Hey all, we're mid week in a Holiday shortened market week. On Friday, the US markets are closed for Good Friday, and I'm happy about that. If we can close for significant people, we can certainly close for God and son.
Now I'm sure you looked at the headline of the article and figure that I lost my last marble. Deflation? Isn't that where prices of things come down? Indeed it is. And like the housing bubble of 2005 - 2007, this time will probably be no different. ( pay attention to that word probably, I'll come back to it later in this piece)
The biggest cure for high prices, is indeed high prices. When prices of things get too far out of whack, markets have an interesting way of putting them back in whack.
Naturally there's multiple mechanisms at work, but the bottom line is that there always comes a point, where "things" are just too expensive to be purchased. Then, things sit on shelves and ultimately have to be "marked down." This is going to happen again. But, and this is the big elephant... we probably have to endure something akin to a hyper inflation, before we get the big bust and everything falls down.
Right now, we've still got supply chain issues, manufacturing issues, etc. to deal with. Take China and their lockdown of tens of millions of people. NONE of those people are producing products that will end up on Wal-Mart's shelf. So, the products that are there or are in transit, will demand higher prices. No doubt.
But trees don't grow to the moon, and everything eventually reverts to the mean. Always and forever. The twist this time, is that the reasons for the hyper inflation, aren't rooted in the public doing incredibly stupid things. Think back to the "Tulip mania" of the 1600's. I don't know what kind of mushrooms they were snorting during that period, but people were giving up family farms for one tulip bulb. Peak insanity.
Hey all, we're mid week in a Holiday shortened market week. On Friday, the US markets are closed for Good Friday, and I'm happy about that. If we can close for significant people, we can certainly close for God and son.
Now I'm sure you looked at the headline of the article and figure that I lost my last marble. Deflation? Isn't that where prices of things come down? Indeed it is. And like the housing bubble of 2005 - 2007, this time will probably be no different. ( pay attention to that word probably, I'll come back to it later in this piece)
The biggest cure for high prices, is indeed high prices. When prices of things get too far out of whack, markets have an interesting way of putting them back in whack.
Naturally there's multiple mechanisms at work, but the bottom line is that there always comes a point, where "things" are just too expensive to be purchased. Then, things sit on shelves and ultimately have to be "marked down." This is going to happen again. But, and this is the big elephant... we probably have to endure something akin to a hyper inflation, before we get the big bust and everything falls down.
Right now, we've still got supply chain issues, manufacturing issues, etc. to deal with. Take China and their lockdown of tens of millions of people. NONE of those people are producing products that will end up on Wal-Mart's shelf. So, the products that are there or are in transit, will demand higher prices. No doubt.
But trees don't grow to the moon, and everything eventually reverts to the mean. Always and forever. The twist this time, is that the reasons for the hyper inflation, aren't rooted in the public doing incredibly stupid things. Think back to the "Tulip mania" of the 1600's. I don't know what kind of mushrooms they were snorting during that period, but people were giving up family farms for one tulip bulb. Peak insanity.
Or, in more modern times, the housing bubble of 2005 - 2007. Everyone was convinced that "houses only go up." and the mania was palpable. Fry cooks at McDonald's were taking out liar loans to buy 400K dollar houses, that were only worth 190K on a good day. But hey, no one minded, because "they only go up." Until they don't.
History is littered with bouts of bizarre human nature. In the 80's the Japanese had a housing/land bubble of their own. The common saying was that "it's an island, they don't make any more land on an island." Well that's correct. However when the land that is there, is completely unobtainable by the masses, because the prices are so high, prices finally collapse. They did.
Oh and by the way, so did their stock market. That too was in a bubble of epic scope. However, gravity once again grabbed ahold of things and their market fell 75%.
I was in Lowes on Sunday. A single 2X4 was 7.45. The same hunk of lumber was 2.15 two years ago. While there, I was chatting with a contractor. He said his projects are costing customers 100% more than just a year and a half ago. That nice shiny 4x8 sheet of good plywood isn't 32 dollars any more. It's 78.
This will not hold up for ever. While in the store, the price of lumber is still sky high, but if you look at a chart of lumber prices, it's down 35%. It will fall more, lots more. As housing mania peaks out,with interest rates going higher, we'll have a crash in lumber prices. As more mills come online after covid, as more production comes back on, it's going to run smack into less demand on the consumer side.
I'm not saying any of this is going to happen today or tomorrow. We just got a CPI that came in at 8.5% year over year, which is actually more like 16% in reality. It will take time for all the mechanics of commerce to align again, but they will and prices will come down in the future.
Inflation begets inflation. You know the deal. If people think prices are going higher in the future, they buy up all they can now, hoping to lock in a better price. But that extra demand, is actually fuel for the inflation, and pushes prices higher and higher.
Once prices hit a certain level, then people don't buy any more. Either they can't because they can't afford it, or simply won't because it's too ridiculous. This has always happened.
Okay so now for the twist. When I started this, I said that deflation will "probably" show up, just like it always has. Why do I say probably and not 100%, absolutely, positively? Simple. Never before have the globalist elites gone 100% against the people like they have today. Make no mistake, these people want you dead. Sorry, it's just true.
Centuries back, When people were selling their bodies to buy a tulip bulb, the elites of the day weren't trying to "reduce the population." When Japanese land hit record highs in the 80's it wasn't because they had a "klaus Schwab" saying you were going to own nothing and be happy. When the NASDAQ bubble of the mid 90's hit and then blew up in 2000, it wasn't because evil lunatics had spread a bioweapon around the world, killing millions, and backing that up with a so called vaccine that's killed millions more.
If the Schwab's of the world come out on top, there could be a scenario, where they simply price squeeze us all to death. If they do manage to shut down 40% of food production, no amount of not wanting to pay higher prices, will bring the price down. You "gotta eat."
If Blackrock and State Street who control trillions of dollars, decide to buy every available "for sale" house, at 2X the ask, no one could possibly buy a home.
So, what's it going to be? Permanent inflation, spurred on by the globalists to starve you out, and turn you into a serf? Or, does sanity creep back in, history begins to rhyme again and deflation will once again make its appearance?
I point to a lot of problems in these letters, because you need to be aware of them. But deep down, I'm always the optimist. In the "long run" I think the good guys win. I think the Schwab's crawl back in their caves and work underground again for their next attack.
Make no mistake, we are in a true war. Not just Russia mopping up Ukraine, but here in the states. They are effectively wiping out the middle class, and they love doing that. In their little porn fantasy, there's a couple thousand of "them" and a few hundred million of "us" and we work like ants for them.
So yeah, it's a "different" time for sure. But one thing "we" have is numbers. More and more people are waking up to reality. There's strength in numbers, especially for an armed society.
I'm going to stick with my guess that at some point we're going to see deflation. The globalists will try their best to cripple us with say high energy and push their lunatic green/carbon neutral baloney, while millions shiver in the cold. Cold and hungry people have been behind most of the revolutions in history. Will that repeat? Let's just say, if I was one of those lunatics from Brussels who think they know what's best for the "remaining" population...I wouldn't be sleeping well right about now.
So, would I buy as much food as I could reasonably store right now? Yes. They're engineering a shortage. Would I buy a house right now? No, I wouldn't. How about a car? Again, no. I think they will lose control of "hard items" and prices will ultimately come down. It might take a couple years, but that's my guess. ( Hope I'm right, or things are going to get terribly ugly)