Morning Note: Yeah, Inflation is a Thing Right Now…

Hmm… there are 9.2 million job openings in this country and new weekly unemployment claims are up 3 weeks in a row (419k reported this morning; 69k more than expected). Somethin ain’t right… ?

Well, according to the Wall Street Journal:

“Consumers aren’t the only ones paying for inflation. Food companies are also cutting costs through employee layoffs, reduced advertising, supplier shake ups and increased automation. General Mills recently announced a reorg involving corporate staffing reductions.” Stagflation is all over that quote.” H/T Peter Boockvar 

Yeah, inflation (if not “stagflation”) is a thing right now…

One more tidbit on housing: While I continue to hear how insanely hot that market is, seems like every week we locate a crack or two. We’ve touched recently on the rock-bottom sentiment among consumers (in terms of buying timing), and an apparent pausing on the part of builders; this morning this:

“D.R. Horton (DHI) reported EPS 9.3% above forecasts with full year revenue guide
raised 4.4%. In a sign of cooling demand, though, signed contracts were almost 20% below estimates,
with a cancellation rate of 17% and a backlog 11% below forecast.”
Bespoke Investment Group

I repeat… yeah, inflation is a thing right now…

Here’s economist Peter Boockvar pointing out what companies have been pointing out on their latest earnings calls:

Coke: “The pandemic has put pressure on supply chains around the world, be it the commodities input or the transportation costs around the world. In 2022 there are more pressures coming at us, and we are working closely with our bottling partners to mitigate some of those pressures. It’s difficult to tell how far into 2022 those pressures persist.”

PPG: Explaining why eps was below their April forecast: “Three main factors impacted the difference: due to supply disruptions we experienced unprecedented levels of raw material and transportation costs that continually elevated as the quarter progressed. This drove raw material inflation to be up a mid to high teen percentage on a y/o/y basis versus our original estimate of high single digit percentage increases…As I mentioned in April coming into the year, we are expecting an inflationary environment and had prioritized selling price increases across all our businesses…Clearly, this inflation cycle is much higher than anyone anticipated and we are continuing on a business by business basis, working to secure further selling price increases. This includes executing additional pricing actions during the 3rd quarter. As a reminder, the 2nd quarter of 2021 was our 17th consecutive quarter of higher selling prices.”

Whirlpool: As for how long the price pressures will last “We do feel that there will be some carry over from this year to next year but the pricing actions offset everything we see in front of us.”

Note, by the way, from PPG’s call, that rising inflation was actually a thing before I could spell “coronavirus.” 

“…the 2nd quarter of 2021 was our 17th consecutive quarter of higher selling prices.””


Asian equities leaned notably green overnight, with all but 3 of the 16 markets we track closing higher.

Europe’s following suit so far this morning, with all but 4 of the 19 bourses we follow up as I type.

U.S. major averages, on the other hand, are mixed to start the day: Dow down 35 points (0.10%), SP500 up 0.02%, SP500 Equal Weight down 0.33%, Nasdaq 100 up 0.33, Nasdaq Comp up 0.19%, Russell 2000 down 1.04%.

The VIX (SP500 implied volatility) is down 0.39%. VXN (Nasdaq 100 i.v.) is down 0.74%.

Oil futures are up 0.77%, gold’s down 0.09%, silver’s down 0.56%, copper futures are up 1.17% and the ag complex is up 0.51%.

The 10-year treasury is up (yield down) and the dollar is up 0.02%.

Led by ALB (lithium miner), Indian equities, base metals futures, ag futures and Eurozone equities — but dragged by KRBN (carbon credits), oil services stocks, Viacom/CBS, banks and metals miners — our core portfolio is off -0.04% to start the session.


One of nature’s lessons — from Will Durante’s The Story of Civilization — that, alas, politicians and policymakers never heed (of course they’re forever spending other people’s money):

“The dog that buried the bone which even a canine appetite could not manage, the squirrel that gathered nuts for a later feast, the bees that filled the comb with honey, the ants that laid up stores for a rainy day — these were among the first creatures of civilization.

It was they, or other subtle creatures like them, who taught our ancestors the art of providing for tomorrow out of the surplus of today, or of preparing for winter in summer’s time of plenty.”


Have a great day!
Marty

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