Inflation

[over9k]

 

[mullokintyre]

There is a quote that is attributed to Ronald Reagan.
“ We don’t’ have inflation because the people are living too well, we have inflation because the Government is living too well”
Pretty much sums it all up.
No one from the Government suffers when inflation is rampant, its just the poor buggers in the bottom 50% of the citizens.
Mick

 

[over9k]

The literal next day.

 

[Smurf1976]

Yet nearly every one of my personal friends still buy all their electronic consumer goods from China.

Personal consumption is one thing especially if the item isn't critical and is just for entertainment or convenience.

If you're running a business however and you need the machinery, components or whatever in order to meet commitments to your own customers then you need your suppliers to be reliable.

If you think there's a 1 in 100,000 chance that something from China won't turn up on time then you'll probably take the risk.

If you think the chance of delay is 1 in 3 however then it's a different story. It's pretty hard to defend your decisions to your own customers, or to your own upper management if you're the employee who made the decision, given how much has been said via mainstream news sources about supply chain disruption.

Back to inflation directly, well I ordered a specific branded item, a brush to be precise. Price now in July 2022 being 157% higher than I paid for an identical one in November 2021. OK, that's only $17.99 versus $6.99 but still, it's a decent rate of inflation there.

That said, I'm going to step outside the box and suggest that we're pretty much done with this current burst of inflation and it won't be too much longer before we see central banks go on pause with rate hikes. Looking around, there seem to be plenty of cracks appearing both in markets and the real economy.

My guess - the (US) Fed will be done with rate hikes by the end of 2022 and it wouldn't surprise me if the language really starts to shift as early as September. Just my

 

[qldfrog]

Personal consumption is one thing especially if the item isn't critical and is just for entertainment or convenience.

If you're running a business however and you need the machinery, components or whatever in order to meet commitments to your own customers then you need your suppliers to be reliable.

If you think there's a 1 in 100,000 chance that something from China won't turn up on time then you'll probably take the risk.

If you think the chance of delay is 1 in 3 however then it's a different story. It's pretty hard to defend your decisions to your own customers, or to your own upper management if you're the employee who made the decision, given how much has been said via mainstream news sources about supply chain disruption.

Back to inflation directly, well I ordered a specific branded item, a brush to be precise. Price now in July 2022 being 157% higher than I paid for an identical one in November 2021. OK, that's only $17.99 versus $6.99 but still, it's a decent rate of inflation there.

That said, I'm going to step outside the box and suggest that we're pretty much done with this current burst of inflation and it won't be too much longer before we see central banks go on pause with rate hikes. Looking around, there seem to be plenty of cracks appearing both in markets and the real economy.

My guess - the (US) Fed will be done with rate hikes by the end of 2022 and it wouldn't surprise me if the language really starts to shift as early as September. Just my

I think feds will only change language after a market capitulation.
But i see your timing right
I am usually too early but disastrous profit reports cause capitualion and by September we start talking QE again..not so sure inflation will be over yet.
Food and oil engineered crisis will only start to bite.. inflation will go on..unmatched

 

[over9k]

Personal consumption is one thing especially if the item isn't critical and is just for entertainment or convenience.

If you're running a business however and you need the machinery, components or whatever in order to meet commitments to your own customers then you need your suppliers to be reliable.

If you think there's a 1 in 100,000 chance that something from China won't turn up on time then you'll probably take the risk.

If you think the chance of delay is 1 in 3 however then it's a different story. It's pretty hard to defend your decisions to your own customers, or to your own upper management if you're the employee who made the decision, given how much has been said via mainstream news sources about supply chain disruption.

Back to inflation directly, well I ordered a specific branded item, a brush to be precise. Price now in July 2022 being 157% higher than I paid for an identical one in November 2021. OK, that's only $17.99 versus $6.99 but still, it's a decent rate of inflation there.

That said, I'm going to step outside the box and suggest that we're pretty much done with this current burst of inflation and it won't be too much longer before we see central banks go on pause with rate hikes. Looking around, there seem to be plenty of cracks appearing both in markets and the real economy.

My guess - the (US) Fed will be done with rate hikes by the end of 2022 and it wouldn't surprise me if the language really starts to shift as early as September. Just my

With you on this. Seasonality will reduce energy demand a bit, probably one more 75 point hike, then a taper off to maybe a 50, a 25, then nothing.

Simple ramp up & then ramp down.

 

[waterbottle]

US GDP Now figures at -1.2%, a bit of an improvement. Real figures out tomorrow at 10:30pm. Will be the decider for the next rate i.e 0.75% v 1%.

 

[over9k]

Stating the obvious I know.

 

[over9k]

Aka inferior vs superior goods

 

[waterbottle]

View attachment 144025

Aka inferior vs superior goods

It may not be an issue of inferior v. superior goods, but rather whether people have the capacity to spend on anything discretionary.

Consumers in US and Canada are expecting inflation to persist. The latter are expecting inflation at 6% into 2023, and their central bank is expected to accelerate their rate hiking schedule with the next jump at 75bps.

Having said that, oil remains volatile and seems to be crashing. I haven't heard any news about new OPEC output and the war in Ukraine is continuing with no peace in sight.

IMO, this indicates that the market is now expecting an pricing in a recession. Commodities had already started to fall earlier this year, now oil is catching up. Meanwhile, central bankers have agreed in unison that they will control inflation by any means necessary I.e. Recession or no recession. And you can understand why when politicians just have to look at Sri Lanka to know what citizens will do when inflation is uncontrolled.

Having said that, I'm not sure if equities have priced in a recession, so am expecting further falls...

 

[waterbottle]

South Korea just delivered an unexpected 50bp increase. More evidence of IR acceleration

 

[Value Collector]

When I stopped for my morning coffee and a read of the AFR (cost offset), I mention to the girl that a pay rise is on its way, her comment was well not really as the cost of living has already taken it.
Nothing like a cup half empty outlook, but it does show that people are being conditioned to expect more, maybe that's a good thing.

How much of the national output should flow to labour vs how much should flow to capital owners and the government is an age old discussion, all three stake holder groups always want more, the truth is unless actual productivity and out put rises then no group can take more with out the other groups taking less.

It’s interesting that 250 years ago Adam smith wrote about this same topic, his discussion on it was measured in Oats, he was basically saying that to keep the British economy going each worker had to be paid enough pounds of oats a year that he could feed himself and his family and have enough oats left to trade for clothing etc.

His basic point was that there is a basic level of pay that the working class requires to support itself, natural forces should always eventually keep things in line with this, over time workers expectations have risen as the increased out put caused by increased capital intensity has been shared with the working class, but there is limits to how much of the pie workers should expect, because if they take to much, then capital investments diminish and over all output will drop causing everyone to suffer.

 

[divs4ever]

depressed/stressed workers tend to be less productive , normally distracted or more liable to workplace accidents

but most office-bound management never see that ( i guess you could call it karma )

 

[Value Collector]

depressed/stressed workers tend to be less productive , normally distracted or more liable to workplace accidents

but most office-bound management never see that ( i guess you could call it karma )

Yep, I agree but on average work places are the safest they have ever been, and in a large part that is due to the capital investments made which have raised productivity and allowed workers to produce more, with less risk and less hours.

————

Take the mining industry for example, 200 years ago the output of a worker was very low because they were using picks, shovels and push carts. So the amount each worker could earn was very limited because their out put with those tools was limited. Eg the amount of Iron Ore 3 men armed with a pick, a shovel and a push cart could produce might be 1 tonne a day each even though they worked back breakingly hard, the system couldn’t sustain paying them more than half a pound of oats a day.

How ever fast forward to today, and a group of investors chip in a few million dollars to buy those workers a huge digger and the worlds biggest dump truck. Suddenly they can sit in air conditioned comfort and produce 1000 tonnes per day, and earn the equivalent of 100’s of pounds of oats a day.

The boost in productivity allowed by the input of the investors now allows the workers to benefit from much higher wages than they could have when they only produced 1 tonne a day each, while working easier and safer.

Of course this suddenly opens the debate of how much of this new found productivity should flow to the workers and how much to the owners of the capital that unlocked the productivity, because at the end of the day it’s a team effort between labour and capital.

Some workers and unions believe they should take almost all the output, because they think it’s all a result of their “hard work” because the days of shovels and wheel barrows have long been forgotten, and some investors think they should receive almost all of the output because they know it’s their capital that was the driving force unlocking the productivity and they are taking all the financial risks involved too.

Some how we have to balance these competing wants, because it’s only fair that workers get a fair share of the output, but at the same time if investors don’t receive fair compensation for their input the whole system can break down.

On average workers receive about 80% of the output of the economy, while investors take about 20%. (After taxes)

 

[waterbottle]

Holy crap, US CPI at 9.1%. Above expected 8.8%.

1% rate hike is now definitely on the cards. Rate hike acceleration here we come!

Equities going to take a beating. Nasdaq futures already down 2%.... Market to now price in recession at this rate. Hold onto your hats folks....

 

[over9k]

Holy crap, US CPI at 9.1%. Above expected 8.8%.

1% rate hike is now definitely on the cards. Rate hike acceleration here we come!

Equities going to take a beating. Nasdaq futures already down 2%.... Market to now price in recession at this rate. Hold onto your hats folks....

 

[waterbottle]

View attachment 144066

SQQQ for meeeee

 

[over9k]

I have a position in BOIL (2x levered long u.s natural gas ETN).

 

[over9k]

Result?



Credit spreads are well & truly widened now.

However:



The demand side might ease but almost nothing's changed on the supply side, nor is going to.

 

[over9k]