Inflation

[divs4ever]

They probably are more honest, there remains in the Brits a left over of ethics which was never there in the US..or here

that is disappearing over there as well , it would be easy to blame the influx on migrants over the last 30 odd years , but that is probably not so , more likely those willing to use cultural divides to their own advantage

time will tell will the current traditional parties fall into obscurity ?

 

[over9k]

Yeah, because it's a supply side problem, not a demand side one, and rates only pummel demand.

They also actually pummel at least part of the supply side too so bottom line is that rate rises aren't going to solve the problem in the way they normally would. It's structural.

 

[waterbottle]

What's the game plan if we actually do get stagflation?

 

[over9k]

What's the game plan if we actually do get stagflation?

pucker

 

[over9k]

What's the game plan if we actually do get stagflation?

Ok being serious, you buy what's inflating and you avoid what's getting pummeled by it.

Inflating: Labour & Oil are the big two (there's other stuff with supply issues but energy's the big one).

Getting pummeled: Housing.

 

[waterbottle]

Ok being serious, you buy what's inflating and you avoid what's getting pummeled by it.

Inflating: Labour & Oil are the big two (there's other stuff with supply issues but energy's the big one).

Getting pummeled: Housing.

Ok, so how do you fix stagflation?

 

[Dona Ferentes]

Ok, so how do you fix stagflation?

Rhymes with flagellation

 

[InsvestoBoy]

Time for a breather methinks. It could be a retracement, could be a consolidation, but I think it won't be up.

Now what?



If this is still an uptrend then this would be the place we start going back up.

 

[over9k]

Ok, so how do you fix stagflation?

You actually kind of don't - at least not without a massive change in global (not national, GLOBAL) birthrates.

A bounce in at least national birthrates would be a help however. Fact is that a shortage of labour, a GLOBAL shortage of labour in particular, is not something that can be solved in anything under a generational timeframe.

A lot of this is just the new normal now.

 

[over9k]

You actually kind of don't - at least not without a massive change in global (not national, GLOBAL) birthrates.

A bounce in at least national birthrates would be a help however. Fact is that a shortage of labour, a GLOBAL shortage of labour in particular, is not something that can be solved in anything under a generational timeframe.

A lot of this is just the new normal now.

You can also use immigration at a national level but those people still need to come from somewhere

 

[So_Cynical]

A think we will see a kind of stagflation, 3 or 4 years of interest rates between 4 to 5%, just enough to hurt the marginals but not really scare off the moneyed, just enough to knock any enthusiasm out of the economy and keep the house price steady, upwards pressure on wages, 4 years to slowly lower the debt burden inflating it down but not away.

 

[over9k]

"The consumer is still spending plenty, take a look at the data, they still have lots of disposable income and stimulus money in the bank, they're just spending in different sectors. Foot traffic in shopping centers is way down but casino numbers, flights, travel, restaurants, theme park numbers are still all sky high, so we don't see a slowdown in the services sector but we do see a huge slowdown in goods".

BINGO. All the "stuff" was bought in covid and now people still A: have stacks of cash leftover and B: want to go and do things, not buy things, with it.

This means A: demand for labour and B: demand for energy.

They then had a nice chat about fixed income and whether you should play the 2 year or the 10 year and consensus was that the 5 & 10 year still probably have stacks more to run yet and that we might even see the yield curve inversion shallow simply because the 2 year will remain relatively static while the 5 & 10 increase.

The entire conversation echoed my thoughts to the letter. Short term has been priced in but medium-long term (i.e structural) trends haven't yet.

 

[farmerge]

View attachment 153828

"The consumer is still spending plenty, take a look at the data, they still have lots of disposable income and stimulus money in the bank, they're just spending in different sectors. Foot traffic in shopping centers is way down but casino numbers, flights, travel, restaurants, theme park numbers are still all sky high, so we don't see a slowdown in the services sector but we do see a huge slowdown in goods".

BINGO. All the "stuff" was bought in covid and now people still A: have stacks of cash leftover and B: want to go and do things, not buy things, with it.

This means A: demand for labour and B: demand for energy.

They then had a nice chat about fixed income and whether you should play the 2 year or the 10 year and consensus was that the 5 & 10 year still probably have stacks more to run yet and that we might even see the yield curve inversion shallow simply because the 2 year will remain relatively static while the 5 & 10 increase.

The entire conversation echoed my thoughts to the letter. Short term has been priced in but medium-long term (i.e structural) trends haven't yet.

Just take Qantas as an example. Massive 6 months profit with the little irishman (send him back on a leaky boat) grinning from ear to ear over the profits. No doubt his pay packet will reflect this massive increase also.

 

[over9k]

Just take Qantas as an example. Massive 6 months profit with the little irishman (send him back on a leaky boat) grinning from ear to ear over the profits. No doubt his pay packet will reflect this massive increase also.

Yep. Question is, how long is it going to last? Will we see the same trend as goods bought during covid, i.e people will travel/restaurant/theme park etc etc etc and then either run out of money and/or have gotten it out of their system and then stop? So we see this lovely big bounce now and then a plummet a year or two from here?

Or will the aforementioned bounce in demand for services, which translates to a demand for internal labour, which translates to higher wages, keep the proverbial wheel turning?

 

[Smurf1976]

The entire conversation echoed my thoughts to the letter. Short term has been priced in but medium-long term (i.e structural) trends haven't yet.

Much like natural gas as per previous comment.

Long term well if the rig count is down and wells in production are trending down then that's not how you get increasing gas supply.

But the market's not pricing in that far ahead.

Same with oil. The stuff's trading at ~$80 per barrel give or take with short term fluctuations meanwhile the IEA forecasts increased demand of 1.9 million barrels per day for 2023 alone. That's going to eat into spare supply capacity significantly given growth of production capacity is nowhere near that rate.

So oil and gas, and those are rather critical things obviously, are just two examples of that where the short term is very different to the medium to long term. Abundance right now but the future looks very different.

Note that my gas comments are referring to the US and Canada specifically given the financial market significance. Since gas is a regional commodity not a truly global one, the situation's very different elsewhere - Europe most obviously but Australia's pretty tight on supply too. That point can't be stressed strongly enough - seaborne LNG is a global commodity but gas as such is not - indeed even within the same country completely separate markets can and do exist.

 

[divs4ever]

Rhymes with flagellation

that might be too subtle for most

but maybe i will be surprised this time

 

[over9k]

Much like natural gas as per previous comment.

Long term well if the rig count is down and wells in production are trending down then that's not how you get increasing gas supply.

But the market's not pricing in that far ahead.

Same with oil. The stuff's trading at ~$80 per barrel give or take with short term fluctuations meanwhile the IEA forecasts increased demand of 1.9 million barrels per day for 2023 alone. That's going to eat into spare supply capacity significantly given growth of production capacity is nowhere near that rate.

So oil and gas, and those are rather critical things obviously, are just two examples of that where the short term is very different to the medium to long term. Abundance right now but the future looks very different.

Note that my gas comments are referring to the US and Canada specifically given the financial market significance. Since gas is a regional commodity not a truly global one, the situation's very different elsewhere - Europe most obviously but Australia's pretty tight on supply too. That point can't be stressed strongly enough - seaborne LNG is a global commodity but gas as such is not - indeed even within the same country completely separate markets can and do exist.

Hilariously, the next guy they had on was the CEO of chevron talking about how "europe needs alternative sources of gas". Not that europe needs to stop using gas, just that it needs new suppliers of it.

And you can all guess who he thought was best positioned to be the new supplier(s) can't you?


I've taken out a degen play of BOIL at the 6.90 mark. We'll see how it goes. A not insignificant part of me wants to swing for the fences (just look at natural gas prices last year) and throw quite a bit into it. Right now I'm about 20:1 NRGU:BOIL but this may change.

The only reason we didn't have gas price armageddon (and we still had it in the middle of the year after the invasion) last year was because europe's winter was so uncharacteristically mild. For this to happen two years in a row seems unlikely at best.

 

[Smurf1976]

The only reason we didn't have gas price armageddon (and we still had it in the middle of the year after the invasion) last year was because europe's winter was so uncharacteristically mild. For this to happen two years in a row seems unlikely at best.

Agreed.

Plus I suspect the true hit to industrial production will turn out to be somewhat larger than most seem to be thinking. I expect that for quite some time we'll be hearing that a shortage of this or that has cropped up and when it's looked into, it turns out that well, the factory somewhere in Europe was shut down for winter due to the gas situation and that's why the inventory of whatever product has been run down.

It's hard to be precise about that but there seems to be quite a bit of anecdotal evidence to suggest that sort of thing's happening.

 

[divs4ever]

Agreed.

Plus I suspect the true hit to industrial production will turn out to be somewhat larger than most seem to be thinking. I expect that for quite some time we'll be hearing that a shortage of this or that has cropped up and when it's looked into, it turns out that well, the factory somewhere in Europe was shut down for winter due to the gas situation and that's why the inventory of whatever product has been run down.

It's hard to be precise about that but there seems to be quite a bit of anecdotal evidence to suggest that sort of thing's happening.

i suspect you are correct

sadly some data i used to rely on is now hard to find or just suspect ( conflicting with indications elsewhere )

 

[over9k]

Agreed.

Plus I suspect the true hit to industrial production will turn out to be somewhat larger than most seem to be thinking. I expect that for quite some time we'll be hearing that a shortage of this or that has cropped up and when it's looked into, it turns out that well, the factory somewhere in Europe was shut down for winter due to the gas situation and that's why the inventory of whatever product has been run down.

It's hard to be precise about that but there seems to be quite a bit of anecdotal evidence to suggest that sort of thing's happening.

So the question becomes, do the factories etc just get mothballed and they just... don't buy the gas? Take the hit and go without the income so they can at least keep the lights/heating on? Basically just covid all over again except for an entirely different reason?

Seems to me like they're building storage/import facilities at breakneck pace to avoid shutdowns but after spending a LOT of time rummaging through all of this it would appear that they're not going to get anywhere near the import/storage numbers they need to remain churning everything out at normal (let alone full) pace.

Either way, there's no actual desire to stop using gas, it's just a question of how they're going to go without it against their will. Problem is, one does actually result in a big dump in demand.

At the moment it would appear as though they're doing anything they can to avoid mothballing the factories so that bodes well for the future gas demand picture. Whether they succeed in doing so is another question entirely.