The Death of Inflation

[errolanderson]

Here's a Did You Know . . . The largest driver of U.S. inflation over the past month is; DRUM-ROLL PLEASE
SKYROCKETING USED VEHICLE PRICES.

Blaming shortage of semi-conductors. But maybe, new vehicles are simply too expensive given the weak economy?

[errolanderson]

Recent inflationary pressures may have died today with stock markets heaving and crude oil prices crushed. Real estate appears next in-line. Consumerism on-the-rocks (IMO).

Wait for the post Xmas price discounts and deals . . . .

[errolanderson]

Inflation will persist for supply chain impacted components, but for non-essentials . . . a sitting duck for deflation (IMO).

Now that oil prices have broken, eyes on now on the stock market. Oil break is going to drive commodity prices lower. If stocks break, a whole lot of the inflated economy breaks. Stocks are fueled by money printing and grossly extended leverage, not true valuations.

Real estate is a bull-eye (IMO). And then central banks believe they can hike rates (go figure). Financial industry is promoting that crude could break $100, $120, even heard $150 from a major bank. Why? Because it fuels the frenzy. And frenzy is easy money, easy profits.

But then there is this achilles heel called deflation. Bankers have no answer for this and scares the heck out of the financial industry. (IMO) it has already started. My opinion . . . .

[F4F]

I respect your opinion Errol. Have been reading on this forum for sometime now. The question that comes to mind is how would you suggest the average farm prepare for what’s coming?

[errolanderson]

I respect your opinion Errol. Have been reading on this forum for sometime now. The question that comes to mind is how would you suggest the average farm prepare for what’s coming?

Not a fan of farm storage. Too much risk for the grower plus what's wrong with these amazing fall cash market prices? The spring market could be different. If you are bullish wheat / canola, some growers have moved the physical (priced the cash) and replaced with calls. This limits your price exposure to the cost of the call option. No risk of spoilage either and risk of lower 1st quarter cash market.

For new crop, there have been some solid new crop prices . . . canola $18/bu plus heard recently. This is a solid starting point for new crop. Bids have pulled back, but still attractive. Also, we have already loaded some growers with new crop put options as a price guard. Using puts eliminates production and delivery risk. Believe more growers will gravitate toward options due to some tough experiences with payout penalties on cash contracts this past year.

Be cautious with new asset purchases. Everything is over-inflated from land prices to fertilizer to equipment. Bulls are a dime-a-dozen because central banks have cuddled this market and taught investors to always buy the dip. U.S. banks continue with their hype . . . .

But the Fed has lost control. Now we have a mix in markets . . . some aspects remain inflationary, but some are now deflationary. Personally, believe inflation has peaked . . . . My two-bits.

[errolanderson]

My apologies for bringing up the dead, but inflation fallout risks appear staggering.

Credit card use now collapsing into 1st quarter. Consumers totally drained. Central bankers off on their own academic world as the recession deepens.

As you may have guessed, I have little respect for gov’t data. Canada already in deepening recession for past 8 months (IMO).

This is very bearish from retail to crude oil. You name it. U.S. housing prices now like catching-a-knife. Wait for the brunt of the commercial real estate collapse likely by spring. We’ll get to see who’s holding the bag.

Errol’s Commodity Wire

[shtferbrains]

Your post above from Dec 2 might get more likes?

[AlbertaFarmer5]

Your post above from Dec 2 might get more likes?

That was Dec 2, 2021.
If I were Errol trying to sell subscriptions, I would attempt to wipe this thread from the face of the internet, not dredge it back up.

[wrongway]

Bank of CanADA pumped $60B into REPO market. no one saying which bank or banks can't sell their securities overnight. Very rare for BOC to do this. media silent of course.

[AlbertaFarmer5]

Bank of CanADA pumped $60B into REPO market. no one saying which bank or banks can't sell their securities overnight. Very rare for BOC to do this. media silent of course.

That would be the birth of inflation. It is a roller coaster we can't get off of once we got on.

[errolanderson]

Bank of CanADA pumped $60B into REPO market. no one saying which bank or banks can't sell their securities overnight. Very rare for BOC to do this. media silent of course.

It has already hit-the-fan. It will be interesting who floats to the top of this mess. We'll all know soon . . . .

[sumdumguy]

The government always wins, they make sure of that. They’ll just keep throwing borrowed money at the markets, oblivious to the consequences. No rhyme or reason.

[biglentil]

Errol tell me has the cost of living gone up or come down since 2021?

[errolanderson]

big lentil, in my opinion, the problem is now by far . . . debt, not inflation.

Raising interest rates caused this debt crisis, it’s also causing deflation.
Place the blame squarely on central policy aimed entirely on preserving Wall Street.

Is inflation the real problem or is debt load the cause of personal and corporate grief? Asset prices are clearly falling.

And wait for fast food burger wars to erupt in a drive-through nearest you.