Companies can't eat it anymore

With fuel now at $4.30 per gal in Chicago, not even close to the summer driving season, corn prices set to rise 40% in 2009, and commodities that are poised to explode to a new leg higher, companies just can't eat it anymore. They HAVE to raise prices. Its a matter of pure survival. They all have to do it. None can hold back any longer. Theyve only been succesful for years with interest rates low. the 30 year bond yield is about to launch big time. The inflation picture is about to explode near term. By the end of the summer you will wish literally you could have purchased even the smallest of things like groceries in bulk in May and stocked them up. Longer term we ain't seen anything. And this will all happen well before we are at $200/bbl on oil. Gold stocks are close to exploding higher. Folks you will be stunned ! This thing is gonna run higher so quickly and even you will be afraid to chase it. ou will keep calling tops. Shorting these raw materials will be a disaster. I have no clue what will happen to general equities though. I would think down. But who knows. the commodities picture. This sucker is probly only in the 4th inning. Maybe you should spend those rebates on the many things you will really need, and buy them while they are relatively cheap. There are some major forces at work, including massive derivative positions that have to start taking the other side. Trillions upon trillions. If you think these gas prices are about to moderate, and are wishing for lower prices, then you will be wondering what the heck happened when you see fuel prices screaming thru $5/gallon this year without blinking an eye. Folks will be like deer in headlights. Im tracking prices on little followed products. The rapid rising price trends are stunning. These are core products, not always used that often. Some are, some aren't. Its a mix. I'm watching them at one of the cheapest retail stores. Good luck to all. You will need your trading money.

Edited by nimblebear, 08 May 2008 - 09:28 PM.

Here is the problem. The consumer can't handle higher prices, the incomes won't catch up. So someone will have to either eat the higher input costs or the simple dynamics will make sure they aren't selling enough goods at higher prices. Incomes haven't increased in the past few years, they stay more or less flat, and China/India outsorcing has a solid lid on those incomes. Someone will definitely suffer. My guess the pain will be shared between consumers and corporations. I don't think there will be anything dramatic as you expect, though. I think it will be a prolonged painful process. We are not in an inflationary environment. Incomes aren't growing and major asset prices ( housing/stocks) are stagnant or falling. And none of that is going to the moon any time soon. We're in an environment were speculative psychology and money have shifted to commodities out of paper assets and real estate. Just another bubble blowing up.

Edited by ogm, 08 May 2008 - 10:20 PM.

Here is another crazy thought. Totally out of this world. Commodities can go down. I heard stories from old people who traded before me and they told me that commodities go both ways (up and down). I have to do more research just to make sure those old traders are telling the truth about the "down" part. And maybe, just maybe the world will go on in a cyclical economic manner it has done for centuries. Meanwhile, some people worry about others, and I selfishly try to make money. Being an economist by education, I stopped losing money in the markets as soon as I stopped using economy to justify my trades. Denleo

Before all that happens, we'll have wars sparked all over the world. Its about time. Since known history, whenever resources were pressed, people went off to kill each other to cut down overall demand. I can find examples going back to written history. This time's no different. They'll first try to buy it, ofcourse, but then when that stops working, they'll just take it by force. We've had decades of relative peace. Subprime and national debts are least of our troubles.

Here is the problem. The consumer can't handle higher prices, the incomes won't catch up. So someone will have to either eat the higher input costs or the simple dynamics will make sure they aren't selling enough goods at higher prices.

Incomes haven't increased in the past few years, they stay more or less flat, and China/India outsorcing has a solid lid on those incomes.

Someone will definitely suffer. My guess the pain will be shared between consumers and corporations.

I don't think there will be anything dramatic as you expect, though. I think it will be a prolonged painful process.

We are not in an inflationary environment. Incomes aren't growing and major asset prices ( housing/stocks) are stagnant or falling. And none of that is going to the moon any time soon.

We're in an environment were speculative psychology and money have shifted to commodities out of paper assets and real estate. Just another bubble blowing up.

Inflation on the items you need is rising at an annual rate exceeding 9%. Most everyone who wants a house has a house. Their mortgage is set for 15 or 30 years. There is no inflation there its already baked in. I could care less of what housing prices do. they could go up 30% or down 40%. My mortgage payment stays the same until I pay it off.

The fact that incomes aren't growing makes it even more inflationary, because as prices rise you have less buying power and if your income stays flat you buy less because you can't afford things. Or you keep taking on debt like many do, and eventually you go bankrupt and shift the burden of your loss to the taxpayers.

There is a core worldwide demand for products now that didn't even exist 10 years ago. There billions more "middle class" consumers in China and India. This core has expanded at an exponential rate. Inflation in those countries exceeds 10% easy, and India is more like 15%.
This inflation gets exported wherever they do business.

It doesn't matter if the economy slows here, because there is now a core baked in demand for many fundamental products that demand huge use of natural resources and raw materials. This demand is not going away, and it keeps growing.

There is ABSOLUTELY nothing speculative about the commodities demand and price increases. It is NOT a bubble and you are sorely mistaken. If anything right now some prices are relatively suppressed.

Pick your favorite food item. Lets check and agree at a price from our local grocery. I'll even give you the benefit of the doubt and say the price will increase 10% in year. I will bet you by year end 2008, not a full calendar year from now that item will be at least 10% higher.

Don't worry, now that home equity withdrawl is largely unavailable and credit cards are maxed out, we can just take early distributions from the 401k with a debit card to buy the groceries...

http://articles.mone...tsNotSoBad.aspx

Here is another crazy thought. Totally out of this world. Commodities can go down. I heard stories from old people who traded before me and they told me that commodities go both ways (up and down). I have to do more research just to make sure those old traders are telling the truth about the "down" part. And maybe, just maybe the world will go on in a cyclical economic manner it has done for centuries. Meanwhile, some people worry about others, and I selfishly try to make money. Being an economist by education, I stopped losing money in the markets as soon as I stopped using economy to justify my trades.

Denleo

one day you want to bail out all the idiots who bought houses they can't afford and the next day you say screw everyone as long as you make money .

ed rader

Someone will definitely suffer. My guess the pain will be shared between consumers and corporations.

i haven't been able to eat all the costs for awhile now because there are more people willing to do my job for less money and work fell off a cliff about a month ago. the price of everything has gone up .... even my wife notices now !

ed rader