The stock market is dropping, Wall Street analysts are flummoxed, but it just isn’t rocket science folks. It’s Main Street economics 101.
The price to produce, manufacture and transport goods has skyrocketed, that’s the Producer Price Index (PPI). Arriving goods at retail are significantly higher in price. Simultaneously, consumer spending is being squeezed by unavoidable inflation in housing, energy, food and gasoline; so consumer spending is tight, that’s the Consumer Price Index (CPI).
Higher costs to retail that cannot be passed on as higher prices to customers, means lower profit margins for the sellers. That’s it. That’s the majority of it. Major retail companies like Target and Wal Mart are reporting the impacts from the squeeze in higher costs that cannot be passed to consumers in higher retail prices. Checkbook economics.
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Businesses are seeing higher costs in the unavoidable goods they need to sell, the fixed price of goods. What comes next? Businesses, knowing they cannot raise prices too much, look at lowering the costs of operations in an effort to remain competitive, stay profitable, and stay in business.
How do businesses lower operational costs? Increase expectations of employee productivity and/or lower employment costs. That leads to layoffs.
I guarantee you…. YOU know more about the basic principles of Main Street economics than a room full of these Wall Street analysts. I like El-Erian, but sheesh, talk about pretending not to know things.
Look at the companies. The companies most exposed to wholesale inflation, those who deal in highly consumable goods like food, are the companies that will see their profit margins shrink fastest.
Highly consumable goods rise in price from origination (field) to destination (fork) the fastest.
The next phase covers the same results in durable goods. That’s when things get really ugly.
I keep reminiscing about Christmas 2019 and what could have been. America was attacked with a bioweapon and then the 5th column in government went to work. I am so worried about my kids.
Well that is why we have the 2A. So folks worried about a Rogue Government can END that Government and start Fresh, I Believe that Day Has Come, in fact is has come and gone several times in 2022 alone. Americans have grown fat soft and weak. I am sickened by most I meet, mush brains like Biden and NO HEART to FIGHT for America OR Freedom.
Sad, I used to be so Proud to be an American, now it’s an Embarrassment!
Good luck getting people to work harder. It is so frustrating to see the laziness of
today’s workers. I actually want to jump over the counter and do whatever the
task is myself.
From 2002 – 2012 Target’s rate of return (w/o dividends) was 5% growth. From 2012 to today giant fall is about 10.5% (about 16.5% at its high six months ago. For the 20 years, ≅7.5%.
Crash it to ZERO!! Take all the Wealth away from the Elites.
Right after the Walmart earnings were announced, CNBC ran an article that said something to the effect that the consumer was still strong because people were still buying and Walmart’s income was up. I couldn’t believe what I’d read and they’ve since edited the article to reflect the reality. I went on over to the WSJ and their article on WSJ earnings was a little more subtle but still stupid. Of course the market knew the reality and began to plummet. Of course I can’t be positive that the journalists are not really and truly idiots or if they’re simply trying to push an agenda, but I have my suspicions…
The Philadelphia Fed Job Index is way down. This is not a surprise to me as my kids and their friends (recent college grads) are not finding work in the Philadelphia area. They’re moving to DC, Baltimore, and NY. The more adventurous are moving to Florida and Texas.
Just curious: When gas prices hit double digits, and all of the digital signage has only a single dollar digit, what will they do? Paint a 1 on the sign? Who would have thought gas prices would potentially TRIPLE inside of 24 months.
Washington State (which is deep blue) is already installing gas pumps that account for price over $10/gal. I remember when gas pumps had to be changed out to allow for gas over $1/gal. Dow awhile we had to buy gas by the liter. That was in the 70s. Good times!
FOR not Dow. Sheesh, autocorrect.
When those who determine retail pricing by bulk buying, lose monies, we are in a different stage of the game.
This economist has no idea what’s coming.
All of this is true, but the one elephant in the room no one will touch its the companies destroying their own TAMs (total addressable markets) by injecting hardcore leftist politics. Most companies are alienating 10-30% of their potential/actual client bases. Enough so for them to walk away or greatly reduce their spending at places such as Disney, Target, Paypal, FB, NFLX etc. It doesn’t take many clients to stop spending to create catastrophic results for share prices and thus mkt caps. FB may have billions of users, but if they come up only short a few million users in a qtr or two, then the Growth rate slows down, and wall street punishes by lowering estimates. What these companies are finding out is that they will never have the ability to hit their previous G rates, and their share prices are not going to recover unless they dial back politics or find new foreign markets.
Good luck trying to sell “Woke”concepts to emerging or foreign markets🙄
Not a bug, but a feature.
Skyhigh fuel, limited choices, erosion of civil rights, constant attempts to disarm the population, warmongering and corruption… What is not to love about Biden and his merry communists?
Plus ca change, plus c’est la meme chose….
It’s no surprise that “the experts” are always the ones who “are surprised” 😲. A high school graduate trying to pay for gas trying to get to work can figure that one out.