informational purposes only and are not to be construed as a solicitation to buy or sell any financial instrument and should not be relied upon as the sole factor in an investment making decision. As a matter of normal and important disclosures to you, as a potential investor, please consider the following: The performance presented is not based on any actual securities trading, portfolio, or accounts, and the reported performance of the A, B, C, D, and F portfolios (collectively the “model portfolios”) should be considered mere “paper” or pro forma performance results based on Navellier’s research.

Investors evaluating any of Navellier & Associates, Inc.’s, (or its affiliates’) Investment Products must not use any information presented here, including the performance figures of the model portfolios, in their evaluation of any Navellier Investment Products. Navellier Investment Products include the firm’s mutual funds and managed accounts. The model portfolios, charts, and other information presented do not represent actual funded trades and are not actual funded portfolios. There are material differences between Navellier Investment Products’ portfolios and the model portfolios, research, and performance figures presented here. The model portfolios and the research results (1) may contain stocks or ETFs that are illiquid and difficult to trade; (2) may contain stock or ETF holdings materially different from actual funded Navellier Investment Product portfolios; (3) include the reinvestment of all dividends and other earnings, estimated trading costs, commissions, or management fees; and, (4) may not reflect prices obtained in an actual funded Navellier Investment Product portfolio. For these and other reasons, the reported performances of model portfolios do not reflect the performance results of Navellier’s actually funded and traded Investment Products. In most cases, Navellier’s Investment Products have materially lower performance results than the performances of the model portfolios presented.

This report contains statements that are, or may be considered to be, forward-looking statements. All statements that are not historical facts, including statements about our beliefs or expectations, are “forward-looking statements” within the meaning of The U.S. Private Securities Litigation Reform Act of 1995. These statements may be identified by such forward-looking terminology as “expect,” “estimate,” “plan,” “intend,” “believe,” “anticipate,” “may,” “will,” “should,” “could,” “continue,” “project,” or similar statements or variations of such terms. Our forward-looking statements are based on a series of expectations, assumptions, and projections, are not guarantees of future results or performance, and involve substantial risks and uncertainty as described in Form ADV Part 2A of our filing with the Securities and Exchange Commission (SEC), which is available at or by requesting a copy by emailing All of our forward-looking statements are as of the date of this report only. We can give no assurance that such expectations or forward-looking statements will prove to be correct. Actual results may differ materially. You are urged to carefully consider all such factors.

FEDERAL TAX ADVICE DISCLAIMER: As required by U.S. Treasury Regulations, you are informed that, to the extent this presentation includes any federal tax advice, the presentation is not written by Navellier to be used, and cannot be used, for the purpose of avoiding federal tax penalties. Navellier does not advise on any income tax requirements or issues. Use of any information presented by Navellier is for general information only and does not represent tax advice either express or implied. You are encouraged to seek professional tax advice for income tax questions and assistance.

IMPORTANT NEWSLETTER DISCLOSURE:The hypothetical performance results for investment newsletters that are authored or edited by Louis Navellier, including Louis Navellier’s Growth Investor, Louis Navellier’s Breakthrough Stocks, Louis Navellier’s Accelerated Profits, and Louis Navellier’s Platinum Club, are not based on any actual securities trading, portfolio, or accounts, and the newsletters’ reported hypothetical performances should be considered mere “paper” or proforma hypothetical performance results and are not actual performance of real world trades.  Navellier & Associates, Inc. does not have any relation to or affiliation with the owner of these newsletters. There are material differences between Navellier Investment Products’ portfolios and the InvestorPlace Media, LLC newsletter portfolios authored by Louis Navellier. The InvestorPlace Media, LLC newsletters contain hypothetical performance that do not include transaction costs, advisory fees, or other fees a client might incur if actual investments and trades were being made by an investor. As a result, newsletter performance should not be used to evaluate Navellier Investment services which are separate and different from the newsletters. The owner of the newsletters is InvestorPlace Media, LLC and any questions concerning the newsletters, including any newsletter advertising or hypothetical Newsletter performance claims, (which are calculated solely by Investor Place Media and not Navellier) should be referred to InvestorPlace Media, LLC at (800) 718-8289.

Please note that Navellier & Associates and the Navellier Private Client Group are managed completely independent of the newsletters owned and published by InvestorPlace Media, LLC and written and edited by Louis Navellier, and investment performance of the newsletters should in no way be considered indicative of potential future investment performance for any Navellier & Associates separately managed account portfolio. Potential investors should consult with their financial advisor before investing in any Navellier Investment Product.

Navellier claims compliance with Global Investment Performance Standards (GIPS). To receive a complete list and descriptions of Navellier’s composites and/or a presentation that adheres to the GIPS standards, please contact Navellier or click here. It should not be assumed that any securities recommendations made by Navellier & Associates, Inc. in the future will be profitable or equal the performance of securities made in this report.

FactSet Disclosure: Navellier does not independently calculate the statistical information included in the attached report. The calculation and the information are provided by FactSet, a company not related to Navellier. Although information contained in the report has been obtained from FactSet and is based on sources Navellier believes to be reliable, Navellier does not guarantee its accuracy, and it may be incomplete or condensed. The report and the related FactSet sourced information are provided on an “as is” basis. The user assumes the entire risk of any use made of this information. Investors should consider the report as only a single factor in making their investment decision. The report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a security. FactSet sourced information is the exclusive property of FactSet. Without prior written permission of FactSet, this information may not be reproduced, disseminated or used to create any financial products. All indices are unmanaged and performance of the indices include reinvestment of dividends and interest income, unless otherwise noted, are not illustrative of any particular investment and an investment cannot be made in any index. Past performance is no guarantee of future results.