Above the Fold

Inflation Has Always Been “Lumpy”

There’s no doubt Americans and consumers across the world are feeling the effects of what have been some very intense, acute and rapid price increases. First and foremost, we should point out that we don’t think this is an easy time for anyone, and though some price increases are here to stay, others should correct lower once demand cools and global supply chain disruptions are restored.

But what we all must realize is that prices don’t typically rise in a linear fashion. Your local diner doesn’t raise its prices 3.5% annually, but rather makes adjustments within the business to either account for input cost changes or maybe shrink the portions a bit. And once every few years or even longer, menu prices may get a bump. In other areas, such as tech for instance, innovation and globalization of resources has actually brought prices down across a myriad of devices and services. I mean, the first Apple Macintosh cost nearly $6,500 in 2022 dollars.

The point is that many businesses and consumers are likely using this severe rush of inflation to adjust prices, habits and strategies that they may have been putting off for some time. It’s also likely that once these adjustments have been made, and global economies reset, we should see stable prices (or even some declines) for an extended period (hopefully). History has shown us that high prices are often a cure for high prices … in other words, civilization finds ways to redirect or adjust itself when large imbalances occur. 

Three Things 

1. Cheap Airlines, Unite! – Frontier Airlines has agreed to buy Spirit Airlines for $2.9 billion in a cash and stock deal. The merger will create a discount powerhouse that can grow at a quicker pace, according to executives. The deal still has to pass regulatory scrutiny, but if approved, will allow the new entity to expand its flights to more underserved destinations, including international locales in the Caribbean and Latin America. The new entity, which will reportedly keep the Frontier name, will be the fifth-largest American airline. 
2. Is Someone Buying Peloton? – While its high-priced stationary bikes were all the rage during the pandemic, shares of the health-tech company Peloton Interactive had slumped below their 2019 initial public offering price. But after pressure from activist investors, it’s being reported that the bike-maker is drawing interest from several suitors, including Amazon, for a sale. A potential buyer could get shares at a discounted price, but would also have access to its largely wealthy client base for marketing purposes. Amazon’s current structure (a Peloton subscription could be a Prime add-on) and its war chest of cash certainly makes it a very viable candidate, but no formal deals have been announced. 
3. China-Made Tech Rampant Across American Networks – In an effort to improve data security across the country, the Federal Communications Commission instituted the Supply Chain Reimbursement Program in 2020. The program was intended to reimburse/incentivize cellular carriers for removing and replacing 5G telecom equipment made in China by companies like Huawei and ZTE, which might cause a national security threat. Initially estimated to cost $1.8 billion, potential reimbursement applications have ballooned to $5.6 billion. Of course, Congress has to approve the additional funds. 

Did You Know? 

Japan’s Deflation Problem

Most of us are probably wishing that our fuel and automotive prices would drop, but deflation could be a worse problem. Imagine your home never appreciated in value, or that your business profits never grew. Japan has faced this struggle for years and its government has been unsuccessful at sparking inflation since the Great Recession. In fact, as the world saw inflation start to jump from 2020 to 2021, Japan’s prices fell. Economists believe the main reason is that consumers have been trained to expect stable prices, and by their actions, hold prices down.