Inflation

[divs4ever]

I don't think anyone knows. Probably a number of factors causing some constraints


Ah sorry! I meant if he EU oil ban fails, then we will be looking at a situation with less inflation. I think oil prices are being by the expectation that a Russian oil ban will occur

the oil ban will most likely fail , BUT the issue is will Russia renew/renegotiate contracts , it can take it's own sweet time to sign up new customers , OR accelerate industrialization inside Russia , they already make a lot of stuff , they could easily choose to make more given the influx of Ukrainian refugees ( some of whom might decide to stay )

they have also recently acquired a BIG steel plant , it will take a hell of a tidy up but probably beats building a new one from scratch

 

[divs4ever]

Isn't that just basic economics?

seemed to be a fact of life when i was working during the 70's and 80's

i don't think you needed to graduate high school to notice that

 

[waterbottle]

the oil ban will most likely fail , BUT the issue is will Russia renew/renegotiate contracts , it can take it's own sweet time to sign up new customers , OR accelerate industrialization inside Russia , they already make a lot of stuff , they could easily choose to make more given the influx of Ukrainian refugees ( some of whom might decide to stay )

they have also recently acquired a BIG steel plant , it will take a hell of a tidy up but probably beats building a new one from scratch

I doubt they would rush to make new contracts... Any new contracts would be demanding a discount - it's a position of weakness for Russian negotiators as they'd be recognising Russia's limited selling options. Besides, it'd interrupt deliveries and income during a fragile period for their economy.

Best case scenario for Russia = no ban, no tarrifs, continued oil trade
Most likely case = continued trade with EU with tarrifs imposed

 

[sptrawler]

Isn't that just basic economics?

If wages are leading your inflation, your productivity is heading the wrong way fast. ?

 

[Mohammed Hazabig'un]

Investing.com -- Inflation in the U.K. leaped to 9% in April, its highest level since 1982, as a thumping rise in regulated household energy bills took effect.

The consumer price index rose 2.5% on the month, the biggest monthly increase since 1991, as the cap on household electricity and gas prices was adjusted to reflect the sharp rise in wholesale prices caused by Russia's invasion of Ukraine. That aggravated an already sharp imbalance between supply and demand.

 

[Mohammed Hazabig'un]

And the US Futures reacted immediately.

 

[waterbottle]

Investing.com -- Inflation in the U.K. leaped to 9% in April, its highest level since 1982, as a thumping rise in regulated household energy bills took effect.

The consumer price index rose 2.5% on the month, the biggest monthly increase since 1991, as the cap on household electricity and gas prices was adjusted to reflect the sharp rise in wholesale prices caused by Russia's invasion of Ukraine. That aggravated an already sharp imbalance between supply and demand.

9% actual v. 9.1% expected

Bullish.

 

[over9k]

And here's where you're going to see the next inflation bounces:



Reality is that margins can only be squeezed so much before the costs *must* be passed on to the consumer. Obviously walmart et al have eaten the cost increases for now but reality is that even if they keep running at a loss rather than pass the costs on, that can only go on for so long too. We will one way or another reach a point where the consumer HAS to pay more.

Either they'll all pass the costs on immediately or it'll be a competition to see who can operate at a loss for the longest before someone goes bust and whoever remains can regain some price making (aka actually making some margin) power.

Combine that with interest rates increasing, pent up demand for services/experiences (holidays etc) rather than stuff after everyone already bought endless physical *things* through the pandemic and retail (and I include etail in this too) isn't looking good at all.

 

[over9k]

Aka "We need to make sure people want our **** so bad they'll pay anything for it".

Meanwhile:



Looks like we might be at the next rollover point. Just kicking myself for not buying some more SQQQ yesterday. Trigger finger now itchy.

If we don't see a bounce tomorrow then friday is likely to be a slaughter.

 

[over9k]

Alright here's one for the econ students or casual guys that are just trying to do a bit of investing to hopefully top their savings up a bit, what's the connection between inflation and the S&P sectors looking like this:



Hint: Think back to my previous comments about how retail has been slaughtered and work your way out from there. If you know why retail was pasted today then you'll be able to explain why the sectors are (for the most part) in the order that they are.

 

[divs4ever]

Heard on the grape vine wages could Increase by 2.5% due to interest rate rise. Real wage growth—or the difference between wage growth and inflation—would be independent of inflation. Productivity?
Sited this vidio suggesting wages to lag behind inflation;

https://www.news.com.au/finance/new-wage-growth-figures-expected-to-lag-behind-inflation-rate/video/7ae7da8c8a1993bb88f846555c3e8aa2

I doubt they would rush to make new contracts... Any new contracts would be demanding a discount - it's a position of weakness for Russian negotiators as they'd be recognising Russia's limited selling options. Besides, it'd interrupt deliveries and income during a fragile period for their economy.

Best case scenario for Russia = no ban, no tarrifs, continued oil trade
Most likely case = continued trade with EU with tarrifs imposed

the Finland contracts for example expire May 23rd ( i assume that is with state-run entities ) whereas several German Corporations have signed new 'modified ' contracts

i doubt Russia is in a position of weakness they HAVE the commodities ( already in the ground ) AND a fair-sized military to protect them and the West couldn't even successfully loot Afghanistan ( of resources )

 

[divs4ever]

Alright here's one for the econ students or casual guys that are just trying to do a bit of investing to hopefully top their savings up a bit, what's the connection between inflation and the S&P sectors looking like this:

View attachment 141847

Hint: Think back to my previous comments about how retail has been slaughtered and work your way out from there. If you know why retail was pasted today then you'll be able to explain why the sectors are (for the most part) in the order that they are.

from my limited experience in retail/wholesale , the retailer( and wholesaler ) ( unless you are WOW or COL ) are the meat in the sandwich the producer/manufacturer dictates the price ( take it or leave it ) , the customer buys ( if they are willing AND can afford it )
the small retailer tends to have profit margins squeezed ( rents , power costs , wages , etc etc ) and normally their best relief is to find a better/cheaper product to sell

BUT the smaller retailer is often resilient , resourceful and flexible ( management CAN take a pay cut , instead of closing the business , they can scale back on stock purchases and be flexible on lines carried )

so you don't have to avoid consumer discretionary but be very sure you are being paid for the extra risk you are taking ( because there could be a lot of rainy days ahead )

 

[Mohammed Hazabig'un]

That'll be it you'd assume? First the Supply shock, now Demand drying up. People skipping Meals due to Inflation don't spend.

 

[over9k]

That'll be it you'd assume? First the Supply shock, now Demand drying up. People skipping Meals due to Inflation don't spend.

Yep you're on the right track mohammed, now think about what goes from the spending list first and work your way down accordingly

 

[divs4ever]

That'll be it you'd assume? First the Supply shock, now Demand drying up. People skipping Meals due to Inflation don't spend.

as a person who had multiple casual jobs ( at the same time ) meals are often skimped on as well ( say shrink wrapped cheese or peanut butter sandwiches ) as you travel between jobs ( which means less bucks spent on 'meals ' even when eating regularly )

 

[over9k]

Here's another one:



How is it that bond yields have actually dropped on a day where everyone are sh!tting themselves about inflation?

The hint for this one is that there's two other asset classes that have actually done relatively (relatively) well today for the same reason.

 

[Mohammed Hazabig'un]

Here's another one:

View attachment 141848

How is it that bond yields have actually dropped on a day where everyone are sh!tting themselves about inflation?

The hint for this one is that there's two other asset classes that have actually done relatively (relatively) well today for the same reason.

Thanks. I've been watching that and wondering. Under normal circumstances you think the curve would've inverted?

 

[over9k]

Thanks. I've been watching that and wondering. Under normal circumstances you think the curve would've inverted?

Depends on how "transitory" you think the inflation is. We saw an inversion for a while until everyone realised that it isn't going to be all that transitory, and this was the point at which the long end just soared.

 

[divs4ever]

from what i understand , the curve doesn't stay inverted , it is inverted for a short time , but the consequences are what do the damage , rates ( different from yields ) spike trying to uninvert the curve , causing a rush to escape excessive debt ( and debt instruments )

 

[over9k]

from what i understand , the curve doesn't stay inverted , it is inverted for a short time , but the consequences are what do the damage , rates ( different from yields ) spike trying to uninvert the curve , causing a rush to escape excessive debt ( and debt instruments )

Correct, this is where you get into a thing called bond convexity. Long story short, everyone have to just head for the exits.