by Gary Alexander
July 23, 2024
The White House just raised its array of numbers across the board – and showed no shame in doing so, despite the upcoming election. The Office of Management and Budget (OMB) just forecast that the Consumer Price Index (CPI) will rise 3.1% this year, up from its previous target of 2.5%, and they also forecast that the 2024 budget deficit will rise to $1.87 trillion (6.6% of GDP) and then inch up to $1.88 trillion in fiscal year 2025, starting October 1, just five weeks before the Election Day of Judgement.
Will inflation really rise back to 3.1% this year? It depends on where you live, I suppose. I just returned from the Freedom Fest in Las Vegas, where the cost of a bar drink in our conference there tripled, from $8 to $24 at the same host hotel from two years ago. The drink cost the same in our rooms: $24 for a 1.5-ounce nip of liquor, or $15 for a small bottle of water or soda – and don’t you dare lift it up to count the ounces or you automatically get charged by a little magnet underneath. Your room rate is reasonable, but you get charged $53 more per night for a “resort fee” and $100 a night for “incidentals” (like looking at a bottle). One speaker forgot to bring a jacket, so he shopped for one at the nearby malls and the cheapest jacket he found (of any quality) was $2,200. And don’t even ask about show prices or gambling odds.
So, I returned home last week to an $8,000 bill for clearing some trees (up from $5,000 five years ago), mostly due to higher labor costs, and a doubling of our property taxes over the last decade due to higher real estate prices in our desirable region. My auto insurance is up 60% in the last three years, even though I drive under 4,000 miles a year on a small island (at low speeds) and haven’t filed a claim in 40+ years.
I’m not complaining. I still work, save and invest a lot at 79, so I can afford it, but many retirees cannot. It’s what my children and grandchildren have to endure that ticks me off, so I propose action… soon.
Housing and Other Interest-Related Costs are Rising the Fastest
We share our retirement home with one of our children and two adult grandchildren (all from Portland) because they’re delightful people who help this aging couple around the house – and also because costs are rising in Oregon, and buying or renting is rising out of their reach. In Friday’s Wall Street Journal (“Get Ready to Pay More for Electricity”), we learn that Portland’s major electric company “this year raised residential rates by about 17%. The company is seeking regulatory approval for another 7.2% increase next year.” Electricity demand is soaring, but supply is flat due to Biden’s Green New Deal policies.
Our children (all in their 50s now) recently shared with us the online prices of the homes they remember so well from their youth. Our first two children were born in an apartment overlooking the Rose Bowl in Pasadena, for which we paid $75 a month in rent! When we were expecting our third child in 1972, we bought our first home on Las Lunas St. We “shot the moon” for $19,500, putting only $500 down, with FHA financing. We sold that home in 1979 for a four-fold gain at $79,000 and thought we were geniuses. But today, Redfin says that 1,727 square foot hacienda is worth $1.47 million, up 75-fold in 52 years.
These days, we have children and grandchildren living in San Francisco – where the average home costs $1.3 million – and Portland, where the average home costs $541,000, not counting rising taxes, fees, and insurance. The cost of buying a coastal home is prohibitive, even to my well-off Silicon Valley engineer grandson making six figures. Homes are generally more affordable in the center of the country, but the typical monthly mortgage cost has still virtually doubled in 2-3 years, from $1,746 in 2021 to $3,322 now.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
As I’ve mentioned here before, debt service is not included in the CPI, so mortgage costs are not part of the Fed’s target rate of 2%. You might argue that “owners’ equivalent rent” factors in some of that cost, but it does not cover rising car loan costs nor rising credit card debt, and those rates are soaring. Credit card debt levels have doubled in the last two years. The combination of higher rates (21.2% at end-2023 vs. 14.5% in 2021), and higher debt levels ($1.13 trillion at end-2023 vs. $775 billion 2021) yields $236 billion in annual credit card interest now vs. $112 billion in 2021 – more than doubling in just two years.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
Due to high and rising housing costs, The Wall Street Journal reported last Monday, July 15th (“Evictions Surge in Major Cities in the Sunbelt), that eviction filings in a half-dozen cities and their surrounding metropolitan areas are up 35% or more (vs. pre-2020 norms) in the last year, according to the Eviction Lab, a research unit at Princeton University. In Phoenix, landlords filed more than 8,000 eviction notices in January alone, the most ever in the Arizona capital in a single month. Nationwide, the asking rents for houses and apartments are up 30% between 2020 and 2023, according to the Zillow Observed Rent Index.
With most other household costs – food, energy, insurance and more – up about the same, many working families cannot afford rent and are being evicted, so I have a humble proposal for the Federal Reserve.
To fight inflation, Chairman Powell, CUT INTEREST RATES NOW – on July 31st, and September 18th.
The next PCED – the Fed’s favorite inflation index – will be released this Friday, July 26. Then, the Fed’s Open Market Committee (FOMC) will meet next Tuesday and Wednesday (July 30-31), to set interest rate policy. If Friday’s PCED is mild enough, the Fed will have reason enough to make a small (0.25%) rate cut on July 31, to signal their intention, and then perhaps reduce rates more (by 0.50%) in September.
Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.
The blue line (PCED) is near the Fed’s 2% target, so with any luck it will hit 2% Friday and the Fed will act next week. Any rate cut will also reduce our service costs on the massive $34 trillion federal deficit.
It’s a win-win move, so “Bring down that interest rate wall against debtors and homeowners, Mr. Powell.”
All content above represents the opinion of Gary Alexander of Navellier & Associates, Inc.
Also In This Issue
A Look Ahead by Louis Navellier
The Best Tech and Energy Stocks Should Remain Strong
Income Mail by Bryan Perry
Riding Out Summer Volatility with the “Mag 7” Earnings on Deck
Growth Mail by Gary Alexander
“Mr. Powell, Tear Down This Interest Rate Wall!”
Global Mail by Ivan Martchev
It is Starting to Look like an Intermediate-Term Sell-Off
Sector Spotlight by Jason Bodner
Here’s Your “X-Ray Vision” Key to the Market
View Full Archive
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About The Author
![ab619710dec9c6c02dfd1eb445413061_f222](https://navellier.com/wp-content/uploads/2019/03/ab619710dec9c6c02dfd1eb445413061_f222.jpg)
Gary Alexander
SENIOR EDITOR
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
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