Thursday, November 4, 2010

I am buying a Freezer

By now the chart circulating the web showing raw material prices skyrocketing, but CPI at almost zero.  Here is  a similar look.  But those days are ending.  Grocery store margins have been squeezed to the end.  Please read from the Wall Street Journel today

WASHINGTON - Get ready to pay more for groceries and restaurant meals as food prices outpace inflation. Grocery chains, including Safeway, say they plan to pass the costs along to you, The Wall Street Journal reports. Food makers, Kraft Foods, Sara Lee Corp. and General Mills, in August said prices would be going up. Now, Kellogg's is hinting the same thing. Some food makers are targeting the $1 price point and then changing their package sizes to get you to buy.
Why are food prices going up? Demand for meat in China, India and other markets is driving up prices for grain. That in turn leads to higher prices for chicken, steak, bread and pasta. A drought in Russia, problems with planting and speculative trading have further driven up grain prices, the Wall Street Journal says. Walmart says customers should expect "very moderate" inflation next year. Weis Markets says it will hold firm on keeping prices down for as long as it can. Fast food joints and restaurants say you should plan to pay more. McDonald's expects a 2 percent price increase in the U.S. Domino's Pizza is letting customers decide what to pay. You can spend $2 more to upgrade one pie to a premium pizza, if you buy two medium, two-topping pizzas for $5.99 each. Morton's - The Steakhouse increased its prices in July, saying it believes people going out to eat are flexible with what they are willing to pay. "
I already installed solar panels, and put in a garden.  Now it is time for the freezer.
We are going to get a great economics lesson take place before our very eyes.  It is the elasticity of demand and the process of substitution.  The American people have no savings and no access to credit, I would start researching stocks in companies that sell want to's, but to the middle class.  They will suffer the most, IMO.  This will get ugly fast, and this is what kills the Fed. 
Brings back an oldie, but goodie.

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