New Inflation Report and Amazon Crushes

We dive into the latest inflation and unemployment reports and what they mean for us as investors and consumers. We also jump to talking about earnings season, consumers still spending money, Amazon having a huge prime day event, and more!

As always, thanks for listening! 

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Eddie Thomas: 0:00

Hey, what's up guys? This is Eli finance in between podcast you already know, I'm your host, Eddie Thomas. And this is brought to you by wealth management services in Hershey, PA. How's everyone doing? Hope you're well hope everyone's Well, I'm recording this on a Friday. So I hope everyone had a good week going into the weekend. And if you're hearing this after the weekend, I hope you had a good weekend. I don't really think I have too much planned for mine. Honestly. No, I think it's gonna be taking it easy. Last couple of weekends, I was out golfing or at concerts. And I think I just want to take it easy this weekend. The one concert I went to in the past couple of weeks. With my girlfriend out in Pittsburgh, the band camino. If you guys don't know who they are, I highly recommend checking them out. But musics not for everyone. It's kind of like alternative rock kind of stuff. But one of my favorite bands for sure I'm actually wearing this shirt. I know this is audio, but I'm wearing this shirt from that concert. It's a long sleeve. And it's probably about 75 to 80 degrees in this room. So it's probably a bad call but but highly recommend the music and the concert was awesome. Concert was actually super cool. So that's really what I've been up to just concerts and golfing and not getting better at golf. So there's not much to report there. Even though I've been playing more, but it's all good work in progress. It's a work in progress. Like anything else. I play it like three times. And I'm like, why am I not unreal at this sport. It's because I only play three times and don't practice. Just one of those things. But like I said, hope everyone going into weekend has a good one. If it's after the weekend, you're hearing this, I hope you still had a good one. Hope you still had a good one enjoyed the summer weather. But let's get into it. Let's get into it. Guys, what I wanted to talk about today is we just recently got the inflation report inflation report back for June to the sad music. So I'll go over that. I also want to talk about today it was a good day in the market. And I kind of want to talk about why or potentially why. And then we'll wrap things up with some talk about Amazon and maybe throw some other things in there in between. But let's just go and get right into it. So we'll start with the bad news first. I'm kind of I'm one of those people that if you're asking me, you want the good news of the bad news, you always always take the bad news over says I want the good news first, when it's like a good news, bad news situation. I don't know why you leave like get yourself built up to get let down. No one's ever like yes, give me the good news. So I can feel good, and then crush me with the bad news. It's never been a thing. So let's start with the bad news. inflation remains there pretty high at 9.1%. Year over year from June 21 to June 22. It was up like 1.3%, from May 22 to June 22. So another increase there month to month. What was the cause it was a lot, a lot driven by gas and energy prices as we can expect and also food, which was driven by gas energy prices. So the story stays the exact same on and on inflation. And it's that energy prices are driving most of it. I think they're up like something like 60% year to date or year over year. So significant increase, and it's continued to driving inflation higher. However, what we've seen kind of towards the latter half of June, and then starting in July midway through July here was gas prices starting to come down, I think we had our first couple of weeks in a row where gas prices were lower, or at least getting lower. So we're hoping that remains as steady as possible. And hopefully, hopefully that remains true. Because I really do think once gas prices, energy prices come down consistently. And over time, we will see inflation come down because of that. The good news about the inflation report is core CPI, which if you don't know what core CPI is, Core CPI is the same gauge for inflation, which is CPI Consumer Price Index. But core CPI takes out two components and it takes out food and energy. So it's a reading on the rest of the pretty much economy and what inflation is there. And the reason being is because energy drives a lot of inflation, and so does food prices. So it's kind of nice to know what outside of those two categories. What is our inflation rate, and it's actually lower, it's at 5.9%, which is not great, but it's getting better. The core CPI actually peaked in March at 6.5%, which is leading some to think that that's a potential sign that inflation is either peaking or We're nearing the peak. Because when it's driven by energy and food, like I just said, when you take those two out of it, it actually peed somewhat in March, when you add those two back into it, it's still up in June. And we'll see what July has, when August rolls around, we get that report. So that's the one good news about inflation is at the core CPI, potentially showing signs of peaking, which is really good, long term for actual inflation. But we really, really just need energy prices to come down. That's really where we're at. So once those energy prices come down, ideally, ideally, we're in a better spot there. So one thing not infected infected by inflation. And this is kind of half joking half serious, I actually admire the company for doing this is Costco is like hot dog combo sale. That is the only thing I feel like that hasn't been impacted by inflation. So it started in 1985. And if you got a hotdog combo, from Costco in 1985, it cost you $1 $1.50. If you walked into Costco today, and you got that same deal, it costs you $1.50. And they like the CEO, like refuses to increase the price of that hotdog combo, which claps for that guy. A couple slow clap for him, because that is admire double that. And I don't know how much Costco is really eating on the price. You know what I mean? Like, I don't think it's really cutting into the bottom line. But the idea that they're staying their ground on something like a hotdog combo, I think is admirable. And while I'll never buy it myself, I actually think it's a really cool thing for the communities there in that you could still have a very low priced meal that, undoubtedly in any other food or rest of the food, business or restaurant, whatever you want to say, would be up over since 1985. But kudos to Costco and being the owner having the only service or product that has not been impacted by inflation. Hopefully, other companies can take suit and take lessons from that. But that's kind of what inflation is looking like at the moment. It's not great. But what is good is unemployment is staying very low. At 3.6%. We saw those numbers over the past week or so. We actually added like 370,000 jobs in June, which I don't know if we're always going to be adding jobs. I've talked about unemployment a decent bit in the past couple of weeks, because it actually is very important. And it's important that it's staying low, it's showing a really strong job market. And when people have jobs, people spend money, and people spend money the economy does well. And as the other things kind of suit figured themselves out, like we've talked about supply chain energy, if we keep unemployment low, and the economy continues to do well and expand, we're going to be in a really good period for stocks at that point, because people are spending money and the economy is growing. And we won't have the hiccups like we do now. So we need or we want unemployment to continue to stay low. And the more jobs we start and keep adding the better, which is really good. And a sign that unemployment is low, and people have money and they're still spending is today it was actually a really good day in the market. And it was based off of or at least the first domino to fall that made it a good day in the market was in the first couple of earnings that are coming out for companies, retail sales are remaining strong, meaning people are still spending money, people are still spending money and spending more money. And now I know a lot of that can be attributed to the idea that things cost more like if you dive into it, and you see what exactly is driving retail sales, it's gas stations, it's online sales, it's bars, and it's restaurants. So yes, those categories obviously impacted by inflation, which means people are spending more money on the same amount of product that they weren't getting before you fill up your tank, instead of costing 50. It cost 75 You get a couple shirts and cut instead of costing 25 and might cost 30. Like those kinds of things. Your your beer at the bar might cost$1 Extra more than it was before your burger at the restaurant instead of 14 it might be 16 Those kinds of things. But even though a lot of the retail sales being strong is driven by higher prices overall, is still showing that people are willing to spend money. And even though we're in a high inflationary environment, unemployment remains low. People still have money to spend and that's a promising thing for the economy. We'd be more concerned and I'm not saying retail earnings are always or sales are going to continue to remain strong. But when they drop off a cliff is when you kind of have to dive in and see why because that means people aren't spending money. There's saving more money, and their confidence is decreasing. But at the moment, if retails or retail companies are showing that they have still strong sales, even though things cost more, it means the consumer is pretty much okay with that as much as you can be, and is still continuing to spend and continuing to live our lives. And I think a lot of that is based off of the last two plus years, we felt like we couldn't. And we're still kind of working our way out of that. So the fact that we can go out to bars and restaurants and feel safe, and there's other people there, and it's a good environment, and you want to be there and you want to have those experiences again. And same thing. Gas stations, obviously, no one likes putting gas in a car. But the reason you're doing so is because you're taking road trips, or you're taking, you're driving to work, you're seeing people, you're going to restaurants, you're doing things, so you got to fill up the tank in your car, and online sales. I don't think that's how we shop nowadays. But it's showing us that, like I said, people are willing to spend money, people are still okay. Even though we have high inflation, people are still in decent enough spots where they're doing this discretionary spending, which is actually a huge thing for you in the economy and actually love that. I love that that's coming out of retail earnings at the moment. So I'm going to keep my eye on those things definitely going forward. But it's a really bright spot with regards to the overall kind of temperature of things. And I think that's why the market had such a good day on the back of that news, which is cool. And I mean, the one retailer, especially in June, especially middle of June, that everyone do, they're talking about or been on the website or buying something from is obviously, Amazon. Amazon just had their Prime Day, which is pretty much everything on not everything. But a lot of products on Amazon's app or website and a are have unbelievable sales. Think like Black Friday, but on to over 48 hour period and middle of July for Amazon. That's pretty much what it is. And so taking a look at what they did, they did $12.5 billion in sales with a B with a B 12. Point 5 billion. And that's up 17% year over a year. So again, a slightly because of inflation slightly. However, when you have all the sales that they've had, you kind of almost take the inflation number out of it a bit. Because I mean, they're on sale cost less than they would just normal sticker price. And so I don't know of you guys, anybody out there listening? I don't know if you guys listening were part of that$12.5 billion. I was not I was looking for a TV, and they did have some pretty good deals for him. I'm not gonna lie. But it was one of those things where like, do I did I really need it need it? No. And there was really nothing else. Like, there was nothing, I felt like I really need this and this sale that Amazon's having is gonna push me over the edge of buying it. But obviously, when you're$12.5 billion in sales, other people needed something or they wanted something and bought it. So showing 17% year over year growth, and that is, is actually phenomenal for Amazon and phenomenal for another kind of factor pointing towards people have money and people are spending and that's long term, a positive. And we need to continue that. And in the meantime, like I said, we bring energy prices down, we're gonna be okay. Things are gonna be okay. It just takes time. And there's there's positive science coming out. So the other thing last probably last thing I'm going to talk about here, because it's it's one of those things where everyone's talked it coming. And I don't know how many people are gonna be okay with it. But the company needed to do something is Netflix is gonna have ads. At this point. I don't know. I'm not sure what, how much of that price. That tier is going to be for subscriptions. But they're partnering with Microsoft to put ads onto their platform for I guess, I think a lower priced subscription to you. And I'm probably going to use it honestly, I don't really love paying 15 bucks a month for Netflix when I don't have show like I'm currently not watching anything on Netflix. I watch stranger things and I finished that. I finished the first seven episodes and like two days, eight episodes. And then when nine and 10 came out, it took me two days to get through those and then I have nothing to watch on Netflix until the next show comes out and I don't even know what that's going to be. So I don't love paying 15 bucks a month for Netflix when they're very slow and getting content out that I enjoy. So the fact that there's gonna be a lower tiered product that they put out, lower priced product that they put out I'm gonna probably, I'm gonna probably end up buying that. And I'm okay with watching like a minute or a minute and a half of ads like that just is what it is. I grew up watching TV on actual cable. There was ads all the time. I'm used to it. I think we're all used to it. So they won't, it won't. It won't kill us to watch them at thing we're going to be okay. But I'm curious how much that's gonna cost? And if you're asking, Why did they do this? Over the last six months, especially Netflix has shown that their subscriber growth is stalling out to the point where they're starting to forecast, we're starting to lose and forecast continuing losses of subscribers, as a ton of streaming services are entering the world of streaming, and they're giving Netflix a ton of more competition that Netflix has to deal with. And when you got the likes of Amazon, and Disney and Apple and Google with YouTube, like your, your shop and Netflix of creating and producing content gets much, much more difficult to keep people on your platform. And they're seeing that now. So I think they're they're taking ads for two reasons. One, giving people a lower priced, subscription tier will drive more people, hopefully back to Netflix, at least that's what they're hoping because it won't be as much cost to it. Secondly, it gives them a huge, huge revenue bump or stream of revenue, because now they have they still have a ton of subscribers. So companies that want to run ads on there are going to pay, I assume, I don't know for sure. But I assume they're going to pay a pretty penny to get ads in front of people. So it's going to open up a huge revenue source for them and hopefully drive subscribers back into the platform. They said for a while they never wanted to do that. But obviously when you're going through trying times like Netflix is as a company right now and you're trying to find your way through a very much so a changing environment. After you had a couple unbelievable years through COVID I guess you tried to make a big splash and make a big change and see how it works out. I think end of 22 is when that's rolling out there. So we'll see. I'll probably buy it. I'm not gonna lie. I'm not gonna lie, I'll probably buy it. But that's kind of that's kind of it for today. That's kind of it for today. I guess inflation is up but core inflation is decreasing. So again, it's there. It's the lights there at some point. We just need energy prices to come down and we need food prices to come down. We're going to be in a better spot. unemployment still low. People are still spending money at retailers Amazon's crushing and Netflix. Netflix is starting to do that. So that's really it. That's really it guys, enjoy your weekend. Like I said if you're listening this after hope you had a good weekend. I'll talk to you guys on the next one. Until then stay happy, stay healthy, and I'll see you. Securities offered through securities America Inc. Member FINRA slash SIPC. advisory services offered through securities America advisors Inc. Wealth Management Services and securities America are separate entities. The opinions and forecasts expressed are those of the author and may not actually come to pass. This information is subject to change at anytime based on market and other conditions and should not be construed as a recommendation of any specific security or investment plan. 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