Target ($TGT) reported earnings today. The stock was down 25%. Home Depot ($HD) reported yesterday. Guidance from the executive teams took the stocks down. Home mortgage applications are down. Home sales are down. The red hot housing market shows some signs of cracking. Gas prices at the pump are now over $4/gallon everywhere in the United States. Food prices are skyrocketing.
Welcome to the Joe Biden Economy.
Corn plantings and soybean plantings are behind schedule. Professor Scott Irwin from the University of Illinois College of Agriculture follows this stuff closely. He is a data dog. The stuff he produces isn’t political, it’s based on data from the field and research.
My friend that runs Fasano Pies has said his raw material costs are up 5x already this year. He makes great pies. I could use a cherry one right now.
There is very little a company can do to hedge against upside runs in costs like this except to buy futures and pass along the costs to your customers. There is nothing a consumer can do except take it. If you stockpile, you run the risk of spoilage.
The problem for consumers is this. You can forego buying a couch. You can’t forego putting gas in your car, heating and cooling your home or putting food on the table.
The elasticity of demand for things like fuel and food is basically inelastic.
Higher grain prices mean higher meat prices. Oh by the way, the Biden Administration expanded the idiotic policy to add ethanol to fuel driving up the cost even further. Put that together with their open assault on the entire energy company and you can see why gas prices aren’t going to go down.
It’s not Russia.
Russia lives at 1600 Pennsylvania Avenue and runs the House and Senate.
Yesterday, former Fed chair Ben Bernanke warned that we are headed for recession. That means we are already in one. People like Bernanke are “rearview mirror people”. I have said as much on this blog about already being in recession in the last month since the last GDP number came out.
We are going to see more shortages and long lead times for goods. Baby formula is the latest thanks to the FDA but there will be more. The government is so integrated into markets via subsidies, price floors, and now proposed price ceilings that they can’t work in a fast enough manner to smooth things out.
I have also been telling people to “STFR”. Remember all the happy talk yesterday on liberal channels about how the bottom was in? Business anchors aren’t that smart and 99% of them know next to nothing about business. They are great-looking, can read a teleprompter, and can listen to producers through their earpiece and speak fast. I looked at the market yesterday and it hadn’t hit 4100 yet in the S+P. I wanted to go short big time between 4100-4200. It didn’t get there and stocks are puking today.
I remain convinced the S+P will see 3200 print before the end of the year, and it might be 3000. I also differ from Wall Street analysts that say “While the stock market might go lower, it will be higher than it is today by December 31. Still down on the year, but not this bad.”
Bad news really dries up liquidity in markets like this. When people run to the exits to sell, there are no buyers, no accumulators.
Because of the total mismanagement of government, we could be in for 8-10 years of bad returns in the stock market. It’s 1974 again.
Want to solve it?
It’s not enough to get government “out of the way”. It’s not taking a scalpel to incrementally trim bad regulation in the bureaucracy and in the tax code. You can’t just work around the edges. Nope. You take a butcher’s cleaver to it. Smash it and put it through the meat grinder so it doesn’t exist anymore.
But, you can’t reason with the other side. Data doesn’t matter and neither do facts. All of this is intentional and for your own good.
Man, you are so spot on with this Jeffrey. "You can't reason with the other side. Data doesnt' matter and neither do facts." So freaking true. I tried discussing inflation with a leftist yesterday (I know, what the hell was I thinking.) He tried to argue that the inflation we're seeing is all supply-chain related. My jaw dropped. And what about money supply? Nothing. This is someone with an advanced degree from MIT, as he reminded me, of course.
I really, really don't think the overwhelming majority of voters understand what it means to "trim bad regulation in the bureaucracy and in the tax code". This applies primarily to Democrats but also to a lot of Republicans as well. I keep wondering if 1974 is the good possibility compared to, say, 1932.