Commodity Super Cycle vs Not...

HoustonHusky

A lot of banks and other type folks are calling for a "supercycle" in commodities...
https://www.reuters.com/article/us-metals-supercycle-ahome/goldman-proclaims-the-dawn-of-a-new-commodity-supercycle-andy-home-idUSKBN29A1QM
https://www.institutionalinvestor.com/article/b1r0r28fl471c5/are-we-witnessing-the-start-of-a-new-commodities-supercycle
https://www.bloomberg.com/news/articles/2021-03-18/we-may-be-entering-a-new-commodities-supercycle

I'm more in this boat...just don't see it. Think you will see a surge through most of this year as the money printing ramps up even higher and claims of inflation being non-existent keep getting shoved down peoples throats, but don't think its sustainable for a long period of time...
https://www.wsj.com/articles/commodities-supercycle-looks-like-a-stretch-11615714383

PurpleThrobber

You can only run the old flim flam for so long.

There will be inflation. There already is - got a construction bid for a new deck in October and materials have gone up to the point that the contractor called back and said he was sorry but he needed to submit a new estimate.

My guess is November 2022. Let it rip.

creepycoug

PurpleThrobber said:

You can only run the old flim flam for so long.

There will be inflation. There already is - got a construction bid for a new deck in October and materials have gone up to the point that the contractor called back and said he was sorry but he needed to submit a new estimate.

My guess is November 2022. Let it rip.

You mean the Malarkey?

creepycoug

Here's one contarian take on inflation for 2021.

https://fortune.com/2020/12/07/investors-inflation-2021-labor-market-mirage/


“We think inflation is going to be muted because unemployment will still be high,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. “There will still be slack in the labor market, which would keep some pressure on wages.”

Have to confess I hadn't really though about the labor input as a counter-force to inflationary pressure.

TheRoarOfTheCrowd

If there is a shortage of goods and raw materials because of disruption in the distribution network there will be increases in prices until the disruption is solved. If there is a shortage of materials and product because the capacity of production is maxed and its difficult to bring new capacity on line then you will have a longer term sustainable form of price inflation until sufficient capacity can be built to handle demand.

This normally happens when major economies embark on substantial long term infrastructure buildouts of a global scale like india and china in the 2006-2015 period. In general terms, that isn't the case now... what it appears that we have now is a substantial but short term shortage of goods and raw materials because of disruption in production and distribution.

The important point is the capacity utilization rate is low for most commodities and industrial production which is insufficient to satisfy only average to below average demand, with the exception of tech based products where capacity utilization is pretty high right now.

At least that is the impression that I am under as I observe the evolving trend.

TheRoarOfTheCrowd

Following that down another step, you can make the argument that because of the shortages of inventory and the rising prices that result, that in a lot of industry groups, the published GDP reports concerning the trajectory of earnings, revenue and cash flow is overstated right now vs normalized production pricing.

The fallout is that year over year comparisons may well be difficult later even assuming a pickup in demand. One thing seems certain though ~ the first step is the resumption of building inventory levels to normalized levels which in the short run will be artificially good for business until the economy normalizes.

creepycoug

DawgsCanDance said:

If there is a shortage of goods and raw materials because of disruption in the distribution network there will be increases in prices until the disruption is solved. If there is a shortage of materials and product because the capacity of production is maxed and its difficult to bring new capacity on line then you will have a longer term sustainable form of price inflation until sufficient capacity can be built to handle demand.

This normally happens when major economies embark on substantial long term infrastructure buildouts of a global scale like india and china in the 2006-2015 period. In general terms, that isn't the case now... what it appears that we have now is a substantial but short term shortage of goods and raw materials because of disruption in production and distribution.

The important point is the capacity utilization rate is low for most commodities and industrial production which is insufficient to satisfy only average to below average demand, with the exception of tech based products where capacity utilization is pretty high right now.

At least that is the impression that I am under as I observe the evolving trend.

This right here. And at the risk of sounding cavalier or just talking out of my ass, that particular source of inflation doesn't bother me because I can pinpoint the source of the problem: the pandemic. That's less troubling to me than too much of our currency in the float, which I would think is more of a systemic issue that could linger or get much worse.

Supply chain shenanigans is just the market at work, and pricing pressure arising from good old fashioned scarcity.