Are we headed for a world wide meltdown?

Yes

A lot of excess inventory is going directly from pallets at ports or from warehouses to liquidators while taking a detour around the receiving docks of the companies that actually placed the initial orders? Seriously? What the fuck does that say about the disconnect between late 2021/early 2022 demand expectations and the "facts on the ground?" (Get out the bullwhip!)

https://en.wikipedia.org/wiki/Bullwhip_effect

https://www.truecommerce.com/blog/bu...t-supply-chain

WSJ story @ https://www.wsj.com/articles/glut-of...ts_pos1&page=1

. Originally Posted by CaptainMidnight

can't read the wsj article due to their paywall. you or someone who have acess to wsj to copy the article here.

So what I heard you say was:
Ammirite?

Where is this "Midnight" character to whom you refer? AWOL? In a witness protection program?

(Actually, rumor has it that he noticed it was hotter'n hell outside and thought the time favorable for a couple of short vacations in cooler parts of the country!)

OK, here goes:

A couple of months ago I posted that Milton Friedman, very late in life, said the Fed had begun acting like a "drunk in the shower" -- quickly and repeatedly turning the knobs back and forth between too cold and too hot, startling himself a number of times in the process. (This was in response to the Greenspan Fed's overreactions in the early '00s.)

Now we have the Fed, acting very late in the cycle, initiating a sharp reversal of QE along with pushing up the funds rate.

The current narrative is that they're heading for 3.25%-3.5% (at least) over the next 12-15 months.

My first contrarian take is that they'll get nowhere near 3.5% without pivoting again. (Remember 2018-19?)

I believe that the economy is much worse than most of the talking heads on the bubblevision channels would have you believe.

The ISM manufacturing new orders index contracted sharply, indicating rapidly waning demand.

Treasuries rallied hard after these reports, pushing the 10-year UST all the way down to 2.88.%

The GDPNow and Nowcast models quickly shifted from slightly less pessimistic forecasts to -2.1 Q2 real GDP. That's on top of a negative Q1, so that means two consecutive quarters.

My second contrarian take is that policymakers are in the process of trading in the unloved, rickety old inflation jalopy for a new high-performance recessionmobile.

First, look at an M2 money aggregate chart. After rocketing from about $15.5 trillion at the outset of the pandemic to almost $22 trillion in March 2022, M2 been on a gentle downslope for three months.

Meanwhile, copper has fallen about 27% from its cycle high and is now at an 18-month low. Wheat is down 28% from its peak, while corn and soybeans are down double digits. Additionally, the trade-weighted dollar strengthened over 9% in the first half of the year.

Now comes the "bullwhip effect."

I mentioned this concept in one of these threads recently and noticed that Michael Burry (of The Big Short fame) wrote about it just a few days ago:

https://www.yahoo.com/video/michael-...125206248.html

All this is why I think it's more likely than not that the bear market has much further to go.

Right now, the S&P 500 is down just a smidgen more than 20% from its peak. The market has yet to price in a recession; even a moderate one.

Remember the bear market following the beginning of the dot-com deflation in 2000? After an initial fall of 25+% and the inception of a Fed easing cycle, the market ground its way steadily down, down, down for all of 2001 and three quarters of 2002 -- eventually dropping another 20+%.

That might not happen this time, as every bear market and every recession is different. But given the lofty status of peak valuations, this is certainly something to think about.

(Aside from references to this forum, the above is my first cut at commentary I plan on submitting tomorrow. Please add whatever you think is appropriate and point them out if I've made any obvious errors. I think I do need to clean up some of the fucked-up syntax!)

. Originally Posted by CaptainMidnight

A few comments courtesy of Bill McBride's Calculated Risk Blog:

Homebuilder Comments in June: “Someone turned out the lights on our sales in June!"
Rising Cancellations, “Investor sales have stalled”

CalculatedRisk by Bill McBride
Jul 11

Read these builder comments from around the country. Sales have declined sharply in June.

#Atlanta builder: “Someone turned out the lights on our sales in June!”

#Austin builder: “Sales have fallen off a cliff. We’re selling 1/3 of what we sold in March and April. Trades are more willing to negotiate pricing since market has adjusted significantly past 60 days.”

#Birmingham builder: “Sales have fallen 75% the last two months in a further out community.”

#Boise builder: “Sales have slowed tremendously. Builders are dropping prices and halting new starts. Seeing prices drop on labor due to slowing of home starts. Expecting 15% to 20% reduction in most costs.”

#Charlotte builder: “This recession is looking like and feeling like a big long five year depression.”

#ColoradoSprings builder: “Amazing how fast a market can change with such a rapid increase in rates. So many people were taken out of the market. Most builders will go to suppliers/trades and ask for rollbacks [on costs].”

#Dallas builder: “Framing labor has become readily available, suggesting housing starts slowdown is finally showing its typical signs. Haven’t raised prices in 3 months.”

#DesMoines builder: “Starting to see [construction] trades hold labor prices for us as they are fearful of a downturn.”

#FortMyers builder: “Investor sales have stalled.”

#GrandRapids builder: “Believe we’re on the edge of cost reductions. Making every effort to refuse further [cost] increases and pushing for decreases in all areas that have seen significant two year run up.”

#Greenville builder: “Traffic has slowed from red hot. Feels different for sure, but it’s more like a normal market.”

#Harrisburg builder: “Sales decreased to 50% of what they were 3 months ago. Traffic is down and we’re only moving spec homes after dropping prices. No one is buying to-be-built homes at this time.”

#Houston builder: “With the exception of concrete, [construction costs] appear to be stabilizing. Lumber is trailing downward, which is good because we’re going to need that reprieve for buying down mortgage rates to get buyers qualified.”

#Kennewick builder: “Sales have been very slow, and inventory is rising. Repricing our houses to try and find the new market.”

#Melbourne builder: “Our investor sales have stalled.”

#Nashville builder: “Scary times. Hoard cash and hang on for the ride! National builders are cutting staff and offering buyers incentives. Move-up buyers are now practically non-existent due to rising rates in comparison to their existing rate.”

#Phoenix builder: “Some builders are already cutting staff. Cancellations are extremely high. Dismal traffic and sales climate.”

#Reno builder: “With the market slowing, we’re expecting to see costs stabilizing and labor become more available.”

#RiversideSanBernardino builder: “We’ve reached the top in pricing.”

#SanDiego builder: “Fewer people in the market than before, but we are comparing against a market that defied any sense of normality.”

#StLouis builder: “Expecting to see opportunities for lower costs coming in the near future as demand cools and manufacturers and trades see backlogs shrinking.” THE END

.

So what I heard you say was:

We Are Proper Fucked

Ammirite? Originally Posted by Why_Yes_I_Do

"Proper Fucked?"

Well, OK! ... maybe not totally fucked? (Hopefully!) ...

But fully in need of some full-spectrum rehab.

Our great nation is like an alcoholic that needs to "hit bottom," as they say, before seeking rehabilitation and treatment.

Since the subject of this thread is "meltdowns," a meltdown forthwith of the electoral prospects of the Barack/Michelle/Valerie (Jarrett) cabal, acting through the Biden-Harris interregnum, would be a good place to start.

First, though, we'll have to survive the multi-faceted assault on domestic energy production, the opened border, and the nation's very fisc before we can even hope to get the ship righted.

Somewhere between the salad and the dessert, though, I have a pretty good feeling that we'll all be able to pick up some delicious bargains on a variety of assets!

Best wishes,

Texas Contrarian

(The annoying BS artist formerly known as "CaptainMidnight")

.

I posted some anecdotes from my recent experiences on the last page of:
Congrat Austin, you are almost San Fran now

I've been watching the lower end housing market North of Austin and have been seeing houses stay on the market longer and having price reductions even. So a little chill front during our 105 degree heat spell going on. Also, some investors still see Austin as a good market, but are holding back at the moment.

BTW: Agree on the bargain sales, just don't yet know when they will be here -- yet. Am also watching rent rates closely.

A few comments courtesy of Bill McBride's Calculated Risk Blog:

Homebuilder Comments in June: “Someone turned out the lights on our sales in June!"
Rising Cancellations, “Investor sales have stalled”

CalculatedRisk by Bill McBride
Jul 11

Read these builder comments from around the country. Sales have declined sharply in June.

#Atlanta builder: “Someone turned out the lights on our sales in June!”

#Austin builder: “Sales have fallen off a cliff. We’re selling 1/3 of what we sold in March and April. Trades are more willing to negotiate pricing since market has adjusted significantly past 60 days.”

#Birmingham builder: “Sales have fallen 75% the last two months in a further out community.”

#Boise builder: “Sales have slowed tremendously. Builders are dropping prices and halting new starts. Seeing prices drop on labor due to slowing of home starts. Expecting 15% to 20% reduction in most costs.”

#Charlotte builder: “This recession is looking like and feeling like a big long five year depression.”

#ColoradoSprings builder: “Amazing how fast a market can change with such a rapid increase in rates. So many people were taken out of the market. Most builders will go to suppliers/trades and ask for rollbacks [on costs].”

#Dallas builder: “Framing labor has become readily available, suggesting housing starts slowdown is finally showing its typical signs. Haven’t raised prices in 3 months.”

#DesMoines builder: “Starting to see [construction] trades hold labor prices for us as they are fearful of a downturn.”

#FortMyers builder: “Investor sales have stalled.”

#GrandRapids builder: “Believe we’re on the edge of cost reductions. Making every effort to refuse further [cost] increases and pushing for decreases in all areas that have seen significant two year run up.”

#Greenville builder: “Traffic has slowed from red hot. Feels different for sure, but it’s more like a normal market.”

#Harrisburg builder: “Sales decreased to 50% of what they were 3 months ago. Traffic is down and we’re only moving spec homes after dropping prices. No one is buying to-be-built homes at this time.”

#Houston builder: “With the exception of concrete, [construction costs] appear to be stabilizing. Lumber is trailing downward, which is good because we’re going to need that reprieve for buying down mortgage rates to get buyers qualified.”

#Kennewick builder: “Sales have been very slow, and inventory is rising. Repricing our houses to try and find the new market.”

#Melbourne builder: “Our investor sales have stalled.”

#Nashville builder: “Scary times. Hoard cash and hang on for the ride! National builders are cutting staff and offering buyers incentives. Move-up buyers are now practically non-existent due to rising rates in comparison to their existing rate.”

#Phoenix builder: “Some builders are already cutting staff. Cancellations are extremely high. Dismal traffic and sales climate.”

#Reno builder: “With the market slowing, we’re expecting to see costs stabilizing and labor become more available.”

#RiversideSanBernardino builder: “We’ve reached the top in pricing.”

#SanDiego builder: “Fewer people in the market than before, but we are comparing against a market that defied any sense of normality.”

#StLouis builder: “Expecting to see opportunities for lower costs coming in the near future as demand cools and manufacturers and trades see backlogs shrinking.” THE END

. Originally Posted by Texas Contrarian

Best wishes,

Texas Contrarian

(The annoying BS artist formerly known as "CaptainMidnight") Originally Posted by Texas Contrarian

Huh? What happened to CaptainMidnight?

Was he being stalked by Krugman's henchmen? A victim of "woke" cancel culture? Did he undergo a personality reassignment? Is he in the Witness Protection program?

Inquiring minds want to know!

A few comments courtesy of Bill McBride's Calculated Risk Blog:

Homebuilder Comments in June: “Someone turned out the lights on our sales in June!"
Rising Cancellations, “Investor sales have stalled”

CalculatedRisk by Bill McBride
Jul 11

Read these builder comments from around the country. Sales have declined sharply in June.

#Atlanta builder: “Someone turned out the lights on our sales in June!”

#Austin builder: “Sales have fallen off a cliff. We’re selling 1/3 of what we sold in March and April. Trades are more willing to negotiate pricing since market has adjusted significantly past 60 days.”

#Birmingham builder: “Sales have fallen 75% the last two months in a further out community.”

#Boise builder: “Sales have slowed tremendously. Builders are dropping prices and halting new starts. Seeing prices drop on labor due to slowing of home starts. Expecting 15% to 20% reduction in most costs.”

#Charlotte builder: “This recession is looking like and feeling like a big long five year depression.”

#ColoradoSprings builder: “Amazing how fast a market can change with such a rapid increase in rates. So many people were taken out of the market. Most builders will go to suppliers/trades and ask for rollbacks [on costs].”

#Dallas builder: “Framing labor has become readily available, suggesting housing starts slowdown is finally showing its typical signs. Haven’t raised prices in 3 months.”

#DesMoines builder: “Starting to see [construction] trades hold labor prices for us as they are fearful of a downturn.”

#FortMyers builder: “Investor sales have stalled.”

#GrandRapids builder: “Believe we’re on the edge of cost reductions. Making every effort to refuse further [cost] increases and pushing for decreases in all areas that have seen significant two year run up.”

#Greenville builder: “Traffic has slowed from red hot. Feels different for sure, but it’s more like a normal market.”

#Harrisburg builder: “Sales decreased to 50% of what they were 3 months ago. Traffic is down and we’re only moving spec homes after dropping prices. No one is buying to-be-built homes at this time.”

#Houston builder: “With the exception of concrete, [construction costs] appear to be stabilizing. Lumber is trailing downward, which is good because we’re going to need that reprieve for buying down mortgage rates to get buyers qualified.”

#Kennewick builder: “Sales have been very slow, and inventory is rising. Repricing our houses to try and find the new market.”

#Melbourne builder: “Our investor sales have stalled.”

#Nashville builder: “Scary times. Hoard cash and hang on for the ride! National builders are cutting staff and offering buyers incentives. Move-up buyers are now practically non-existent due to rising rates in comparison to their existing rate.”

#Phoenix builder: “Some builders are already cutting staff. Cancellations are extremely high. Dismal traffic and sales climate.”

#Reno builder: “With the market slowing, we’re expecting to see costs stabilizing and labor become more available.”

#RiversideSanBernardino builder: “We’ve reached the top in pricing.”

#SanDiego builder: “Fewer people in the market than before, but we are comparing against a market that defied any sense of normality.”

#StLouis builder: “Expecting to see opportunities for lower costs coming in the near future as demand cools and manufacturers and trades see backlogs shrinking.” THE END

. Originally Posted by Texas Contrarian

I just snuck a peak at lumber prices. The front month futures contract is down from $1400 earlier this year to $660. But still way above the long term average up to 2020.

Contrarian, where do you think the delicious bargains will be found? Real estate? Stocks? Or maybe Bitcoin!!!

Huh? What happened to CaptainMidnight?

Was he being stalked by Krugman's henchmen? A victim of "woke" cancel culture? Did he undergo a personality reassignment? Is he in the Witness Protection program?

Inquiring minds want to know! Originally Posted by lustylad

good question.


maybe Tiny tied him up on a bull for the infamous bull run?

I just snuck a peak at lumber prices. The front month futures contract is down from $1400 earlier this year to $660. But still way above the long term average up to 2020... Originally Posted by Tiny

Wish those building goods prices and bigger items would come down a bit quicker. They are killing me ATM. One article I read (and confirmed by someone else) is the "big ticket" items will be first to reduce prices as they take up a lot of physical space.

There is a bit of a whip lash occurring since the covid caused some fools to wear face diapers in public. People confined to their homes realized how shabby they really were, so they fixed them up a fair bit to suit their new life of cowering in the basements and spare bedrooms in fear. Kind of similar to what prisoners to do their own cells.

Anyway, that caused an unusual spike in in building products demand, which drained inventories. Then of course, the predictable supply chain shortages reduced the ability to resupply effectively. So you have abnormal demand, followed by inability to supply effectively - which results in a lot of stuff clogging the warehouses and now the aisles that people no longer need and can't now afford to purchase anyway, largely because of inflation everywhere else.

I read an anecdote that some inventory is now going directly to the discount reseller channel, instead of the intended supplier channel's retail space.

good question.


maybe Tiny tied him up on a bull for the infamous bull run? Originally Posted by dilbert firestorm

Indeed. At this very moment Midnight is strapped on the back of a bull, which is running through the streets of Pamplona. It was the only way. Our portfolios need another bull market. The Saints of Classical Liberalism are angry and must be appeased. So one who was pure of heart, an optimist who believed in free markets, had to be sacrificed.

Wish those building goods prices and bigger items would come down a bit quicker. They are killing me ATM. One article I read (and confirmed by someone else) is the "big ticket" items will be first to reduce prices as they take up a lot of physical space.

There is a bit of a whip lash occurring since the covid caused some fools to wear face diapers in public. People confined to their homes realized how shabby they really were, so they fixed them up a fair bit to suit their new life of cowering in the basements and spare bedrooms in fear. Kind of similar to what prisoners to do their own cells.

Anyway, that caused an unusual spike in in building products demand, which drained inventories. Then of course, the predictable supply chain shortages reduced the ability to resupply effectively. So you have abnormal demand, followed by inability to supply effectively - which results in a lot of stuff clogging the warehouses and now the aisles that people no longer need and can't now afford to purchase anyway, largely because of inflation everywhere else.

I read an anecdote that some inventory is now going directly to the discount reseller channel, instead of the intended supplier channel's retail space. Originally Posted by Why_Yes_I_Do

Something similar is going on in clothing, and based on one of the Contrarian's posts, all over the economy. Inventories have piled up. Maybe we'll escape this bout of inflation without sky high interest rates.

Something similar is going on in clothing, and based on one of the Contrarian's posts, all over the economy. Inventories have piled up. Maybe we'll escape this bout of inflation without sky high interest rates. Originally Posted by Tiny

Hmmm... Dunno 'bout dat. While I can appreciate the hopium supply and all, imma thunk'n those actions have their own set of consequences. Somewhere, someone gets furloughed because they are no longer needed to produce items that people are not buying. As ironic as our luck really is, the slave labor camps will be the first to be unemployed. So is that a good thing or a bad thing?!?

Hmmm... Dunno 'bout dat. While I can appreciate the hopium supply and all, imma thunk'n those actions have their own set of consequences. Somewhere, someone gets furloughed because they are no longer needed to produce items that people are not buying. As ironic as our luck really is, the slave labor camps will be the first to be unemployed. So is that a good thing or a bad thing?!? Originally Posted by Why_Yes_I_Do

I’m not an economist. But they appear to believe that inflation right now, at this point in time, can’t be controlled if unemployment stays at sub 4% levels. Larry Summers is saying things like 7.5% unemployment for 2 years could be needed. See

https://fortune.com/2022/06/21/larry...inflation/amp/

Phil Gramm and Stephen Moore had a good rebuttal in the WSJ the other day. If interested let me know and I’ll look it up.

As to foreign factories in lower wage countries, I don’t think they’ll be hit worse than us.

President Biden, "I called this press conference today to tell you of the steps I'll be taking to lower inflation". Now I want you to all understand that this is what my advisors are telling me but I don''t actually believe this nonsense about "to much money chasing to few goods". So, IF that is true and let me repeat, I don't believe it's true, we will have to raise un-employment to make this happen but make no mistake, we have now due to my policies, the strongest economy the country has ever seen. So I'm going to ask you all to do your part and give up your jobs until we reach 7.5%. I have no idea where they got that number but again, this is what I am being told by people with economic degrees.