The Fight Against Greedflation

For most of my life I have handled my own investing. My dad spent most of his working life as an investment advisor, so from the time I was 16 I knew all about mutual funds, the stock market, the Rule of 72 and the vast and complicated world of money management. It’s truly one of the greatest gifts a parent can bequeath upon a child. Somewhere around my mid forties, however, I realized it was time to hand my portfolio off to an investment firm.

The computer age brought with it instruments that drove the market in irrational ways, and my dad’s strictly rational approach to investing went sideways. I don’t handle the day-to-day movement of my investments any more, but I am an even more avid follower of America’s financial system. The ebb and flow of the market is somewhat predictable from a long-term point of view, though decidedly unpredictable in the short term.

Let’s look at what’s happened in the market just over the last two weeks. Normally, having historically low unemployment, historically high job creation and record-breaking earnings from the Forbes 100 would mean constant, steady growth for the stock market. Unfortunately, the inflation that began with the recovery from the COVID-19 global pandemic has thrown a gigantic wrench in the works. Inflation continues to rise, which in turn causes the Federal Reserve to raise interest rates, and any hint at an interest rate raise (or even just a delayed reduction) sends the market into a tizzy.

This is not logical, but it is what

This is not logical, but it is what consistently happens.

Ironically this vicious cycle is not at all out of the control of we, the American consumers. We make choices every day that absolutely enable what has been called “greedflation,” the new buzzword for corporate greed pushing inflation higher.

Let’s look at one easy case in point. My daughter and I love Chipotle. What’s not to love about a place where you can pick and choose whatever you want on your quesadilla or tacos or inside your burrito? Well, Chipotle decided that they were going to start jacking up their prices after the COVID recovery and have continued to do so long after the recovery ended. Their CEO said their foot traffic was higher than ever, so he was planning to continue to raise prices. This is an example of consumers enabling and even encouraging greedflation. As much as we love Chipotle, there are other places to get a burrito and we simply don’t eat there any more. We went from eating there 3-4 times a month to never eating there, but apparently no one else got the memo.

In the first quarter of 2024, Chipotle raised their prices by as much as 7%, depending on where you live, and yet their overall customer traffic grew more than 5%. Congratulations. By continuing to give your business to a company that’s charging more just because they can you are assuring that they will continue to raise prices. Don’t complain about it, don’t blame President Biden or even corporate greed. Take a long, hard look at yourself in the mirror and recognize the only cause of the problem. When restaurants raise prices don’t grin and bear it, choose another place to eat. Better yet, choose to eat at home.

So now, let’s revisit that stock market issue. Earlier this week we saw the market take a 500-point dive based on slowing economic growth, meaning consumer spending was down. But again, the reason the Fed continues to keep interest rates high is because consumer spending was still strong despite rising prices and rising interest rates. The Fed has been raising interest rates to try and encourage people to stop spending so much money, especially on non-essential things.

Ok, so putting it all together, the market drops off a cliff at even the slightest hint that the Fed might not lower interest rates. Why, then, does the market also drop when reports come in that the conditions under which the Fed will lower interest rates are starting to manifest? In a logical paradigm, the slowing of consumer spending would cause the market to rise in anticipation of interest rate cuts. That’s why I turned my investments over to a professional. Let someone who uses computers to run investment algorithms keep my investments ahead of irrational Wall Street investment algorithms.

Let’s be clear, though, we are not powerless and we do not have to be victims to the phenomenon of greedflation. As sure as we are the cause of it, we can also be the cure. If you’re spending hundreds or even thousands on concert tickets or sporting event tickets, don’t complain about the price of tickets. If you’re still frequenting establishments where prices are skyrocketing, don’t complain about those prices. You’re the reason they’re so high. Are meat prices through the roof? Easy enough. Eat more chicken. Kellogg’s Raisin Bran over $5.00 a box? Aldi’s is just as good at around $2.00 a box. There are a million ways to save money and slow down or even eliminate greedflation.

Let’s be smarter and end this economic pandemic together!

-B