Inflation is just getting started
Inflation is just getting started. At some point the Fed is going to have to slam on the brakes - not tap the brakes - slam on the brakes. And that will pop this historic asset bubble but only until the Fed steps in even BIGGER - which they will. If I'm right, 70's-style inflation is guaranteed. When I worked for Arthur Laffer, we did a deep dive into the root causes of 70's inflation. I think Milton Friedman's equation for inflation: "too much money chasing too few goods" is exactly what we have currently in the world economy.
Please read and think about today's Producer Price Index (PPI) number. The chart above reveals how margins are taking a hit from the difference between producer prices (raw materials) and end prices (for the consumer).
Obviously, a high and rising PPI is bad for corporate margins so I would expect companies to continue raising prices which will push the CPI much higher - OR - risk a degradation of their margins (which have been reported as high as you know).
My theory on why corporate margins are so high is that the laggards, commodity producers, with traditionally low margins, are enjoying high commodity prices so their margins are high (bringing up the rear). Also, tech firms are growing their share of the economy and their margins are high - both skewing the margin picture higher for now. In the middle are cyclicals, especially consumer products companies.
Either way, CPI is going to be pushed higher from underneath as rising PPI forces companies to raise prices even more than they are already. This inflation thing is not transitory.