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2021 - Is inflation finally back in the conversation?


Reagan1k

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1 hour ago, Trey3216 said:

You need to watch more international soccer matches.   

I dunno man. I worked for a Dutch company, amongst a bunch of them.  Maybe it was just really, really bad luck and we had all their zeros. And I’m not saying there isn’t any. I’m just saying I’ll take my chances with the French.  

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4 minutes ago, fattyflattie said:

I dunno man. I worked for a Dutch company, amongst a bunch of them.  Maybe it was just really, really bad luck and we had all their zeros. And I’m not saying there isn’t any. I’m just saying I’ll take my chances with the French.  

It’s been a few years, but what struck me about the Dutch was the utter lack of fat people. I figured it was all the bike riding they do in Amsterdam. It was pretty refreshing coming from America. 

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3 minutes ago, Humble Beast said:

It’s been a few years, but what struck me about the Dutch was the utter lack of fat people. I figured it was all the bike riding they do in Amsterdam. It was pretty refreshing coming from America. 

For sure. And their height.  I dont recall a single male under 6’, but dozens of them at 6-2/3 in our office.  Oh, and of course, they are very smart and we are very dumb (their entire ethos) 

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Just read an interesting piece looking at possible signal that stagflation is coming. It’s a long, paid one with lot of graphs and a couple tangents so I’ll just spoiler/paste a few passages. 
 

It looks at the price/btu of various hydrocarbons and a couple anomalies that have emerged in the energy crisis. 
 

Spoiler

Look yet again and another observation – one with potentially greater implications – emerges: the energy price of coal is now higher than that of oil!

Spoiler

“It is in this spirit that recent action in a relatively off-the-radar corner of the coal market caught our attention and made us ponder what our trusty Bloomberg terminal was telling us. For the first time that we can recall, the price of thermal coal has now decisively exceeded that of coking coal for several weeks, a bizarre situation few would have predicted. Thermal coal is burned to produce electricity, whereas coking coal is a higher quality product used exclusively to make steel. As the US Energy Information Administration (EIA) describes it, ‘Coking coal must be low in sulfur and requires more thorough cleaning than coal used in power plants, which makes the coal more expensive.’”

 

Both coking coal and oil are predominantly used to make higher-value materials, but thermal coal is selling for a higher price than both. While Biden might be hyper-focused on the price of gasoline, we doubt he – like most people – even knows the difference between thermal and coking coal. A better explanation than simple manipulation is needed to solve these riddles.

Our intuition tells us these historic disparities indicate something ominous: stagflation is coming.

Stagflation is defined as persistently high inflation despite a slowing economy and is usually caused by energy shocks. If the world is desperate to stockpile thermal coal but has a diminished need for the value-added goods derived from coking coal and oil, we might truly be confronting a “worst of both worlds” scenario.


Intuitively makes sense, especially the coking coal/steel angle. 
 

14 minutes ago, 52-80 said:

dutch women are mad hot.  dutch dudes are arrogant though.

Indeed. I’m a sucker for blondes and they represent well. 

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In the good news is bad news update today -  ISM Services PMI Index: 56.7 vs. 56.0 consensus and 56.9 in August.

The services sector continues to grow despite the Fed hiking rates. The is bad news for inflation and signals the Fed will not slow rate hikes. 

Oil headed up will contribute to higher inflation (price at the pump). 
 

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Saw an article this morning can’t find it again about Ford and vehicles on wheels but missing key parts due to supply chain. 40,000 of them? Also sticker prices going up 10% into next year.  Ugh. 
 

and china’s no Covid policy is the dumbest policy on the planet right now. 

Edited by troph
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International shipping rates are currently about 10% of what they were a year ago. WSJ has an article today about Costco and why it will take a while for those cost reductions to translate to price reductions. 

 

Quote

 

Shipping and commodities prices have seen steady declines recently, but Costco Wholesale Corp. isn’t yet in a position to pass savings on to customers, the CFO said.

Pricing at the retailer’s 839 global warehouse stores hasn’t decreased, according to Chief Financial Officer Richard Galanti, despite the lower prices for shipping goods and for things like gasoline and steel. Costco in some cases locked in prices it pays to suppliers months ago and inflationary pressures from rising labor costs persist, which means the drops in shipping and commodities prices aren’t necessarily benefiting the company’s balance sheet yet.

“It takes time for changes to come through,” Mr. Galanti said.

The daily freight rate to move a container across the Pacific is now $2,265, compared with $13,706 at the beginning of the year and $20,586 in September of last year, according to the Freightos Baltic Index, an international freight rate reading.

It can take anywhere from six months to a year before lower shipping costs translate into falling prices for consumers, said Chuck Grom, a managing director at Gordon Haskett Research Advisors. 

 

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37 minutes ago, Storm the Field said:

International shipping rates are currently about 10% of what they were a year ago. WSJ has an article today about Costco and why it will take a while for those cost reductions to translate to price reductions. 

This is the kind of shit that messes with markets bad. Many have speculated that JIT inventory methods have created much of the supply chain issues. If prices start falling, it's going to absolutely destroy margins for those being proactive and building inventory. Damned if you do, damned if you don't.

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6 minutes ago, Cheeseweasel said:

This is the kind of shit that messes with markets bad. Many have speculated that JIT inventory methods have created much of the supply chain issues. If prices start falling, it's going to absolutely destroy margins for those being proactive and building inventory. Damned if you do, damned if you don't.

I'm no manufacturing whiz, but I did get stuck with leading the manufacturing engineering team for a bit at a company I used to work for.  JIT always seemed risky, almost like leverage in finance.  Good while things are good, but man, when things go south the ripples become shock waves.

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4 minutes ago, jimmyjazz said:

I'm no manufacturing whiz, but I did get stuck with leading the manufacturing engineering team for a bit at a company I used to work for.  JIT always seemed risky, almost like leverage in finance.  Good while things are good, but man, when things go south the ripples become shock waves.

It's certainly risk/reward and in a time of uncertainty, people with be risk averse. Lost sales are bad but lost money dumping inventory can be catastrophic. 

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1 hour ago, Storm the Field said:

International shipping rates are currently about 10% of what they were a year ago. WSJ has an article today about Costco and why it will take a while for those cost reductions to translate to price reductions. 

 

 

They'll drop prices when the competition does, and not before.  That's how Capitalism works, nttawwt.

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On 10/5/2022 at 8:04 AM, Cheeseweasel said:

US consumers: Will they take the length?

They always do….

 

 With regard to consumer demand, that’s what the Fed is about to do.  I think what’s been missing from the discussion is what happens to consumer credit cards as rates climb.  That is about to kick some people in the nuts too.

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I’ll give a short anecdote based on the real estate world right now.

1). Homebuyers are having a hard time qualifying.

2). Builders at first were like “whatever, we’ll keep selling”

3). Then builders start to see too many cancellations and panic throwing whatever they can in at closing to keep buyers (but not lowering prices)

4). Builders start walking deals because of the reduced closings.  Alternatively they renegotiate smaller purchases with huge escalators to avoid having inventory on their books

 5). Developers cancel projects because they can’t sell lots to builders.  They don’t reduce per lot costs on contracted projects though.

6). Raw land owners or flippers are stuck with the dirt they bought.  The only way out is to wait until demand recovers.

i don’t see a deflationary path anywhere in there.  Maybe tightening margins bring about a slight reduction but unlikely.  We’re at stage 4 and 5 now.  
 

We’ll be at stage 6 by the end of the year.  I think 3 quarters of pain right now.

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11 hours ago, Hefeweizen said:

I’ll give a short anecdote based on the real estate world right now.

1). Homebuyers are having a hard time qualifying.

2). Builders at first were like “whatever, we’ll keep selling”

3). Then builders start to see too many cancellations and panic throwing whatever they can in at closing to keep buyers (but not lowering prices)

4). Builders start walking deals because of the reduced closings.  Alternatively they renegotiate smaller purchases with huge escalators to avoid having inventory on their books

 5). Developers cancel projects because they can’t sell lots to builders.  They don’t reduce per lot costs on contracted projects though.

6). Raw land owners or flippers are stuck with the dirt they bought.  The only way out is to wait until demand recovers.

i don’t see a deflationary path anywhere in there.  Maybe tightening margins bring about a slight reduction but unlikely.  We’re at stage 4 and 5 now.  
 

We’ll be at stage 6 by the end of the year.  I think 3 quarters of pain right now.

We skipped to 6. Other than our house which is almost done we are out of the game for now. We closed up shop on projects in June and paused new work last April. Sitting on land we tried to sell, no one wanted it. It’s good land too. We will wait. Build or sell later. We have zero interest playing in this market. Will be painful for a few years but not as bad as fully leveraged on a project. 

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13 hours ago, Cheeseweasel said:

This is the kind of shit that messes with markets bad. Many have speculated that JIT inventory methods have created much of the supply chain issues. If prices start falling, it's going to absolutely destroy margins for those being proactive and building inventory. Damned if you do, damned if you don't.

I wouldn’t expect that to be a long term problem. 1-2 quarters max. If you’re holding inventory that takes more than 2 quarters to move you’re already screwed. 

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22 minutes ago, Fudge Nuggets said:

All the Dutch dudes I worked with were awesome so long as you took care of your shit.

Oh, never mind maybe we found the problem.

Thats so great that youre fond of dutch dudes. We’re proud and supportive of you. 

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36 minutes ago, Fudge Nuggets said:

I’m sorry that you seem to be repressing some things and aren’t comfortable working with others different from yourself. Maybe seek therapy and it can help you careerwise.

You seem very satisfied with 20 years of getting “blood squeezed out of [your] stone”. 

what other great career advice can we learn from you?

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How are the employment numbers inflationary?  Explain like I’m five because I saw participation rate is still down overall.  I don’t see the report as inflationary but rather that the Fed is having very little impact on the job market so far.

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2 minutes ago, Hefeweizen said:

How are the employment numbers inflationary?  Explain like I’m five because I saw participation rate is still down overall.  I don’t see the report as inflationary but rather that the Fed is having very little impact on the job market so far.

Better than expected unemployment numbers (1 of feds 2 mandates), gives them more leeway to tighten and tackle inflation (the other mandate)

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On 10/6/2022 at 10:53 AM, Hefeweizen said:

I’ll give a short anecdote based on the real estate world right now.

1). Homebuyers are having a hard time qualifying.

2). Builders at first were like “whatever, we’ll keep selling”

3). Then builders start to see too many cancellations and panic throwing whatever they can in at closing to keep buyers (but not lowering prices)

4). Builders start walking deals because of the reduced closings.  Alternatively they renegotiate smaller purchases with huge escalators to avoid having inventory on their books

 5). Developers cancel projects because they can’t sell lots to builders.  They don’t reduce per lot costs on contracted projects though.

6). Raw land owners or flippers are stuck with the dirt they bought.  The only way out is to wait until demand recovers.

i don’t see a deflationary path anywhere in there.  Maybe tightening margins bring about a slight reduction but unlikely.  We’re at stage 4 and 5 now.  
 

We’ll be at stage 6 by the end of the year.  I think 3 quarters of pain right now.

From my experience, we are already at stage 6.  Have knowledge of 3 land deals in Elgin (well over 600 lots) that have been terminated in the last couple of months and at least 4 others (several of those involved corporate owned rental property subdivisions) in Pflugerville.  I was involved in several of them and the developers/builders are headed for the hills right now.  Personally, I'm thinking it will be 2024 before things start to improve but that is just a gut feeling, can't really explain it.

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15 hours ago, troph said:

I wouldn’t expect that to be a long term problem. 1-2 quarters max. If you’re holding inventory that takes more than 2 quarters to move you’re already screwed. 

Whiplash is hell. We've gone from "I'm gonna load up because I have no idea if I will be able to get it anytime soon" to "holy shit, I need to unload it"

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22 minutes ago, Catpfish said:

From my experience, we are already at stage 6.  Have knowledge of 3 land deals in Elgin (well over 600 lots) that have been terminated in the last couple of months and at least 4 others (several of those involved corporate owned rental property subdivisions) in Pflugerville.  I was involved in several of them and the developers/builders are headed for the hills right now.  Personally, I'm thinking it will be 2024 before things start to improve but that is just a gut feeling, can't really explain it.

If you’re in acquisition you may already be there.  I cover the spectrum from early feasibility to finished lots and different people have different risk tolerance.

 

Elgin is a pretty annoying place to work honestly.  Only place I prefer to work less is unincorporated Travis county, but it pays way better.

 

Construction loans appear to be the main deal killer right now.

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3 hours ago, 52-80 said:

You seem very satisfied with 20 years of getting “blood squeezed out of [your] stone”. 

what other great career advice can we learn from you?

It wasn't so bad way back when I started and even the first 10 - 15 years.  Ever since 2014 it's been shit.

If you don't recognize that you either don't work in the industry, are a non college grad where the oilfield probably does pay better than anything else you could find, or you're a moron.

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1 hour ago, Cheeseweasel said:

Whiplash is hell. We've gone from "I'm gonna load up because I have no idea if I will be able to get it anytime soon" to "holy shit, I need to unload it"

It's no wonder why most people lose money in the stock market.

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26 minutes ago, Fudge Nuggets said:

If you don't recognize that you either don't work in the industry, are a non college grad where the oilfield probably does pay better than anything else you could find, or you're a moron.

Can you explain to an uneducated and underpaid moron like me, if you’re so wealthy and successful, how come you’re so angry?

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10 minutes ago, Humble Beast said:

Fudge-

AE817043-E3-E9-4619-86-CA-95-FC1-BA7091-

 

Pretty much.  I don't care if others succeed or not, but I do hate most people.

 

23 minutes ago, 52-80 said:

Can you explain to an uneducated and underpaid moron like me, if you’re so wealthy and successful, how come you’re so angry?

It's my edge and has paid off well.

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5 hours ago, Cheeseweasel said:

We are (basically) at full employment which means that wages will go up as businesses "bid" for employees. Which will cause costs to go up. Therefore, inflation.

Wages have lagged inflation (hourly up only 5% yoy).  They are part of the equation but there are other key drivers.  I am starting to believe lower productivity is an underrated factor.  Of course oil supply (Russia, opec, stateside limits) is also a major major factor.

 

I do not believe unemployment will get high anytime in the next decade, regardless of what happens to rates, inflation, or the stock market.

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20 hours ago, Cheeseweasel said:

New hire wages are up but the big increase will come in January when the end of year raises go into effect. 

We have to get final approval from the board, but we are trying to bump all the hourly fairly significantly, with the biggest bump to the operators at ~33%. Sales better have another price increase planned 

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This would be extremely bad.

 

 

The proposed deal was celebrated as a big achievement for Biden, who has pledged to be the “most pro-union president” in U.S. history. On Tuesday, a White House spokeswoman said that Biden remains focused on avoiding a rail shutdown.

https://www.washingtonpost.com/business/2022/10/11/railroad-union-rejects-deal/

 

 

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