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2021 - Is inflation finally back in the conversation?

Reagan1k

By Reagan1k
in Business and Markets

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High Plains Drifter

High Plains Drifter 10,981

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1 hour ago, Cheeseweasel said:

Why? Supply/Demand should cease to exist when you don't like it? 

And yeah, Oil and Gas are going to have record profits this year due to increasing prices. So what? Eventually, they won't.

How about "Congressmen/women continue to make millions while Americans suffer from their failed policies". Show me that fucking headline.

 

So what? so you don't care about inflation then? Good to know.

 

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Bateshorn
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The only thing more predictable than the GOP running up huge deficits on tax cuts and military spending, is each one suddenly becoming horrified by deficit spending 5 mins after a Democrat is sworn in

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Cheeseweasel

Cheeseweasel 26,437

Posted
Posted
12 minutes ago, jimmyjazz said:

There's a difference between pricing of a worldwide commodity and pricing of a microwave oven.  These retail executives are telling you exactly what they are going to do -- maintain inflated prices even when costs drop back down.  Oil and gas has never really had that luxury.

True. I've been in pricing and I know than any signal to raise prices will be met with "hell yeah!". No one talks about the counter to that though. Many times we've needed to raise prices but the market wouldn't bear it, so you sucked it up and found savings elsewhere.  You ride waves when they come. I just think it's disingenuous for a member of Congress blaming business for what is obviously a FED creation. 

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52-80

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6 hours ago, crash_davis said:

https://www.commondreams.org/news/2022/11/04/house-analysis-confirms-corporations-use-cover-inflation-raise-prices-excessively

They found the smoking guns:

  • In certain concentrated industries, corporations were able to use their market power to raise prices far above any increases in their underlying costs attributable to existing inflation

Wow!  Some concentrated industries wield more pricing power than others. (The corollary being most have none). The House Subcommittee deserves a Nobel for Economics.

  • The two largest public companies in the rental car industry enjoyed a profit increase of 597%

Nevermind the largest rental car company literally going bankrupt.  I'm sure the sequential numbers were all soundly calculated and adjusted for.

  • Four of the ten largest public companies by market cap in the oil and gas industry had profits rise by 62%

Yes, breaking revelation - when the price of a commodity goes up, companies that deal in that commodity tends to go up.  Even though in this case, apparently the data is not compelling enough they have to cut off the figure at to a minority (4/10).  Apparently, we'll just memoryhole the preceding half a decade.  Or, you know, XOM and CVX losing literally billions of dollars in FY2000.

image.thumb.png.6dff57387835db23310e51125573f7bb.png

  • Statements from corporate executives in certain industries show they are exploiting news about inflation to raise prices even more than necessary to cover costs

Not sure who needs to hear this, but executives don't boast about erosion of pricing power in earnings calls to wall street analysts. 

  • American companies’ operating profit margins before taxes averaged 14.6% from the 1960s to the 1980s, eventually rising to 16.7% during the 2010s. In 2021, pretax profit margins rose 3.2% to 19%

Yeah, it's totally not defensible that after 60 years businesses learned to increase operating efficiency to improve margins by 440 basis points (nevermind the shift to asset-light tech).  But we can surely finger a 320bps increase for a 900bps increase in inflation.

I really do like their highlighting the rental car sector, because that's really a core contributor to everyone's day to day spending.

 

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52-80

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Price gouging is such an attractive rhetoric to the smoothbrains because most of them are rarely in the supply side of the equation.  Except when they sell their house, or car, or xbox on craigslist, price gouging magically doesnt work, but connecting all those dots require too many neurons. 

GM and Chrysler go bankrupt; entire lots of car go on liquidation over and over again; but if the production runs short once: gouging! Samsung phones basically sell at 50% MSRP 12 months out.  And if you make Blackberries when the iPhone came out, you find out real quick how much price control you have on the product.

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washparkhorn

washparkhorn 9,935

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Fed should make clear that rising profit margins are spurring inflation

Companies have taken advantage of circumstances to lift prices

https://www.ft.com/content/837c3863-fc15-476c-841d-340c623565ae

The writer is chief economist at UBS Global Wealth Management

In the world’s financial markets, US Federal Reserve chair Jay Powell is increasingly cast in the role of playground bully — looming over the prostrate form of the global economy and chanting “hike, hike, hike” with malicious glee. US policy rates are rising relentlessly.

However, Powell’s public remarks offer little insight into how he expects higher rates to tame inflation. The omission matters as the current policy tightening will have an impact through an unusual route. That is because today’s price inflation is more a product of profits than wages.

F524AEC3-2FD9-4BBE-849D-ACD471D8C0F6.thumb.jpeg.ae52a38786e16607075667281cbe2448.jpeg
 

The UBS chief economist is looking specifically at whether this is a wage/price spiral. It’s not, according to him.

It has become lazy-thought for the Fed to raise the specter of a wage/price spiral and insinuate wages as the cause of inflation. They must do that because the inflation fighting tool they deployed crushes demand via unemployment - regardless of the cause for said inflation. It will work and create pain for most. But robust employment is not the primary cause. 

Edited by washparkhorn
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Hefeweizen

Hefeweizen 5,307

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1 hour ago, Parliament said:

TBH, I kinda wanna see what it's like.  Is that bad?  Seems bad.

I don’t think we’re going to get a choice other than to gnash our teeth or lay back and enjoy it.  
 

Personally I think I’ll blame everyone else’s lack of buying stuff.  I have everything I need already, you jerks.

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Incredulity

Incredulity 11,556

Posted
Posted (edited)
2 hours ago, Cheeseweasel said:

Just had a customer ask for pricing based on a product we supplied to them last year. Wants a 25% discount from the price we gave them in May and wants to hold the price through 2023.

What's a kind way to tell them to go fuck themselves?

 

"It's good to have goals in life." 

Edited by Incredulity
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fattyflattie

fattyflattie 4,636

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14 hours ago, Cheeseweasel said:

Just had a customer ask for pricing based on a product we supplied to them last year. Wants a 25% discount from the price we gave them in May and wants to hold the price through 2023.

What's a kind way to tell them to go fuck themselves?

 

“Best of luck in your search for a new vendor”

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Hefeweizen

Hefeweizen 5,307

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36 minutes ago, Cheeseweasel said:

Yeah, some fuckwit upstart will take the bait, fail to deliver, and they'll be back begging us to help. 

Same as it ever was.  The good news is usually stupid like this gets weeded out after the failure.  The  bad news is they don’t always come back to you, just to a vendor that delivers.

 

My attitude on this is fuck ‘em.

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gmr548

gmr548 16,518

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I can only speak with any real expertise in my sector (housing), but the housing cost numbers used to determine CPI are kind of shitty indicators in general (owner equivalent rent has to be the dumbest metric ever invented), and they’re also lagging. So the housing cost portion of the CPI was underselling housing cost increases when they were really at their peak, and now that portion of CPI is issue itself… wait for it… inflated.

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gsoda3

gsoda3 3,237

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18 minutes ago, gmr548 said:

I can only speak with any real expertise in my sector (housing), but the housing cost numbers used to determine CPI are kind of shitty indicators in general (owner equivalent rent has to be the dumbest metric ever invented), and they’re also lagging. So the housing cost portion of the CPI was underselling housing cost increases when they were really at their peak, and now that portion of CPI is issue itself… wait for it… inflated.

hah yeah.  it really is an unnecessarily complicated and inaccurate method.  

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Captainant

Captainant 27,468

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36 minutes ago, Dbeasy said:

A question for economics experts. Why isn’t the government looking to use additional taxes to slow down inflation? 

On the other side of midterms, I would imagine that would help. The 2017 TCAJ act really took the brakes off of that mechanism though, and good luck increasing corporate taxes and imperiling their profit margins, and forcing them to lay off their staff to preserve an extra half point of earnings 

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