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The One Thing That Can ‘Fix’ Inflation

What’s causing inflation today? Two things. Supply shortages and labor shortages…

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This article was originally published by Investor Place

You’re probably going to go shopping at some point this weekend. And when you do, your jaw is probably going to drop at the some of the sky-high prices on the shelves.

That’s right, folks. I don’t think I have to tell you this, but inflation is more than just a concept Wall Street has been worrying about over the past few months. It’s something that is causing a spike in prices in the real-world, too.

I mean… McDonald’s (MCD) just hiked its menu prices by 6% …

Now, if McDonald’s – the ultra-price-sensitive fast-food chain – is increasing the price of Big Macs, then you can bet your bottom dollar all those cool tech gadgets you want to buy for Christmas are going to be way more than expensive this year than they were last year.

Get ready, folks, for the most expensive holiday season ever.

a person standing in a shopping mall with a bag in their handSource: Shutterstock Source: Shutterstock

Let’s just hope this doesn’t last. Spoiler alert: It doesn’t have to.

What if I told you that next year could actually be the cheapest holiday season ever? Doesn’t that sound like a paradise after paying $5 a gallon for gas to just get to the store?

Well, guess what? It 2022 can turn into the cheapest holiday season on record – and key to that happening is the mass deployment of a breakthrough technology that one small company is pioneering right now.

Yep. You read that right. One small tech startup could end up changing the world in 2022, and “fixing” our inflation problem.

Best of all, this startup’s stock is trading for just over $5 – meaning that as this company does fix in inflation in 2022, the stock price could absolutely soar!

Here’s the story…

What’s causing inflation today? Two things. Supply shortages and labor shortages.

U.S. companies have, for decades, outsourced supply chains to China, India, and other parts of Asia, where labor is cheap. The problem therein is that those emerging economies do not have the same resources as the U.S. to handle the Covid-19 pandemic, and therefore, they are a few months behind the U.S. in terms of controlling that problem.

The result? U.S. companies are outsourcing production of goods to factories in southeast Asia that are only running at 50% capacity, which is of course creating huge supply shortages.

U.S. companies are getting fed up with these shortages. This is now the second time in three years that outsourced supply chains have proven unreliable (remember the Trade War?), so they are increasingly looking to localize their supply chains – or bring them stateside.

But then they run into the other half of the inflation problem: Labor shortages.

 

If U.S. companies localize their supply chains, that means they’re going to need to hire a bunch of U.S. workers to manage those supply chains. But U.S. workers are also in a shortage. So, these companies will either fail to find enough U.S. workers to localize their supply chains, or they’ll find enough workers but will be paying them insanely high wages which erode said company’s profit margins.

It’s a lose-lose situation.

And that’s why inflation is still red-hot. U.S. companies aren’t localizing their supply chains because doing so is economically and logistically unfeasible, and therefore, we’re stuck with big supply shortages and huge price surges.

What in the world is the fix?

Well, it’s actually a pretty easy fix: Automate the localized supply chain via robotics.

That is, if I’m a company that is supplying product from Asia, what I’m going to do in 2022 is bring my supply chain stateside, invest in automated technologies, and set-up an entirely automated supply chain run by robots that don’t require a salary. That way, I bypass both the current supply and labor shortages, produce enough goods to meet demand, see a boost in sales and decrease costs, and ultimately make more profits.

I turn my lose-lose situation, into a win-win.

Trust me, folks, this is exactly how most companies in America are thinking right now – and that’s why supply chain automation and robotics will be one of corporate America’s biggest investment focuses of 2022.

There’s just one slight problem: The technology behind supply chain automation is exceptionally complex.

So complex, in fact, that only a handful of companies have working prototypes in this field. However, there’s huge opportunity in this niche area today.

Because, by 2030, supply chains everywhere are going to be automated. Walmart. Target. Home Depot. Lowe’s. All of their warehouses will be completely run by robots.

Which company will be the winner here? That remains to be seen. We’ll be keeping our eye out for potential opportunities as they arise. Stay tuned!

On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.

The post The One Thing That Can ‘Fix’ Inflation appeared first on InvestorPlace.

Author: Luke Lango

Economics

Are These The Charts That Spooked Jerome Powell?

#CKStrong Fed Chair, Jerome Powell finally admitted today there is too much stimulus demand (in the macro context) in the global economy and the Fed will…

#CKStrong

Fed Chair, Jerome Powell finally admitted today there is too much stimulus demand (in the macro context) in the global economy and the Fed will have to accelerate its tapering.

The following charts clearly illustrate the U.S. economy is overheating and a major contributing factor to inflation. Nominal retail sales and core capital good shipments remain 15 percent above and years ahead of their pre-COVID trend. Think of the trend line as the supply curve.

In hindsight, it is easy to say the global policymakers overshot with their stimulus, but it is certainly better than the alternative and a deep recession/depression.  Just as you and I, policymakers make decisions with imperfect information.  Counterfactuals don’t go a long way in the political arena.

We think it is about time the FOMC finally starts to focus on the problems caused by the “monetary supply chain,” rather than blaming the economic imbalances on “supply chain issues,” and it appears they have. If demand were not so strong, the supply chain issues would have worked themselves long ago, and the Port of Los Angeles and Long Beach wouldn’t look the 405 freeway during rush hour.   

As reflected in the charts below, the supply chain broke early during the pandemic as upstream suppliers were “bullwhipped” by the massive volatility in point-of-sale or end demand.

We believe the next inflection point, where the Fed keeps tapering and then tightening until something breaks, which leads to reversal and a new monetary regimes, is a long way off.

Stay tuned.



Author: macromon

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Economics

Financial Markets and Omicron and Powell

Five year inflation breakeven (unadjusted) down, 10yr-3mo term spread down, VIX and EPU up, and S&P 500 down. Figure 1: Five year inflation breakeven…

Five year inflation breakeven (unadjusted) down, 10yr-3mo term spread down, VIX and EPU up, and S&P 500 down.

Figure 1: Five year inflation breakeven (blue), ten year – three month Treasury spread (red), both %. Source: Treasury via FRED, and author’s calculations.

Ignoring adjustments for inflation risk term and liquidity premia, implied expected 5 year inflation is down to 2.8%, while growth prospects also revert back to September levels.

Figure 2: VIX (blue, left scale), and Economic Policy Uncertainty index (red, right scale).  Source: CBOE via FRED, policyuncertainty.com.

Risk and policy uncertainty are also at recent highs, but still are dwarfed by Trump era highs (83 for VIX at 27.2; 862 for EPU at 180 on 11/29).

Figure 3: S&P 500 index (blue, log scale). Source: S&P via FRED. 

Given this backdrop (lower expectations for growth and presumably profits, due to Omicron, and higher interest rates from Powell’s statement re: inflation persistence), it’s not surprising to see a drop in stock indices.




Author: Menzie Chinn

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Economics

Retailers Open Pop-Up Container Yards To Bypass Savannah Port Jams

Retailers Open Pop-Up Container Yards To Bypass Savannah Port Jams

By Eric Kulisch of American Shipper,

Overflow lots set up by large retailers…

Retailers Open Pop-Up Container Yards To Bypass Savannah Port Jams

By Eric Kulisch of American Shipper,

Overflow lots set up by large retailers this month as temporary staging areas for imported containers have helped bring down congestion levels at the Port of Savannah, and Georgia officials expect further efficiency gains with this week’s opening of two more port-sponsored pop-up sites.

The Georgia Ports Authority, in partnership with the Norfolk Southern, will start accepting loaded containers on Monday at the freight railroad’s nearby Dillon Yard and later this week will begin routing shipping units to a general aviation airport in Statesboro, located about 60 miles west of Savannah, Chief Operating Officer Ed McCarthy told FreightWaves.

Moving containers to off-port properties is part of the recently announced South Atlantic Supply Chain Relief Program designed to reclaim space at the Garden City Terminal, where container crowding is making it difficult for vessels to unload and for stacking equipment and trucks to maneuver. In October, Savannah handled an all-time record of 504,350 twenty-foot equivalent units for a single month, an increase of 8.7% over October 2020. The volume surpassed the GPA’s previous record of 498,000 TEUs set in March.

Port officials began testing the Dillon Yard and Statesboro locations last week after renting top loaders for stacking and truck transfers, installing computer lines in order to track containers entering the gate with radio frequency identification, and laying extra pavement at the rail facility, McCarthy said. 

Four or five more pop-up container facilities are scheduled to open around Georgia by mid-December and the port authority is talking with freight railroad CSX about an auxiliary storage site in Rocky Mount, North Carolina, the COO said in an interview. 

The sites are mini-versions of inland ports where containers are brought to strategically located sites by intermodal rail, shortening the distance trucks have to travel to collect imports or drop off exports and reducing traffic in and around busy seaports. The concept essentially brings the seaport closer to manufacturing, agriculture and population centers. 

The GPA currently operates a large inland intermodal rail terminal in Murray County, Georgia, as well as an inland dry bulk facility. Construction on a second inland rail link for containerized cargo in northeast Georgia is scheduled to begin in April and be completed by mid- to late 2024, spokesman Robert Morris said. South Carolina also operates two inland ports, Virginia has one in the northwestern part of the state and the Port of Long Beach in California recently launched an effort to quickly flow cargo to Utah for distribution by converting truck traffic to rail.

Several users of the Port of Savannah this month have opened pop-up yards of their own where they can directly flow import containers to avoid waiting for longshoremen to sort through shipping units for their cargo and then retrieve them when space opens at one of their distribution centers. Each of the private spillover yards can accommodate 2,000 to 3,000 containers. 

“We’re starting to see some of our customer base do their own pop-ups. They’re contracting with some folks who have capabilities in the Savannah region and … taking their long-term destiny in their own hands,” McCarthy said in an interview.

The Rocky Mount intermodal facility being discussed with CSX will probably be used as an alternative storage location for empty containers. It could be running by early December, the COO said. Whether containers are diverted from other locations or whether empties are loaded up in Savannah and sent there remains to be determined. 

The Biden administration, which is focused on alleviating a nationwide supply chain crisis that is creating product shortages and contributing to inflation, helped fund the GPA’s emergency storage yards by reallocating $8 million in federal funds. Additional flexibility recently granted by the Department of Transportation allows port authorities to redirect cost savings from previous projects funded by port infrastructure grants toward mitigating truck, rail and terminal delays that are preventing the swift evacuation of containers from ports.

White House port envoy John Porcari, the liaison between industry and the White House Supply Chain Disruptions Task Force, said the government is looking to create more inland ports. 

“We’re encouraging other ports to do the same [thing as Savannah.] I think you’ll see a generation of projects in the short term around the country that will help maximize the existing on-dock capacity through interior pop-up sites,” Porcari said on Bloomberg’s “Odd Lots” podcast last week. 

“The fundamental issue is that the docks themselves are such valuable pieces of real estate that you don’t want the containers dwelling there a second longer than you have to. You want to get them to the interior or back on ships to their target markets overseas,” he said.

Better Fluidity

Improvements in rail handling, a dip in import volumes in line with seasonal patterns and the customer pop-up yards have combined to improve cargo flow and reduce the number of ships waiting for a berth at the Port of Savannah, McCarthy said. 

The port authority released an operations update last week showing the average dwell time for a container moving by rail after vessel unloading is two days, and that the average resting time within the terminal for import and export containers is about eight days, down from 11 and 10 days, respectively. The backlog of empty containers remains a problem, with boxes lingering an average of 17.8 days.

The improved performance is helping personnel work vessels faster and reduce Savannah’s cargo backlog. The number of ships at anchor in the Atlantic Ocean declined to 15 as of Monday morning from 22 two weeks ago, Morris said. There were 24 container vessels at anchor in mid-October. Total containers on the terminal also declined 13% and are down 16% from the peak of 85,000, according to the update.

McCarthy said there are about 225,000 TEUs currently on the water, a 10% to 12% reduction from early November that indicates “we are over the hump of the peak season.”

Last week, ocean carrier CMA CGM said its Liberty Bridge service from northern Europe to the U.S. East Coast would temporarily skip Savannah due to the congestion. According to the revised schedule, seven stops between late December and early February will be omitted. Shippers can send Savannah cargo to the Port of Charleston, South Carolina, until then, it said.

The GPA also noted that providers have increased the supply of chassis, the wheeled frames on which containers rest when pulled by truck, and are increasingly able to repair more chassis to help meet demand for cargo deliveries.

Mason Rail Terminal expansion. (Source: Georgia Ports Authority)

The Port of Savannah increased its near-dock rail capacity by 30% with the commissioning two weeks ago of a second set of nine tracks at the Mason Mega Rail Terminal. The port moved 550,000 containers by rail last year and now has more than 2 million TEUs of capacity with an eye toward future growth. The ability to discharge cargo from a vessel and ship it out by train in less than two days is best in class for the U.S., McCarthy noted.

A huge new container yard will come online in phases starting in December and culminate with about 820,000 TEUs of additional capacity by March. The project includes rubber-tired gantry cranes for sorting, stacking and transferring containers.

Construction of another berth is underway and scheduled to be complete in 2023.

Meanwhile, the federal dredging project to deepen the Savannah River to 47 feet (54 feet at high tide) is expected to be completed in the first quarter of 2022. It has already allowed vessels with deeper drafts to enter the port, McCarthy said. The deepening translates to about 200 extra loaded containers per foot and a total of 1,000 per vessel when the project is finished.

Tyler Durden
Tue, 11/30/2021 – 19:45

Author: Tyler Durden

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