Founders: Booming Structures and Fiscal Incentives Kick in

CPI

Oct 12, 2023

∙ Paid

You got to be nuts to think inflation is going away. Not only is government fiscal spending kicking in, but private money is now stepping in massively.

Good Morning. Things are looking good so far for Gold and Silver. But lets get CPI and any surprises out of the way first.

Contents:

Fiscal Spending and Long Term Inflation Ramps Up
CPI today.

1- Fiscal Spending is Booming

On page 4 of the JPM Weekly Prospects and CPI review below you will find an update on fiscal spending due to various government incentives. This is something we’ve been keeping an eye on since the Inflation Reduction Act went int effect. a big part of fiscal spending is subsidies. Part of subsidies, be they tax incentives, discounts, lucrative contracts or what have you almost always is contingent on the companies somewhat matching investment in the projects in some way

Bottom Line from the report:

You got to be nuts to think inflation is going away. Not only is government fiscal spending kicking in, but (and many don’t talk of this) private money is now stepping in massively.

Essentially these government investments in infrastructure are designed to get private money to match them down the line. Private money then steps in as their confidence in the new programs grow.

Here are 3 graphs from that page telling the story:

And that’s not all…

It seems every category has been revised higher. It seems the rate of investment by private firms has been under estimated.

Not only is the BLS revising jobs numbers lower after the headlines have passed as ZH notes consistently, we’re telling you gov’t is revising spending upwards afterwards as well. JPM downplays but notes smartly:

Looking under the hood suggests that some of the incentives provided by legislation enacted last year, such as the CHIPS Act or IRA, could be providing additional support to this strength in structures.

Implications: Inflation is higher than they say it is, but you knew that.

Silver Lining: Properly executed, this is spending intended to morph the economy out of Finance and back into Manufacturing, as we’ve noted will happen since the IRA was launched. Related to that is re-domesticating supply chains and becoming self-sufficient again.

The idea is eventually, the productivity gains pay for the inflation caused.

The key for investors is to have the companies that benefit from these changes in your portfolio.

This piece from last year is a must read for anyone looking to learn more about the changes engulfing us now