This morning was the highly anticipated release of the Consumer Price Index. This is the index that many use to track inflation at the general public’s level. Is the everyday Joe paying more for items this year over last? That is definitely in the affirmative.
The CPI posted a year-over-year increase of 6.2%. A blistering pace for sure. This is well outside the supposed mandate of the Fed. Inflation hasn’t been this high since the 4th quarter in 1990. The dramatic increase that the CPI has taken in such a short time frame has only three precedents; 1950-1951, 1973-1974, & 1978-1980.
Even teasing out “volatile” food and energy items, the “core” CPI has done a double fake. It peaked, receded, and now is in take-off mode once more.
Bank of America’s fabulous Global Research team has the heatmap.
October’s surprise CPI print (6.2% actual, 5.8% consensus) was led by energy and food costs, as well as a continued increase in shelter costs. Rents are going to be the biggest cyclical driver of inflation. They are allocated a large percentage of the CPI and having back-to-back .4% increases pushes the CPI up quickly. It will be an important focus in future CPI data releases. We are also seeing a large increase in motor vehicles & parts. From personal experience, vehicle parts are becoming increasingly difficult to source. Back-orders and long lead times are now standard.
The year-over-year heatmap really lays out the full picture.
We are witnesses to the collapse of the “transitory” narrative. The continued strong rise in inflation is looking to be more sustained and perpetual than previously believed.
In the recent past when hot CPI, PPI, or PCE data was released, it was an occasion for traders to sell gold and buy the S&P500. This was because traders thought the Fed was in control and could flip a switch to kill inflation. Today’s market action is a giant yellow-light to those traders. This morning the S&P500 started with a large drop. It fought back but is now on the downhill slide once more. Gold (the yellow metal) has come on strong. It is currently up 1.43% on the day at $1856.90 per ounce. Silver has blown over $25 an ounce on the news.
Concerning yellow cake (better known as uranium), two articles have dropped recently that add to the “uranium is awesome” thesis.
The first is a press release from Rolls-Royce. Rolls has raised money for the development of a “Small Modular Reactor” (SMR). The CEO of Rolls-Royce, Tom Samson had this to say,
“Today’s announcement is fantastic news. Rolls-Royce SMR has been established to deliver a low cost, deployable, scalable and investable programme of new nuclear power plants. Our transformative approach to delivering nuclear power, based on predictable factory-built components, is unique and the nuclear technology is proven. Investors see a tremendous opportunity to decarbonise the UK through stable baseload nuclear power, in addition to fulfilling a vital export need as countries identify nuclear as an opportunity to decarbonise. The capitalisation of Rolls-Royce SMR takes us a step closer to achieving a unique, and most importantly investable, proposition in nuclear energy. It is a major vote of confidence in British nuclear technology and the potential for building a world-leading domestic supply chain.”
Rolls-Royce calculated that one of these SMR units could power approximately one million homes and occupy around one tenth the size of a conventional nuclear power plant. This isn’t Rolls first foray into nuclear power. They have had a hand in the UK’s nuclear submarine programs since the 1950s. This is another “feather-in-the-cap” for uranium miners.
In addition to this news coming out of the UK, France has announced that they will build new nuclear reactors for power generation. According to Reuters, France’s president, Emmanuel Macron, said
“We are going, for the first time in decades, to relaunch the construction of nuclear reactors in our country and continue to develop renewable energies”
Macron’s decision is said to be a way to keep energy prices “reasonable”. Macron wants “"to guarantee France's energy independence, to guarantee our country's electricity supply and achieve our objectives, in particular carbon neutrality in 2050". There are few details available on what exactly France has planned. Rumors state that the French government is planning on constructing up to size new pressurized-water reactors. An announcement is expected within a few weeks.
Uranium’s story will eventually hit the mainstream. It has way to much momentum at this point to slow down. Uranium miners no longer have a few feathers in the hats, they are sporting full-blown headdresses.