Where Does the Global Economy Go From Here?

[Gregmal]

The worst indoctrination has occurred through advertising/materialism. Americans need their things and their food. It’s why you see folks with shitty Hondas rockin fancy rims and window tints with sound systems. Why obesity is surging.
 

Most clean energy solutions lose tons of money, especially if the government is involved. Remember last time Biden was around we had Solyndra? But even outside of this, it disrupts the status quo. Upend the family balance sheet so you can take on solar panel financing for 20 years! Ditch that car you have to upgrade to a goofy looking EV at 3x the upfront cost.
 

I’ve generally found most people in the lower brackets don’t even care about this stuff. It’s more an upper middle class virtue thing. The upper end of the income spectrum says they care but it doesn’t matter and they aren’t effected. It’s largely the upper middle class in the same context wealthy suburban girls are pro abortion…makes them feel good and empowered but mostly is just handwaving rather than a life devotion. 

[adesigar]

4 hours ago, cubsfan said:

No - some people are just plain dumb. They don't do absolutely fine.

 

You want the USA to go back to 3rd world status,

where millions of children die in childbirth and don't have enough to eat. Affordable fossil

fuels insure that agriculture, fertilizers and healthcare systems are affordable and safe.

 

That's the Al Gore view: Collateral Damage for the Climate Change Cause. Everyone but me.

 

IF I didn't know you were such a smart guy - I'd swear you just don't care. But I'm sure you do.

 

 

 

 

 

Yes I said $10 in taxes for its shock effect. No I don't think there is even a remote chance it will happen. The populists in both parties would raise hell. 

 

 I want US to close the gap it has with some of the Western European nations when it comes to Obesity and Healthcare costs. Its taking up 20% of US GDP.

I want excellent public transport so people NEED to have a car. Then how will high fuel prices affect people? I want the infrastructure to not need constant repairs because of heavy usage. 

 

And i agree that we need to fossil fuels for fertilizer so why is it being wasted. We can drive using solar and hydrogen we cant use it to grow our crops. The US should save our fossil fuels for our food and health products and other items where there is no alternative and not waste it on cars. That why I specified taxing only Petrol/Diesel. 

 

If it causes demand destruction for Oil so dictators and terrorists don't have the money to do anything that would be great.

 

As for Global Warming here's how I look at it. If someone gave you a gun with 1000 chambers and a single bullet in one of the chambers and said pull the trigger for a million dollars there's just a 1/1000 chance you will destroy your kids/grandkids future. Would you do it? What if it was a 1 in a Billion chance then would you? Im guessing the answer from everyone reading this would be NO.

 

So if there's even a 1/1000 chance that we end up destroying the planet how is ANYONE comfortable with taking that chance? 

 

 

Edited June 7, 2022 by adesigar

[crs223]

7 hours ago, Blugolds11 said:

Nuclear is so obvious from a cost, safety, output, scale perspective that it is IMO a no brainer.

Winston Churchill allegedly said “you can always count on the United States to do the right thing… after all other options have been exhausted”.

 

If you are correct about nuclear, then we will end up with nuclear.  IMO following the day to day drama on this topic is a waste of time/life.  Sort of like following/arguing the minute to minute price fluctuations of BRK.

[cubsfan]

8 hours ago, adesigar said:

 

So if there's even a 1/1000 chance that we end up destroying the planet how is ANYONE comfortable with taking that chance? 

 

 

Again - the flaw in this thinking is that you are sacrificing the living NOW to solve a problem

that you may have no impact on..    We can all agree with your argument about conservation

of energy and fossil fuels. Yes, we should conserve them and continue developing alternative

energy sources. But you do NOT destroy the lives of millions in the process.

 

There is an assumption in the Climate Change crowd that global warming is CAUSED by 

fossil fuels. NO one has proved that - it's all opinion. So on what moral grounds do you 

sacrifice the living for a problem, climate change, that MAY not be the cause. Climates have

changed for millions of years - you are not acknowledging this FACT.

 

Fossil fuels are needed for the living. What right do these Climate Change morons have 

to withhold them from the living?  And they would have a lot more credibility if they followed

their own lectures, which they don't.

 

 

[Jaygo]

Cubs, this is the problem with high minded aholes like the above. He is willing sacrifice others under the guise of saving the world. Sure, maybe he does not use fossil fuels and is a role model for all of us, if not he should shut his trap because hypocrisy is a really bad look.

 

Aside from the completely amoral idea of a few dictating the fate of the many, these people do not consider the lives and freedom of others or their plight.  Sure lets tell starving people who dying today " dont worry, this will be good for our future grandchildren" 

 

CO2 caused global warming may or may not be a thing, Ive seen convincing studies showing both sides, some say we have the lowest CO2 levels in history and could just as easily slip into another ice age, some say fire and brimstone. I'm not smart nor stupid enough to say I know for sure. I do know pollution is bad and burning coal increases it and fills the air and ocean with mercury and we need to take steps to clean up our act. 

 

Good stewarship of fossil fuels will probably be the saving grace for humanity just like it has been since it started being used. Ask the whales if they were happy about the discovery of kerosene.

[Ulti]

Oil is absolutely certain to become incredibly short in supply and very high priced. The imported oil is not your enemy, it's your friend. Every barrel that you use up that comes from somebody else is a barrel of your precious oil which you're going to need to feed your people and maintain your civilization. And what responsible people do with a Confucian ethos is suffer now to benefit themselves and their families and their countrymen later. The way to do that is to go very slow in producing domestic oil and not mind at all if we pay prices that look ruinous for foreign oil.

It's going to get way worse later ...

The oil in the ground that you're not producing is a national treasure ... It's not at all clear that there's any substitute [for hydrocarbons]. When the hydrocarbons are gone, I don't think the chemists are going to be able to just mix up a vat and create more hydrocarbons. It's conceivable that they could, I suppose, but it's not the way to bet. We should spend no attention to these silly economists and these silly politicians that tell us to become energy independent.

Charlie Munger over a decade ago

[cubsfan]

^^^ Yes, there is a lot to Charlie Munger's argument about the conservation of fossil fuels - it's a

very wise thing. But that is a different argument than the climate change idiots make.

 

In the meantime, civilizations need to advance. The 3rd world needs safe & reliable food and healthcare. The losers in climate change think they have the moral right to call the shots for

everyone but themselves about energy usage - and withhold energy from others. I just disagree.

[Viking]

The economic impacts from covid continue. Phase 1 was consumers staying home and dramatically increasing goods purchases at the expense of services. Phase 2 is consumers shifting purchases to services (like travel) and away from goods. Phase 3? And then Phase 4? Who knows. Good luck forecasting consumer demand for goods or services over the next 12-24 months.

 

Well, these are the phases in some of the world. China, kind of important, is still locked in Phase 1. 
 

Bottom line, the learning is pandemics take years to play out…

—————

Goods producers are a hot mess right now. Airlines too.

 

Target will take a profit hit to clear out inventory that shoppers don’t want.

 

Target plans to cut prices and cancel orders to clear out unwanted inventory, announcing a series of steps on Tuesday to combat rising prices and supply chain disruptions. The actions would cut its profit in the current quarter, the company said, pushing its shares down 7 percent in premarket trading.

 

It is the latest move by a major retailer revealing how inflation and shifts in consumer habits are swiftly changing the outlook for business. Just three weeks ago, Target shocked investors with earnings that were much worse than expected, leading its shares to fall nearly 25 percent. It cut its forecast for profit then, and lowered it even further on Tuesday.

- https://www.nytimes.com/live/2022/06/07/business/economy-news-russia-inflation#target-profit-inflation

 

Edited June 7, 2022 by Viking

[Gregmal]

It has been and continues to be, really easy to predict actually. It’s just money flow on the backdrop of a large and unexpected event. Take something away, demand goes to zero, bring it back, it spikes, over time it normalizes.
 

Everything in time will go back to normal, barring any unique and substantive fundamental shift. The only two of which I’ve found right now for that to be the case are energy and some real estate. Housing on the positive side and office on the negative side.
 

Otherwise, it’s like throwing a rock in a pond. The bigger the rock the bigger the ripple. But eventually everything normalizes and the ripples fade to calm. Goes back to the way it was pre COVID. There’s nothing structurally unique about toilet paper, masks, or air travel that would warrant it being a massively different component of life, in time, than they were pre COVID. The entirety of this in terms of mentally picturing these disruptions actually mirrors the structural underpinnings of a pump and dump. 

[james22]

20 hours ago, adesigar said:

If someone gave you a gun with 1000 chambers and a single bullet in one of the chambers and said pull the trigger for a million dollars there's just a 1/1000 chance you will destroy your kids/grandkids future. Would you do it? What if it was a 1 in a Billion chance then would you? Im guessing the answer from everyone reading this would be NO.

 

You'd guess wrong.

[mattee2264]

Gregmal: what about technology?  That seems the obvious fundamental shift as hybrid/remote working will persist and there is also a lot more e-commerce as the pandemic encouraged late adoption e.g. the elderly etc. and with people working from home more frequently it is easier to schedule deliveries etc. Although there is an argument that a lot of investment has been pulled forward and higher earning power post pandemic will be offset by lower growth prospects going forward not to mention that if we are heading into a recession there will be capex cuts. And with e-commerce obviously spending is being diverted towards services, fuel etc. 

 

Grantham believes strongly in long term inflationary trends driven by resources scarcity and tight labour markets due to demographic factors. Question is whether the central banks decide to accommodate this inflation in the usual way or whether they will be forced to return interest rates to more normal levels which will be tough medicine given all the debt in the world. 

 

Re climate change from what I have read about the subject as things stand the only real hope of achieving the climate change ambitions is to sacrifice economic growth. That obviously has implications for the world economy when it has been taken for granted that over the long term economic growth is a given. 

 

 

 

 

 

Edited June 8, 2022 by mattee2264

[Spekulatius]

High energy prices work exactly like a regressive tax on pretty much everyone living on earth. As we know, taking money away from people that spent it is not positive for either economy.

Giving free money to not so nice folks like the Saudis and Putin is not great idea either. Thats why high energy prices are not a good thing at all.

[Gregmal]

29 minutes ago, mattee2264 said:

 

Gregmal: what about technology?  That seems the obvious fundamental shift as hybrid/remote working will persist and there is also a lot more e-commerce as the pandemic encouraged late adoption e.g. the elderly etc. and with people working from home more frequently it is easier to schedule deliveries etc. Although there is an argument that a lot of investment has been pulled forward and higher earning power post pandemic will be offset by lower growth prospects

 

Your thoughts are my thoughts. The shift was already there, it did get accelerated, but the investment options were already too far into the growth cycle(at least for large caps) and valuations way too high. 

[Blugolds11]

I had mentioned a while back that I was hearing from others back home that they were really feeling the squeeze from elevated prices on everything. 

 

I’m generally a bit skeptical, and I’m not one to spread rumors etc, but today a friend (who’s son is a manger at a gas station chain that is very well known all over the Midwest) told them to prepare to see $9/gas by September and that in-store sales are down 60% since April. 

 

These gas stations have a reputation for good grab and go food, sandwiches, burgers, pizza, donuts, coffee etc they are pretty well known and have a good reputation, subject of memes, cult like following. 

 

Like I said, I’m skeptical and obviously would wonder who this guy running the manager meeting was, why he picked $9 etc etc…but for him to say in-store sales down 60% that’s pretty surprising…and this is in the largest city in a 2 hour radius with high traffic count including truckers..also would have asked if that was store specific or across the entire chain..

 

Not one to spread rumors, but thought I would pass it along, IMO $9 fuel is what everyone is afraid of and I don’t give it much credence, a lot of fear mongering but if in-store sales are down 60% across a chain that has a cult like following etc to me that says something, the consumer is seriously cutting back, if you cant sell someone a $2 slice of pizza, or a $1.50 chicken sandwich..could that be the canary in the coal mine…

[Dinar]

6 minutes ago, Blugolds11 said:

I had mentioned a while back that I was hearing from others back home that they were really feeling the squeeze from elevated prices on everything. 

 

I’m generally a bit skeptical, and I’m not one to spread rumors etc, but today a friend (who’s son is a manger at a gas station chain that is very well known all over the Midwest) told them to prepare to see $9/gas by September and that in-store sales are down 60% since April. 

 

These gas stations have a reputation for good grab and go food, sandwiches, burgers, pizza, donuts, coffee etc they are pretty well known and have a good reputation, subject of memes, cult like following. 

 

Like I said, I’m skeptical and obviously would wonder who this guy running the manager meeting was, why he picked $9 etc etc…but for him to say in-store sales down 60% that’s pretty surprising…and this is in the largest city in a 2 hour radius with high traffic count including truckers..also would have asked if that was store specific or across the entire chain..

 

Not one to spread rumors, but thought I would pass it along, IMO $9 fuel is what everyone is afraid of and I don’t give it much credence, a lot of fear mongering but if in-store sales are down 60% across a chain that has a cult like following etc to me that says something, the consumer is seriously cutting back, if you cant sell someone a $2 slice of pizza, or a $1.50 chicken sandwich..could that be the canary in the coal mine…

Thank you very much for the heads up.  A couple of questions if you do not mind: a) is it credible?  60% is an insane number?  Is there chain in an area that had some one time events in May? b) Is it caused by ticket or number of occasions?  c) Is it caused by people not having the money or not thinking that it is worth to pay?  

 

Sorry for the questions, this is just shocking versus what I see around me and what companies are reporting.  

[Gregmal]

I mean the other big thing here is the difference in regime. Trump was very invested in seeing the stock market do well. He utilized executive orders, or emergency powers almost anytime an issue came up. Even “trusting the science” and forcing auto companies to producing ventilators when the idiots who called themselves scientists claimed this was a good solution to COVID even though obviously it wasn’t. Biden doesn’t give a shit about any of that. I don’t think he’s once mentioned the stock market. I don’t think he cares about energy; it’s a “you shouldn’t be using fossil fuels” campaign line for him if anything. His use of executive orders and emergency authorizations have been comical at best, pushing weirdo sex stuff and far left agenda issues. Nothing that really solves real world issues or things effecting the majority of Americans. So a big part of investing in certain parts of the market is…is help on the way….I don’t think it’s even on the agenda here so if you invest I’d stuff that is sensitive to that I’d be cautious.

[Blugolds11]

27 minutes ago, Dinar said:

Thank you very much for the heads up.  A couple of questions if you do not mind: a) is it credible?  60% is an insane number?  Is there chain in an area that had some one time events in May? b) Is it caused by ticket or number of occasions?  c) Is it caused by people not having the money or not thinking that it is worth to pay?  

 

Sorry for the questions, this is just shocking versus what I see around me and what companies are reporting.  

 

I had the same questions basically, but since I was hearing from his father, I didnt get to ask. 

 

I don’t think there were any one time events, and a gas station in general probably wouldn’t surprise me, I guess its this specific chain, they are the station that I look for when driving through midwest because they do have the best “snacks” layout is the best, clean, best reputation…I guess that’s what kind of surprised me, I would expect them to be the last men standing.

 

This isn’t some random station on a back road, or a dirty dated generic station. This is IMO a best-in-class retailer in that space. City size approx 75k, multiple locations in the city, but this particular location is just off the interstate on the edge of town, has always been busy when I have been around (they all are, and to be unbiased I guess I haven’t notice a downtrend at least when I have been to gas stations anywhere but I also haven’t been going inside or working the counter) so I would think this has prime location, was rather new, built within 5 years, super high traffic count etc…should check all the boxes. 

 

Unsure if that is ticket or visit. I don’t know if it makes sense that people don’t think its worth it, as their prices are very reasonable to low, general perception is value for what you are buying, decent hot snacks at reasonable prices, so I guess I am assuming that people are feeling it at the pump and skipping the trip inside for snacks..or going inside to buy smokes (hopefully) but not grabbing the slice of pizza or sandwich, pop etc. They also have a grocery section, can buy onions, bananas, bread, meat, burger to grill etc…bakery, fast food, grocery, beer all in one…one stop shop. 

 

As to credibility, if he would have just said $9 gas I would have brushed it off, everybody and their brother is shouting about how high gas can go and its a lot of irrationality IMO…just like the impending nuclear war with Russia etc…things get spun up and the game of telephone starts and next thing you know gas is gonna be $500/barrel but his son is college age, I could see him parroting some fear he heard some place about gas maybe.…but 60% drop in-store sales is pretty specific and not something a early 20’s kid would come up with, he isn’t a finance major or anything, he’s probably considering managing this location as a long term career move…if that tells you anything…

[Thrifty3000]

43 minutes ago, Dinar said:

Thank you very much for the heads up.  A couple of questions if you do not mind: a) is it credible?  60% is an insane number?  Is there chain in an area that had some one time events in May? b) Is it caused by ticket or number of occasions?  c) Is it caused by people not having the money or not thinking that it is worth to pay?  

 

Sorry for the questions, this is just shocking versus what I see around me and what companies are reporting.  

Oil is currently around $120 per barrel, on its way to $150 to $200 per barrel. Oil will be earning more than its fair share of GDP for a while. (I wonder if that’s why the smartest investor in history has been investing in oil lately?) Welcome to stagflation, people.

[Ulti]

https://oilprice.com/Energy/Energy-General/What-Is-Fueling-The-Surge-In-Gasoline-Prices.html

[SharperDingaan]

10 hours ago, Dinar said:

Thank you very much for the heads up.  A couple of questions if you do not mind: a) is it credible?  60% is an insane number?  Is there chain in an area that had some one time events in May? b) Is it caused by ticket or number of occasions?  c) Is it caused by people not having the money or not thinking that it is worth to pay?  

 

Sorry for the questions, this is just shocking versus what I see around me and what companies are reporting.  

 

Check in with the local foodbanks in your area. In the Greater Toronto Area, visits are up materially, and rising rapidly. There are also a lot of new visitors, who would not normally be part of the population they serve. According to food bank managers, a lot of people are cutting back on food to pay their other bills -  and supplementing from the food bank once/twice a month. Some of these users drive up in a F150 truck .......

 

Some of the additional demand is from newcomers still establishing themselves; wage earners working a taxi/Uber/food delivery gig and 2 minimum wage jobs, rest of the family supplementing their take-home from the food bank. What isn't talked about are the growing number of angry folks, whose standard of living would appear to have been permanently impaired - entitlement meeting poverty.

 

Hard to imagine this is not also the case in the US.

How it manifests in the smaller cities and more rural areas may be a little different though.

 

SD

 

 

 

Edited June 9, 2022 by SharperDingaan

[Dinar]

SD, thank you for the suggestion.  NYC has always been weird.  25% of the population on food stamps, yet tens of thousands of jobs go begging at $20+ per hour + bonus + health insurance + dental + 401(k).  There was a line at a local food bank a year ago, with people pulling up in SUVs.  When you get free fish, free meat, free eggs, very expensive tomatoes for free, et all, it corrupts the people.  I will check in NJ when I will be there.  

[Thrifty3000]

Remember when gas prices skyrocketed in 2007 and people started ditching SUVs? It “drove” Hummer right out of business.

 

https://www.businessinsider.com/rise-and-fall-of-hummer-recession-general-motors-bankruptcy-arnold-schwarzenegger-2020-2

[Viking]

Here is a master class on QT, the Fed and how bond markets work. And what it might all mean for financial markets. 

- 23 minute mark: what is priced into the market today

- 47:40 minute: financial market forecast

 

Bottom line, Wang feels inflation will remain ‘sticker’ (higher) than expected. As a result, the Fed actions will ultimately move interest rates higher than the market currently expects. The 10 year treasury could hit 4%. This would then cause bonds to fall in value. And stocks would sell off further.
 

 

Edited June 11, 2022 by Viking

[Gregmal]

Quick but interesting read.

 

https://markets.businessinsider.com/news/stocks/burry-grantham-einhorn-stock-market-outlook-bubble-crash-inflation-recession-2022-6?amp

 

Whats weird is we keep hearing some people say the consensus is that inflation is transitory and that the market is complacent and expecting a soft landing.
 

FYI “consensus” means “this is what everyone thinks”….huh? On Mars maybe? Only consensus amongst pretty much “everyone” is that a recession is inevitable(duh, when has that ever NOT been true) and that inflation is going to be around forever, and that the markets are doomed. 

[Viking]

Good discussion of the news from the past week (there was lots). I like listening to The Macro Trading Floor; they are European so provide a perspective from across the pond. 
 

Bottom line, all eyes will be watching the Fed this week:

1.) will they move by 50 basis points? My guess is yes.

2.) will they signal 75 is back on the table for the next meeting? No idea.

3.) will their overall commentary be more or less hawkish… or more of the same? No idea.

 

What i do know is what the Fed does will have a big impact on financial markets (bond and stocks). Get the popcorn out…
—————

Europe really is a complete mess right now. inflation is running hot at about 8% and the ECB is NEGATIVE. The problem for Europe is they have zombie COUNTRIES like Italy. Higher rates will be catastrophic. Oh, and they have a war raging in Ukraine. And nat gas/energy prices are through the roof. Sounds like Legard is losing all credibility (much worse than Powell). What a shit show. 
—————

Pivoting to the US, Felder suggests some of the drivers of inflation are more structural than is currently appreciated (like lack of labour; deglobalization etc). The Fed is still fighting the old paradigm (deflation) and therefore is underestimating inflation still today.
 

In the near term Felder feels the stock market (even at current levels) is asleep at the wheel - much too optimistic on corporate earnings and profit margins looking 6 months to 1 year out. Why?

1.) he quotes Druckenmiller: high oil prices, rising interest rates, rising US$ is terrible for corporate earnings 6-12 months out.

2.) CNBC recently surveyed COO’s and 100% were forecasting a recession in the next 12 months

3.) recently released Michigan survey shows lowest consumer sentiment on record (going back 75 years).

4.) PMI indicators are forecasting lower top line growth AND higher costs (the latter being driven by inflation pressures)

 

As a result, Felder expects the Fed to pivot and lower rates much too soon. So inflation will remain higher for longer. His trade idea? Precious metals (Sprott Physical Gold and Silver Fund). 
 

i enjoyed the discussion. I am not ready to buy precious metals.