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The Inflationary Everything Bubble is Now Entering Its Final and WORST Stage

oil&gas

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Apr 16, 2002
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Ghawar
PHOENIX CAPITAL RESEARCH
April 23, 2021

As I’ve been outlining for the last few weeks, the Fed and other central banks have finally succeeded in unleashing inflation.

The Fed and its ilk are trying to downplay this by saying the inflation is “transitory,” but who are you going to believe… your own eyes or the words of a Fed official who is literally paid to say things that downplay systemic risks?

Year to date, the price of copper, gasoline, corn and soybeans are all up double digits.



The last two (corn and soybeans) are the most concerning as the Fed’s own research shows that food inflation is the single best predictor of future inflation.

And unfortunately, things are about to get a whole lot worse.

You see, inflation arrives in stages. It’s not as though it enters the financial system and POOF suddenly the cost of everything rises.

Instead, inflation slowly works its way into the financial system in phases.

The first stage occurs in the manufacturing/ production segment of the economy when you see producers suddenly paying more for the raw goods and commodities they use to manufacture/ produce finished goods.

You can see this development in the chart above. The prices of things like copper, gasoline and corn are all spiking higher.

Now, one or two months of higher commodities or raw goods is no big deal, but once you’re talking 6-8 months of steadily rising prices it’s significant. At that point manufacturers/ producers have to start raising the prices of finished goods or face shrinking profit margins

At that point you move into the second stage of inflation: when the prices of ordinary objects begin to increase.

We are now entering that phase as the below headlines show.

Coca-Cola CEO says company will raise prices to offset higher commodity costs

Procter & Gamble to raises prices on baby care, feminine care and adult incontinence products

Kimberly-Clark raises prices on Scott toilet paper, diapers in U.S. and Canada

Another furniture maker raises prices to cope with rising costs


This is where things start to get nasty. Once you start seeing price hikes appear in the broader economy, inflation has become systemic. At that point the only thing that will stop it is if the Fed begins to tighten monetary policy (raise rates, taper QE, etc.).

Bad news here too… the Fed has explicitly stated it has no interest in raising rates or tapering QE for another TWO YEARS.

Which means… inflation is going to rage and rage. And the damage done will be measured in trillions of dollars with a (trillions with a “t”).

Those who are properly prepared, however, will make literal fortunes.

 
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fall

Well-known member
Dec 9, 2010
1,581
228
63
PHOENIX CAPITAL RESEARCH
April 23, 2021

As I’ve been outlining for the last few weeks, the Fed and other central banks have finally succeeded in unleashing inflation.

The Fed and its ilk are trying to downplay this by saying the inflation is “transitory,” but who are you going to believe… your own eyes or the words of a Fed official who is literally paid to say things that downplay systemic risks?

Year to date, the price of copper, gasoline, corn and soybeans are all up double digits.



The last two (corn and soybeans) are the most concerning as the Fed’s own research shows that food inflation is the single best predictor of future inflation.

And unfortunately, things are about to get a whole lot worse.

You see, inflation arrives in stages. It’s not as though it enters the financial system and POOF suddenly the cost of everything rises.

Instead, inflation slowly works its way into the financial system in phases.

The first stage occurs in the manufacturing/ production segment of the economy when you see producers suddenly paying more for the raw goods and commodities they use to manufacture/ produce finished goods.

You can see this development in the chart above. The prices of things like copper, gasoline and corn are all spiking higher.

Now, one or two months of higher commodities or raw goods is no big deal, but once you’re talking 6-8 months of steadily rising prices it’s significant. At that point manufacturers/ producers have to start raising the prices of finished goods or face shrinking profit margins

At that point you move into the second stage of inflation: when the prices of ordinary objects begin to increase.

We are now entering that phase as the below headlines show.

Coca-Cola CEO says company will raise prices to offset higher commodity costs

Procter & Gamble to raises prices on baby care, feminine care and adult incontinence products

Kimberly-Clark raises prices on Scott toilet paper, diapers in U.S. and Canada

Another furniture maker raises prices to cope with rising costs


This is where things start to get nasty. Once you start seeing price hikes appear in the broader economy, inflation has become systemic. At that point the only thing that will stop it is if the Fed begins to tighten monetary policy (raise rates, taper QE, etc.).

Bad news here too… the Fed has explicitly stated it has no interest in raising rates or tapering QE for another TWO YEARS.

Which means… inflation is going to rage and rage. And the damage done will be measured in trillions of dollars with a (trillions with a “t”).

Those who are properly prepared, however, will make literal fortunes.

There are three most important component that drive up inflation: monetary policy (low interest rates), government transfers (like COVID payments to people) and wages. We have two out of 3 components. As soon as wages will go up - it will be very hard to stop the inflation. The increase in prices of final and intermediate product is just the sign of inflation, not its cause.
 
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oil&gas

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Apr 16, 2002
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Ghawar
EV revolution is another factor as well. It is going to drive up prices of
copper, nickel, cobalt, lithium and eventually electricity big time. Uranium
will emerge as the ultimate winner.
 
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fall

Well-known member
Dec 9, 2010
1,581
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EV revolution is another factor as well. It is going to drive up prices of
copper, nickel, cobalt, lithium and eventually electricity big time. Uranium
will emerge as the ultimate winner.
Yes, but inflation is always demand-driven: if people do not have money to buy, prices cannot go up. So, in some sense, inflation is an indicator that economy is doing good (unless, of course, it is driven by artificial low interest rates and unfunded government expenditures and handout which is, unfortunately, the case now)
 

Ceiling Cat

Well-known member
Feb 25, 2009
26,246
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No doubt that what the world has gone through in the last year and a half will be a burden on the governments of the world. The governments can only do their best to calm things and bring stability back. There will be inflation, deflation and stagnation. Hopefully there will be no depression. My guess is that the economy of the world will experience stop and go growth till we get back to pre pandemic levels.
 

oil&gas

Well-known member
Apr 16, 2002
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Ghawar
Global electric vehicle numbers set to hit 145 million by end of the decade, IEA says

APR 29 2021
Anmar Frangoul

The number of electric cars, buses, vans and heavy trucks on roads is expected to hit 145 million by 2030, the International Energy Agency said on Thursday.

According to the IEA’s Global Electric Vehicle Outlook, if governments ramp up their efforts to meet international energy and climate goals, the global electric vehicle fleet could increase further still, hitting 230 million by the end of the decade. Both of these projections exclude two- and three-wheeled electric vehicles.

The Paris-based organization said roughly three million new electric cars were registered last year, a record amount and a 41% rise compared to 2019.

This jump pushed the total number of electric cars on the road to over 10 million, a figure supplemented by approximately 1 million electric buses, vans and heavy trucks.

The rise in electric car sales in 2020 came even as the worldwide automobile market contracted by 16% due to the effects of the coronavirus pandemic. In the first quarter of 2021, electric car sales were almost two and a half times higher than during the same period in 2020.

“While they can’t do the job alone, electric vehicles have an indispensable role to play in reaching net-zero emissions worldwide,” Fatih Birol, the IEA’s executive director, said in a statement.

“Current sales trends are very encouraging, but our shared climate and energy goals call for even faster market uptake,” he added.

Birol urged governments to use Covid economic recovery packages to “invest in battery manufacturing and the development of widespread and reliable charging infrastructure.”

The IEA said consumer spending on electric cars in 2020 totaled $120 billion, a 50% increase compared to 2019, with government support measures designed to encourage electric vehicle take-up coming in at $14 billion.

With regards to the latter figure, the IEA said it was “the fifth year in a row in which they have fallen as a share of total spending.”

“Even if government subsidies remain important for spurring the uptake of electric vehicles, this suggests sales are increasingly being driven more by consumer choice,” it added.

Around the world, authorities are looking to increase the number of low- and zero-emission vehicles on their roads in a bid to tackle air pollution and move away from the internal combustion engine.

The U.K., for example, has announced plans to stop selling new diesel and petrol (gasoline) cars and vans from 2030.

The European Commission’s “Sustainable and Smart Mobility Strategy,” meanwhile, wants at least 30 million zero-emission cars on the road by 2030.

Faced with these targets, major carmakers are looking to increase their electric vehicle offering and challenge Elon Musk’s Tesla.

Last month, German automotive giant Volkswagen announced plans to establish six “gigafactories” — which the firm says will be able to manufacture battery cells with a combined energy value of 240 gigawatt hours each year — in Europe by the end of the decade. It also pledged to expand its charging infrastructure in Europe, North America and China.

March also saw the Volkswagen Group’s CEO, Herbert Diess, dismiss the notion that his firm could join forces with Tesla, telling CNBC that the German automotive giant was looking to go its own way.

Speaking to “Squawk Box Europe”, Diess was asked if he would rule out any future deal with Musk’s electric car maker, in which VW could manufacture its cars, or if the Tesla and VW brands would ever unite.

“No, we haven’t considered (that), we are going our own way,” he replied. “We want to get close and then overtake.”

“We think that we can – we need our own software stack, our own technology,” he added. “And also, I think Tesla, or Elon, is very much thinking ... (about) his way forward. So no, there are no talks between Elon Musk and myself regarding joining forces.”

 

oil&gas

Well-known member
Apr 16, 2002
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Ghawar
This EV revolution could turn out to be the mother of global inflation.
People are going to borrow money to replace their ICE car to save the
world from global warming.
 

oil&gas

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Ghawar
GRAINS-Corn, soybean futures hit multi-year highs on supply fears

Tom Polansek
May 7, 2021

Concerns that global crop supplies will remain lean pushed Chicago Board of Trade corn futures to their highest price since March 2013 on Friday, while soybean futures reached their highest since October 2012.

The markets surged before the weekend as traders braced for the potential of further rallies driven by tightening inventories and a monthly U.S. Department of Agriculture crop report due on Wednesday.

In its first estimates for 2021/22, the USDA is expected to predict U.S. soybean ending stocks will remain tight at 138 million bushels, according to a Reuters poll of analysts. They projected the agency will reduce its 2020/21 stocks estimate to 117 million bushels from 120 million.

"The market's gone vertical this week," said Don Roose, president of Iowa-based broker U.S. Commodities.

The most-active corn contract Cv1 settled 13-1/2 cents firmer at $7.32-1/4 per bushel and reached a peak of $7.35-1/4, its highest price since March 2013. The contract gained a whopping 8.8% this week.

Soybeans Sv1 climbed 20-1/4 cents to $15.89-3/4 per bushel and reached their highest price since October 2012 at $15.99-1/2. For the week, the most-active contract rose 3.6%.

Wheat Wv1 jumped 8-1/2 cents to $7.61-3/4 per bushel at the CBOT and traded near an eight-year high reached last week.

The gains built on a sizzling rally that began last year as China accelerated imports of U.S. farm products.

In their biggest purchase since January, Chinese importers bought 1.36 million tonnes of U.S. corn that will be shipped during the 2021/22 marketing year, which starts in September, according to USDA.

In Brazil, a rival supplier, forecasts continued to show little rain for parched corn-growing areas.

Dryness raises the threat of deteriorating yields for the country's second annual corn harvest, considered crucial to boosting short-term availability ahead of the U.S. harvest later in the year.

"It's needed more than ever, but it's not forthcoming," Rabobank analyst Michael Magdovitz said.

 

oil&gas

Well-known member
Apr 16, 2002
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Ghawar
Those of you who never got to taste what real inflation was like
around the Iran-Iraq war years are going to be shocked. I do hope
I am being pessimistic.
 

oil&gas

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Ghawar
Skyrocketing Lumber Prices Have Increased The Average Price Of A New Home By $35,872 In 1 Year

May 3, 2021
Michael Snyder

Do any of you remember when you could buy an entire house for $35,000? There was a time in America when middle class Americans could buy a house and have it paid off in just a few years. But now existing home prices have soared into the stratosphere, and lumber prices are making it ridiculously expensive to build new homes. As you will see below, skyrocketing lumber prices have driven up the average price of a new home in the United States by almost $36,000 over the past 12 months. That is absolutely nuts, but everyone agrees that even more inflation is on the way.

Of course it isn’t just lumber prices that are going haywire. In California, the price of gasoline has almost reached five dollars a gallon in some areas, and the price for premium gasoline has almost reached six dollars…


Gas prices continued to increase in or around Southern California for the ninth day in a row. And that appeared to be a similar trend nationwide where other states were seeing an increase as well.

The average price of a gallon of regular gas in the Beverly Grove area on Saturday was $4.99 and $5.99 for premium.

We are being told that one of the reasons why the price of gasoline is spiking is due to a lack of tank truck drivers…

According to the National Tank Truck Carriers trade group, up to 25% of trucks are parked around the country because there are not enough qualified tank truck drivers. That number is up 15% from the beginning of last summer.

The demand for drivers took a hit when pandemic-induced lockdowns triggered steep declines in the gasoline market, and drivers opted for other jobs. However, the return to pre-pandemic numbers has been further undermined by unemployment benefits and stimulus checks keeping people away from jumping back into the workforce.

You can thank our politicians in Washington for this mess, and hopefully the driver shortage will just be temporary.

But if you think that the price of gasoline is bad now, just wait until the big war in the Middle East officially starts.

On Monday, the price of lumber continued to escalate dramatically. According to the Wall Street Journal, lumber futures are now “more than four times the typical price this time of year”…

Lumber futures delivery later this month ended Monday at $1,575.60 per thousand board feet, a record and more than four times the typical price this time of year. Futures rose by the daily maximum allowed by the Chicago Mercantile Exchange during nine of April’s 21 trading sessions.

But don’t worry, because the Federal Reserve insists that they have everything under control.

Hopefully they are on top of things, because we are rapidly getting into crisis territory. As I mentioned above, rising lumber prices have driven the average price of a new home up by nearly $36,000 in the last 12 months…

Skyrocketing lumber prices that have tripled over the past 12 months have driven the price of an average new single-family home to rise by $35,872, according to new analysis by the National Association of Home Builders (NAHB), with the price spike threatening to hobble the momentum of the U.S. housing market, one of the bright stars of the recovery from the pandemic recession.

Thanks to the completely and utterly insane policies of our “leaders”, high inflation is here to stay, and it is going to be exceedingly painful.

At this point, even Warren Buffett is acknowledging that inflation is starting to become a major problem…
.......................................

 

jeff2

Member
Sep 11, 2004
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High inflation is not always that bad for Canada due to our higher weighting of resource stocks. Commentators often refer to the 1970s as being bad for stocks and workers and confuse Canada with the US.
For the U.S. it was not good. The OPEC crisis did not really hurt Canada though. Also, the standard of living in Canada caught up to the U.S. in the 1970s. After resources plunged in the early eighties, the story reversed.

Having said that, due to automation, any new resource boom would not employ as many workers. But shareholders and the government(through taxation and royalties) would benefit.
 
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oil&gas

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Ghawar
Iron Ore, Steel Hit All Time High As Monster Commodity Rally Breaks Records

TYLER DURDEN
May 5, 2021

While most of the attention in recent days has focused on copper, overnight both Iron ore and steel climbed to records as Chinese investors returned from a three-day holiday and sparked a furious rally.

Spot iron ore prices topped $200 a ton for the first time ever, as futures in Singapore and China climbed. Iron ore with 62% content hit $201.15 a ton on Thursday, according to Mysteel. Futures in Singapore jumped as much as 5.1% to $196.40 a ton, the highest since contracts were launched in 2013. In Dalian, prices closed 8.8% higher.




The story is familiar: steel demand is soaring as economies emerge from covid lockdowns just as the world’s biggest miners have been hampered by operational issues, curbing ore supply.

The boom as Bloomberg notes, comes even as China’s steelmakers keep output rates above 1 billion tons a year, despite a swath of production curbs aimed at reducing carbon emissions and reining in supply. Instead, those measures have boosted steel prices and profitability at mills, allowing them to better accommodate higher iron ore costs.

"China’s plan to cut steel output is not showing any success,” wrote RBC analyst Kaan Peker. While steel production outside China has been slow to ramp up, output should start to recover from late in the second quarter, he wrote.

Meanwhile, according to Fitch, the rally has more room to run, though prices will likely grind lower during the second half of 2021 as supply improves and demand growth slows. There’s also a risk that China could engage in policies that may stymie the rise in iron ore prices abruptly, it said. As a reminder, a similar surge in copper prices which pushed them above $10,000 last week and set to make a new all time high, has unleashed havoc on China's copper-reliant economy, as "some Chinese manufacturers of electric wire have idled units and delayed deliveries or even defaulted on bank loans, according to a survey by the Shanghai Metals Market." Meanwhile, end-users such as power grids and property developers have also been pushing back delivery times, unable to pay for the metal, while producers of copper rods and pipes saw orders slump this week, said the researcher."

Indeed, it's all fun and games as long as leveraged speculators can keep piling on even more leverage to push the price higher, but to buyers of the end product, the price surge is nothing short of catastrophic.

The Thursday surge in iron ore came after Beijing said that it was suspending a ministerial economic dialog with Australia. While a largely symbolic move, ties have worsened in recent years and China has hit Australian barley and wine with crippling tariffs and told traders to stop buying commodities including copper, sugar, timber and lobster. So far iron ore has been spared in the spat, as the Asian nation relies on Australia for about 60% of its imports. Should iron be swept up in the growing trade war, there is no telling how high its price will rise.

Meanwhile, on the steel front, rebar closed at the highest since futures started trading in 2009..



... and hot-rolled coil was at the highest since contracts were launched in 2014.

 

oil&gas

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IEA sees oil demand recovery outpacing growth in supply

May 12, 2021
Reuters

Progress in vaccinating the world against COVID-19 means the world's economic recovery and demand for oil will outpace the output of top producers, the International Energy Agency (IEA) said on Wednesday

"The anticipated supply growth through the rest of this year comes nowhere close to matching our forecast for significantly stronger demand beyond the second quarter," the IEA said in its monthly report, citing increased pumping from OPEC+ countries.

"But India's COVID crisis is a reminder that the outlook for oil demand is mired in uncertainty. Until the pandemic is brought under control, market volatility is likely to persist."

 
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oil&gas

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IEA sees major oil demand rebound of 6.5 million b/d between Q1 and end-2021

Nick Coleman
May 12, 2021

The International Energy Agency on May 12 forecast a major rebound in oil demand of some 6.5 million b/d between the first quarter and the end of 2021, and said likely supply growth, by the OPEC+ group and others, would be "nowhere close" to the expected demand increase.

In its monthly oil market report, the IEA also noted oil stocks held by the OECD developed countries were returning to "more normal" levels, based on figures from March showing levels just 1.7 million barrels above the five-year average.

The IEA's bullish assessment for the year ahead came despite it lowering its overall demand growth estimate for 2021 as a whole by 270,000 b/d to 5.4 million b/d, and trimming its estimate of the "call" for OPEC crude in the second half of this year by 200,000 b/d, based on downgrades to first-quarter demand in Europe and North America, and a major reduction in India's estimated second-quarter demand, of 630,000 b/d, due to the pandemic.

The report, implying a need for OPEC+ to relax its production curbs even if sanctions against Iran are eased, also gave a lower estimate for US oil output this year compared with last month's report, with an expected contraction of 160,000 b/d, due both to lower shale activity and reduced expectations from fields in the Gulf of Mexico.

"Under the current OPEC+ production scenario, supplies won't rise fast enough to keep pace with the expected demand recovery," the IEA said. "The widening supply and demand gap paves the way for a further easing of OPEC+ supply cuts or even sharper stock draws."