Is The Bottom Almost Here?

[thepupil]

 

10 minutes ago, Gregmal said:

These have largely occurred in the last year, and especially that last 6 months while the input increases largely precedes that. If investing in super duper large blue chip stocks was my thing, I’d probably wager heavily on those margins going up over the next 12-24. Same with something like Lamb Weston. 

 

then you'd have a different view because no one is predicting that. 

 

I frankly don't find any validity to this "corporate greed" as cause of inflation reasoning. Like Kroger's margins are very barely up to flat from 2019. many companies' margins are declining and earnings power is declining in real terms. 

 

The simpler explanation is that inflation is  has been real. 

Edited March 9, 2023 by thepupil

[Gregmal]

8 minutes ago, thepupil said:

 

 

then you'd have a different view because no one is predicting that. 

 

I frankly don't find any validity to this "corporate greed" as cause of inflation reasoning. Like Kroger's margins are very barely up to flat from 2019. many companies' margins are declining and earnings power is declining in real terms. 

 

The simpler explanation is that inflation is real. 

It varies for sure. Restaurants and entertainment type stuff, 100%. Stuff that relies largely on low end labor…yup. Blue collar labor is en fuego…and good for them. Those workers got screwed for the last 15 years by corporates and wealth schmucks because they had no leverage. Waiter couldn’t say fuck you I’m out nor could the truck driver. Now they can. 
 

Not to get too hung up on snack food, but something doesn’t add up if your margins in 2019 at $2.49 a bag are higher than they are in 2023(largely yet to be factored into reported figures) at $5+….I certainly don’t have the time or care enough to get into the granularity of trying to parse the accounting mechanisms of a company this size…but it doesn’t add up when you look at the inputs for those types of products and also then account for a world class distribution network. 

Edited March 9, 2023 by Gregmal

[Gregmal]

Remember all those socially aware corporate benevolents who in 2017-18 pledged to raise their minimum wages from like $15 to $20 an hour by 2022? There were tons. Now they have to deliver and the voices with all the money are the loudest screamers that we have to put an end to it…ironic eh?

[Gregmal]

 

You can call this lots of things, but calling it inflation is bullshit. 

 

Edited March 9, 2023 by Gregmal

[Gregmal]

Cost of tomatoes went up bigly….but only for Heinz lol? 
 

A guy I know, his family owns a groups of regional supermarkets. He explained it quite well using canned seltzer water. Look at the entire isle. 90% of it is controlled by 2-3 distributors. Whether it’s soda, juice, poultry, frozen vegetables, fresh produce….2-3 control 90% of shelf space. So as the store brand…you offer a 12 pack of seltzer for $2.99. Your competitors used to be $3.99-4.99. Now they’re selling 8 packs $2/9. Maybe your production cost went up, sure, but so does everyone on the shelf, but if your goal is to be a value prop for the customer, and you’re in the business of making money, you can raise from $2.99 to $3.99 whether it’s warranted or not, because what’s the alternative?

[Spekulatius]

If you grab a handful of ketchup single packs from your local McDonald (of course without dining there), then there is no inflation

When times are really tough, I go there for inspiration:

http://www.bumwine.com/compare.html

 

The Fed can also deflate stonks so we can buy more of them. That also helps with inflation.

Edited March 9, 2023 by Spekulatius

[changegonnacome]

2 hours ago, thepupil said:

you can see PEP's wild and crazy (and by that, i mean completely non existent) margin expansion from all those price hikes here:

 

4 hours ago, Spekulatius said:

Yes, that’s correct. Inflation is a flat tax on everyone and we know where tax checks go. Inflation is the government way to silently reduce liabilities and obtain more taxes at the same time.

 

Yep the only margin expansion occurring right now is at the IRS.......I wish it was publicly listed 

[Gregmal]

50 minutes ago, Spekulatius said:

The Fed can also deflate stonks so we can buy more of them. That also helps with inflation.

Edited 27 minutes ago by Spekulatius

Of course, thats part of this scheme. The people telling us how "instrumental it is to tackle this thing".....ask them, oh how do you benefit from this? Lobbying for more interest, aka freeloading in the form of getting something for absolutely nothing? Are you short, IE you benefit from the actions you are proposing to "solve the problem"...Are you hiring but cheap and pissed off because you dont want to pay market rate for labor?...interesting. 

 

All this stuff has lags and ebs and flows. Most things went nowhere for the decade following the GFC. COVID and our government turbo charged the catch up...its here, it occurred in 2021 and 1H 2022...its largely over. Prices rose, theyre not coming back down, deal with it. Shit also costs more now than it did in 1990...thats life. 

 

I also think pupil, especially being a RE investor, knows that public company accounting, may not always be accurate in picturing whats going on. Especially if whats occurred is more recent. Market rate rents went parabolic in late Q4 2020 through 2021 and then basically stopped going up. But the reported financials are still bleeding through rent growth. You can see this stuff plain and simple with your eyes...why would you rely on accountants using complex classifications when the info you need is right in front of you? With food, your gap between store brand and premium brand has blown out massively, which isnt inflation. At a certain scale, the inputs, aka the aluminum cans, tomatoes, delivery routes, etc, all cost the producers the same. So why the larger than normal gap? 

Edited March 9, 2023 by Gregmal

[Spooky]

Inflation really hurts lenders and benefits borrowers. The Fed is owned by the lenders.

[Gregmal]

https://www.reuters.com/business/retail-consumer/few-signs-us-companies-curbing-profits-after-powell-says-it-could-cool-inflation-2023-03-09/

 

So like whats the game at this point? The capitalists are lazy, and angry restaurants and trips are expensive, so they want handouts in the form of interest as they root for things to occur that remove a big part of the capitalist element from the market? Theyre probably doubly mad they arent getting vacation homes for pennies like they did last time the system was gamed by Summers and Co. So they demand higher interest until they can get bargain basement prices on equities again? Is that it? Why not just let people keep paying prices they are ok paying until they are no longer willing to do so? That would be sinister of course. 

Edited March 9, 2023 by Gregmal

[thepupil]

32 minutes ago, Gregmal said:

Cost of tomatoes went up bigly….but only for Heinz lol? 
 

A guy I know, his family owns a groups of regional supermarkets. He explained it quite well using canned seltzer water. Look at the entire isle. 90% of it is controlled by 2-3 distributors. Whether it’s soda, juice, poultry, frozen vegetables, fresh produce….2-3 control 90% of shelf space. So as the store brand…you offer a 12 pack of seltzer for $2.99. Your competitors used to be $3.99-4.99. Now they’re selling 8 packs $2/9. Maybe your production cost went up, sure, but so does everyone on the shelf, but if your goal is to be a value prop for the customer, and you’re in the business of making money, you can raise from $2.99 to $3.99 whether it’s warranted or not, because what’s the alternative?

 

well KHC and KO's margins are down (GP and EBITDA) from pre-covid, so maybe they have to reinvest all that into advertising. 

 

I don't really think it's important in the end or precisely understand your point. Everyone's complaining about egg prices. Cal Maine's margins are high, but they go thorugh boom/bust cycles all the time. nothing new.

 

i just don't see any evidence of "price gouging" or whatever. if anything, inflation is wreaking havoc on profitability (as one would expect)

[Spekulatius]

I actually agree that Pepsi for example is not price gauging. you can read their earnings releases. They just managed to pass on the cost increases (give or take) and their profit grew with inflation basically (9%).

[changegonnacome]

5 minutes ago, Gregmal said:

Theyre probably doubly mad they arent getting vacation homes for pennies like they did last time the system was gamed by Summers and Co. So they demand higher interest until they can get bargain basement prices on equities again? Is that it? Why not just let people keep paying prices they are ok paying until they are no longer willing to do so? That would be sinister of course. 

 

I dunno Greg - I think your seeing conspiracies where none exist.....rather what we have is a bunch of participants in the political economy acting at points in time as you would expect them too..........voters/the population were scared by COVID, politicians acted to 'protect' them, in doing so people (voters) needed to be bailed out, the politicians responded with bailouts, the bailouts were widely popular with voters........and so the politicians tripped over themselves to do even more....so they could get re-elected in 2021/22.........they did too much for too long & we got inflation....the monetary authorities too lest they be accused of not doing 'enough' to fight COVID in that period, kept financial conditions too loose for too long....they messed up now and are trying to fix it. You put the too together and you begin the chain reaction of monetary inflation we have now which is self-reinforcing.

 

Indeed the next cognitive policy error is where the monetary authorities...........getting beat up by Elizabeth Warren on TV a few more times & becoming widely unpopular as unemployment climbs up to 4-5%.........fools themselves into thinking that the inflation fight is complete and they begin to cut rates too early & inflation returns.

 

The other expected policy error with the fiscal authorities to come next is to continue to espouse their hate for inflation.....while simultaneously fueling it.......CPI like increases to social security.........more borrowing/more spending bills etc.

 

I don't see a conspiracy here.......I see what I usually see.......people doing what is expedient and repenting later.

[Gregmal]

Well the point is that theres a lot of screaming about something that just isnt really that big a deal. Did anyone really think that margins wouldnt come down at all from 2021? Of course they would somewhat. There were a lot of unique one offs anchored to the events that occurred during covid that had to normalize. 

 

Something like Kraft/Heinz or KO were largely viewed as shitty businesses pre covid. Buffett got a ton of flack especially for KHC. 

 

Same point and I agree with you on eggs. OJ too. Its just how this stuff works. Folks need to deal with it. 

 

Instead, and again my general point, just like with the "oh energy prices are ridiculous" bs, theyre just grabbing at these datapoints in absolute terms and without context, most people doing it are probably doing it dishonestly and intentionally, in order to manufacture some 1970s style inflation issue that simply doesnt exist. If people wanna pay $6 for a certain specific brand of ketchup they'll either do it or they won't. Supply and demand imbalances stemming from inflation arent the issue. Thats dumb. And thats the inflation narrative being peddled. 

[changegonnacome]

52 minutes ago, thepupil said:

i just don't see any evidence of "price gouging" or whatever. if anything, inflation is wreaking havoc on profitability (as one would expect)

 

Exactly - inflation manifests itself in different inputs, at different times in unpredictable waves for a producer.....inflation is a mental overhead tax for a business......just ask someone running a enterprise in Argentina for the last 40yrs............its why, all things being equal, inflation is barrier to long run planning & investment......the future trajectory of prices/inputs/margins becomes unpredictable.....at the edges corporates back away from making productivity enhancing capital investments as the IRR on projects, always foggy, gets foggier still.

 

You dont miss your water till your well runs dry.......and you dont miss 2% inflation until............

 

 

Edited March 9, 2023 by changegonnacome

[Gregmal]

So now the sinisterness of inflation, is that the Ivy leaguers getting paid 6 and 7 figures annually to run the mega corporations, can’t properly budget? I guess I give up. The new ongoing list of reasons this is such a big deal and warrants such persistence in terms of stealing people’s jobs just keeps getting more ludicrous. 

[Gregmal]

I don’t think there’s many times where I ever agree with Elizabeth Warren but she totally nails the issue here. Who does this jerk off think he is playing with the lives of millions of people on little more than a whim and an academic theory peddled by people with conflicting interests, predicated on short term, largely meaningless weekly datapoints, largely influenced by theoretic stories about all the doom and despair it’s “guaranteed to bring” in the future, if not handled now?

[thepupil]

1 minute ago, Gregmal said:

I don’t think there’s many times where I ever agree with Elizabeth Warren but she totally nails the issue here. Who does this jerk off think he is playing with the lives of millions of people on little more than a whim and an academic theory peddled by people with conflicting interests, predicated on short term, largely meaningless weekly datapoints, largely influenced by theoretic stories about all the doom and despair it’s “guaranteed to bring” in the future, if not handled now?

 

i don't know man, i think he thinks he's the steward of the almighty dollar tasked with keeping our dollar hegemony intact ("price stability") which allows for our gloriously profligate standard of living....and also charged with wrecking the shit out of the speculative froth in all kinds of unproductive assets (including, probably, some i own). 

 

I kinda dig it.  on the other hand, no idea how the whole government budget thing works at 5% rates and don't relaly think this last for a long time...but macro's obviously not my strong suit. 

 

and it's nice to have real return on savings. i sort of see it as a cleansing. cleansing of the most speculative behaviors (crypto, short term floating rate funded financial stuff (PE, RE flipping), and a check on non productive or marginal projects. we all got a little carried away. hell i put $100K in a groundup mixed use development in an opportunity zone that i won't see a dime for for like 10+ years if ever. 

 

we just had a crypto bank blow up. good to see some bodies start falling no?

 

 

 

 

 

[changegonnacome]

8 minutes ago, Gregmal said:

stealing people’s jobs just keeps getting more ludicrous. 

 

Inflation is stealing a little bit of everybody's job daily but especially those on the poorer end of the spectrum.

 

Economists talk about a 'misery index' which is simply the unemployment rate added to an economies inflation rate. I think that little number is actually quite important and speak to the more nuanced point you seem to miss....presently we are at about a score of 10 (~6% inflation & 3.5% unemployment).....pre-pandemic we had misery index score of 6.....THAT was a great economy.......having a job but being unable presently or in the future to cover your household expenses is indeed miserable.......folks talk about a great economy simply on one measure alone 'unemployment'....its myopic & stupid.....how do I know.....look at consumer sentiment survey's, political polling.....a 3.4% unemployment with that jaundiced view should be screaming positivity and happiness......but it isn't....people are miserable.........why........cause inflation is picking peoples pockets & they feel insecure about the future.

 

I think Greg you simply consider inflation to be a nothing burger....that a 5% inflation rate is a 'whatever'.........with that framework of course you look at the Fed raising rates, engineering a slow down & creating unemployment......as some kind of monstrous act pointless destruction. If you don't believe its a problem....ultimately......we have been talking past each other these past few months.

 

However in my world when you balance the pros and cons..........the pros of 2% predictable inflation on investment, aggregate household budgets, societal stability etc........getting 'back to 2' is a hugely important, hugely desirable and the noble thing to do.......JP & I are in crushing agreement. Lets see if he follows through once the going gets tough!

[Dinar]

14 minutes ago, Gregmal said:

I don’t think there’s many times where I ever agree with Elizabeth Warren but she totally nails the issue here. Who does this jerk off think he is playing with the lives of millions of people on little more than a whim and an academic theory peddled by people with conflicting interests, predicated on short term, largely meaningless weekly datapoints, largely influenced by theoretic stories about all the doom and despair it’s “guaranteed to bring” in the future, if not handled now?

Greg, with all due respect, I could not disagree more.  5% inflation is a huge problem, it confiscates the wealth of people, including tens of millions of retirees, and those who are prudent, including many who while working low wage jobs do save.

Clearly this was caused by Trump's stimulus checks, exacerbated by Biden, worsened by shut down of the economy by the likes of Cuomo and Powell being irresponsible by keeping rates so low for so long.  

However, to say that 5% inflation is not a problem, it actually is.  If you make 6% real return in the stock market (historical average over the last 90 years) then post tax you make 4-5% in a world of zero inflation, and 0% in the world of 5% inflation in real terms post tax & inflation.  Inflation is confiscation of wealth!  How many countries have succeeded with 5% annual inflation?

[Gregmal]

17 minutes ago, changegonnacome said:

I think Greg you simply consider inflation to be a nothing burger....that a 5% inflation rate is a 'whatever'.........with that framework of course you look at the Fed raising rates, engineering a slow down & creating unemployment......as some kind of monstrous act pointless destruction. If you don't believe its a problem....ultimately......we have been talking past each other these past few months.

5% caused by events of 2021 and early 2022 that are far, far in the rear view mirror to me are a nothing burger. Just like rents going parabolic for 12-18 months around 2021, but still showing up in various datapoints even into 2023…so will the 2021 inflation boom. This chump is sitting here acting like it’s still happening based on weekly datapoints and acting like Heinz charging $6 for ketchup highlights the problem. It’s absurd. If one year from now we are at 5% I’ll totally eat my words. But people are fixated on 5% right now which is preposterous because to come down from the levels we were at last summer you need to roll off the numbers and that’s all there is to it.
 

You go case by case and majority is far from inflationary. People screaming about energy costs are either liars or uninformed. Housing? Peaked a year ago. Hasn’t inflated at all last 12. Grocery? Again depends what you look at. Commodities, not much there either, to the tune of like 30% DOWN year over year for the Dow index…yet people like Powell get to keep talking unchecked. If we think it’s a tax, well we already get hit with those too. They’re part of life as well. Unless in addition to raging about the inflation tax, we re planning to riot at the Capitol over the bigger ones too?

Edited March 9, 2023 by Gregmal

[Gregmal]

Warren:

"In other words, you don't have a plan to stop a runaway train if that occurs," Warren said. "Chair Powell, you are gambling with people's lives. And there's a pile of data showing the price gouging and supply chain kinks and the war in Ukraine are driving up prices.
 

…………

 

Are people really arguing that those 3, well definitely the latter two, aren’t major contributors….to the backwards looking datapoints everyone is currently looking at and extrapolating out in perpetuity?

 

And if you really wanna argue no price gauging(I hate that word, it’s capitalism) look at homebuilder margins….what % of the “inflation” is influenced by shelter??

[SHDL]

So now a major bank run has suddenly entered the picture? That’s promising…

 

The only problem is I can already hear the sound of government intervention coming this way. 

[Valuebo]

Markets been a bit jittery and participants are fighting the last crisis. Bank run on SVB maybe but should be easily contained. This isn't the last crisis. 

Edited March 10, 2023 by Valuebo

[Gregmal]

Keep listening to your academic buddies and hedge funds Jay. They’re using you like they used Summers and Co who walked us into GFC. Derivative deregulation is good for the economy! 
 

Good to see another solid jobs print though. Can’t help but root for the normal guy against these monsters.