The debate

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DOUG  By Guest Blogger Doug Rowat
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Everything’s a debate.

Just ask this kid:

For investors, the biggest debate this year is whether the US has reached peak inflation.

Those who doubt that it has, often cite food prices, which increased a staggering 11.4% y-o-y in August, the largest 12-month increase since 1979. Given that Russia and Ukraine collectively account for 30% of all global wheat exports and food is, well, essential for living, many believe that this is one form of inflation that—barring an end to the war—will remain elevated and prevent overall CPI from moderating.

These are fair points, but they overlook key factors.

First, much of the cost of food relates to the cost of shipping it and with gasoline prices dropping sharply upward pressure on food prices will likely abate. US gasoline prices are now down 25% from their June high of US$5.02/gallon. Second, fertilizer costs have soared this year mainly due to the rise in natural gas prices. Natural gas is a major feedstock component of fertilizer.

However, natural gas prices have also dropped significantly in recent weeks. The NYMEX natural gas price, for example, is down 27% in just the past month. Lower fertilizer costs will also ease food prices.

We also tend to think of food budgets as inelastic (everyone’s gotta eat), but this isn’t entirely the case. If egg prices are up 40% y-o-y, which they are, then consumers will find cheaper alternatives. Consumers also become smarter shoppers, clipping coupons, buying in bulk and frequenting lower-cost big-box stores.

Finally, while the food category overall makes up a chunky 13.5% weight of the US CPI, “food away from home” makes up more than five percentage points of this total. “Food away from home” is largely discretionary and consumers will adjust lower their spending here as well.

While food inflation has been stubborn, many other components of CPI have been easing. For example, used cars and trucks, a 4% CPI component, have experienced steadily lower pricing. Federal Reserve Economic Data notes that used car dealers, who earlier in the year were price setters, are “now forced to negotiate with buyers, thus pushing prices down.” The widely followed Manheim Used Vehicle Value Index is down 13% from its January highs and has fallen for six of the past seven months.

Needless to say, I’m on the peak-inflation side of the debate. In my view, it starts with energy prices and if they’re decreasing then this positively extends to most other inflation components. It’s also likely that much US consumer discretionary spending (apparel, airline fares, household furnishings, etc.) will continue to ease. If the Fed’s making borrowing more and more costly then discretionary spending will decline. Airline fares, as one example, fell 4.6% in August after falling 7.8% in July—a function of both lower energy costs and less volume.

One might argue that a drop in discretionary spending will plunge the US into a recession. That’s possible. But it would be an unusual recession as each of the past 12 recessions have shown both a decline in GDP and a rise in the unemployment rate. Rising unemployment is, thus far, not occurring. Regardless, at the time of this writing, the S&P 500 is already down 24% y-t-d. Is the risk of a recession not already significantly priced in?

Other data suggesting that US inflation’s peaked come from outside of the official CPI numbers themselves. Freight costs, for instance, continue to plunge. As with food, the cost of getting any product shipped is a major contributor to its eventual cost to the consumer. And shipping rates have been declining dramatically. The World Container Index, for example, which shows a weighted freight rate for eight major trade routes, continues its freefall:

World Container Index

Source: Drewry Supply Chain Advisors

Finally, if I’m right that we’re near peak inflation, then history is supportive of an equity-market rally. Below is how the S&P 500 has fared the past three times that US inflation peaked above 6%:

S&P 500 performance after the past 3 inflation peaks above 6%

Source: Bloomberg, Turner Investments

All investor eyes will now be on the September CPI release, which is scheduled for October 13.

See you in a few weeks. The debate will continue.

Doug Rowat, FCSI® is Portfolio Manager with Turner Investments and Senior Investment Advisor, Private Client Group, Raymond James Ltd.

 

94 comments ↓

#1 Bill zufelt on 10.01.22 at 9:27 am

Peaked or not they’ve said they’re raising rates until inflation gets back in the 1-3% range.Does anyone seriously see that happening with anything less than an overnight rate of 6%?Even 4% if left there too long will prove stimulative and set us up for another stronger bout of the beast.The report on Oct 13 could well show inflation has come down to 6 or even 5.5%.Stocks will have a jump for joy party but it will be pretty short lived when they sober up and realize what is still to come.Until RE prices(and all their accompanying access to easy money)comes off substantially inflation and rates ain’t going anywhere.

#2 crowdedelevatorfartz on 10.01.22 at 9:32 am

Interesting argument Doug.
But you’ll not looking at unemployment numbers.

I also worry about the Wage/price spiral.
We’re still missing millions of workers for jobs that are still wanting.

I was in a Safeway last weekend.
A Saturday morning. 8am.
ALL the staff were the regular Mon to Friday staff. 50 years old or older. The Safeway is 2 blocks from a high school. I asked the 50 something guy at the checkout, “Do all of you work 7 days a week?” He grimaced and answered, “Pretty much. We’re all burnt out. We can’t get anyone to do this work. ”
A union job paying $20+ an hour for green kids to stock shelves or over see self cash registers.

Another example is a friend who’s 20 year old kid is an apprentice heavy duty mechanic. Full time. He works, 12, 14, 16 hour days. Making killer money. A rare example of todays youth getting dirt under their fingernails. But he’s thinking of backing off the Overtime….”Taxes take too much. It’s not worth it.”

Every person I talk to in their early 60’s ( there’s a lot of those fading Boomers) is ready to pull the pin and retire OR they are complaining they cant find people.

Wages will chase the 1,000,000 missing workers out there for a while longer.
Throwing all the inflation busting rules to the curb along the way.

#3 Olg gringo on 10.01.22 at 9:41 am

Excellent take on the economy and a very good morning to you

#4 Nora Lenderby on 10.01.22 at 10:01 am

As always, we hope for the best and prepare for the worst.
Good column, thanks.

#5 Dharma Bum on 10.01.22 at 10:08 am

I remember in the ’70s (you know…the good old days!), when food prices were skyrocketing – around the same time as the “energy crisis” (gasoline was essentially being rationed) – the private label concept really took hold at supermarkets.

The “No Name” brand, for instance, offered less expensive substitutes for all kinds of nationally branded food products, and innovative marketing departments at food companies came up with things like “Hamburger Helper” to stretch consumers’ meat budgets. (It was kind of a scam for dumb consumers, as it was only a spice packet with cheap pasta to add to ground beef so you didn’t have to buy as much beef because the pasta filled you up instead. Brilliant!).

Humans adapt in all kinds of ways to offset the sting of higher food and fuel costs. We survived the pinch 50 years ago, and we’ll survive it again.

Boomers rule!

#6 Marsh on 10.01.22 at 10:13 am

“ In my view, it starts with energy prices and if they’re decreasing then this positively extends to most other inflation components.”

With the US SPR releases about to slow/stop over the next couple of months the cost of energy should rise again. This will then negatively extend to most other inflation components? Not sure I agree with you on this one.

#7 Paolo on 10.01.22 at 10:15 am

Always well prepared analyses. Thank you Doug.

#8 Father’s Daughter on 10.01.22 at 10:16 am

Does anyone else find it bizarre that food is shipped so widely all around the world? Amazed at how far removed from our own food production that we are? How a meal may contain products from 5+ different countries? I find the whole thing to be strange, and sad.
I’m seeing a lot of 30% signs off at the local premium butcher. I’m sure that with little effort I can decrease my grocery spending despite inflation with some modifications in my shopping without significantly affecting my diet. Other consumers will do the same. Eating out has been slashed around here, except my pizza the other day.
No shame for lack of 25% tipping either. Will try to support our favourite spots, but the mindless stops are gone.

#9 mj on 10.01.22 at 10:24 am

two things tell me that inflation isnt over yet. China lockdown is causing less oil consumption. Second is Biden is using oil reserves to keep prices lower. Once those two things stop, oil prices go back up.

#10 George on 10.01.22 at 10:26 am

No place to hide in this market Doug.

Bonds not negatively correlated with stocks . Do you see this changing anytime soon?
Any predictions for 4th quarter ?

#11 crowdedelevatorfartz on 10.01.22 at 10:44 am

The video of Trudeau managed to prove several things.

He showed more intellect at 18 than he does now.
And he still doesn’t care what voters think.

#12 epic bear on 10.01.22 at 11:06 am

Is the risk of a recession not already significantly priced in?
________________________________

no. it’s not….

1. forward SP earnings for 2023 are still projected to grow by 6% this is utter fantasy. last i looked $232 this year, $245 next year…

in a recession, typical drop in EPS for SP was -17%. that would make 2023 earnings to $185-192 for the SP (IF YOU ARE LUCKY. Ed Hyman did a regression analysis showing earnings drop by 36% when USD rises, rates rise, and oil rises. that takes you to $148-150 for 2023 rates)

2. higher inflation = lower multiples. SP still trading at 17-19X. when in reality is should trade at 12-14X (2200-2700 SP target)

3. average stock bear market when accompanied by recession is -37% . that’s the AVERAGE. (3000 SP target)

4. bear markets do not bottom when the fed is raising rates. markets bottom after the fed starts lowering rates. the fed is not finished raising rates.

5. inflation. i guess you missed yesterday’s PCE and core PCE – the Fed’s preferred inflation metric – came in well above expectations. ..

6. stocks are going to CRASH in October. or as much as the breakers will allow. over a few weeks. the SP Closed at the LOW for the day, low for the week, month, quarter and YEAR. there is ZERO reasons to be bullish.

7. SP DIVIDEND YIELD 1.79%. the average dividend yield for SP/DOW since 1870 was 4.25%. either the SP is about to triple it’s dividends all of a sudden, or it’s still massively overvalued. (if we only go to 3%, 2130 SP target) stocks now how to compete with … rates…

8. if you haven’t figured it out yet, the BOND BULL MARKET IS DEAD. 1982-2020 yields went LOWER. going out 10-20 years, yields will RISE. this is a NORMAL historical pattern.

you think that’s factored in? it’s not.
market isn’t even close to bottoming yet.

#13 MC on 10.01.22 at 11:11 am

Excellent, informative and most of all, a timely + contextual post. These are what I come for… thanks Doug.

#14 jess on 10.01.22 at 11:13 am

Greece-Bulgaria gas pipeline means ‘freedom’: EU chief

Speaking at the opening ceremony of the Gas Interconnector Greece-Bulgaria pipeline in Sofia, chief of the European Commission Ursula von der Leyen has described the pipeline as a “game changer”.

“And it means freedom,” von der Leyen told an audience which included heads of states and governments from the region.

The 182-kilometer (115-mile) pipeline will run from the northeastern Greek city of Komotini, where it is linked to the Trans-Adriatic Pipeline, up to Stara Zagora in central Bulgaria.

#15 Ponzius Pilatus on 10.01.22 at 11:16 am

#2 FURZ
As usual, you’re working with a small sample size.
Extrapolating from our “own” experience.
The grocery store I go to, has no workers over 25.
There you go.
I’ll take Doug’s analysis of the markets and the economy over yours anytime.

#16 Ponzius Pilatus on 10.01.22 at 11:24 am

#9 mj on 10.01.22 at 10:24 am
two things tell me that inflation isnt over yet. China lockdown is causing less oil consumption. Second is Biden is using oil reserves to keep prices lower. Once those two things stop, oil prices go back up.
————————
Not so sure.
China is making giant steps towards mass transportation and electric cars.

#17 Doug Rowat on 10.01.22 at 11:26 am

#1 Bill zufelt on 10.01.22 at 9:27 am
Peaked or not they’ve said they’re raising rates until inflation gets back in the 1-3% range.

—-

Markets won’t rally when everything’s perfectly on target. They’ll rally at hints of progress. In other words, they’ll rally in the midst of crisis.

This is why, for instance, markets began to recover in March 2009 and April 2020 when we were still knee-deep in it.

—Doug

#18 Chris on 10.01.22 at 11:36 am

I would argue that those numbers from Doug used different formulas over those time. Through friends peers I heard that even at Statistics Canada as a mathematician you have to bend the math if you want to keep your job…

I would only trust those numbers when the Government start publishing the raw data and the formulas that they used as then I can check for myself.

Transparency, Fairness, Accountabily – need to become our true values till then nothing will change for the better.

#19 Phylis on 10.01.22 at 11:45 am

#8 Father’s Daughter on 10.01.22 at 10:16 am
Yes, I’ve always wondered why NN relish comes from India. I’m sad and impressed.

#20 Quintilian on 10.01.22 at 11:49 am

#11 crowdedelevatorfartz on 10.01.22 at 10:44 am
“And he still doesn’t care what voters think.”

A quality of a true leader, rather than a follower.

#21 TurnerNation on 10.01.22 at 11:58 am

This a global thang. Kicked off March 2020. Why are these guys running our lives? Our elite global rulers, named. Dialing us back to the stone age.

There will be global control over our Feeding, Breeding and Travel/Movements. The QR code was the test rollout. Comrade are your “carbon credits” up to date?

“The Globe and Mail reports in its Friday edition that Canada’s big banks are growing uncomfortable about legal and governance risks stemming from their membership in a Mark Carney-led group of global financial institutions that has pledged to cut carbon emissions in line with the Paris Agreement. The Globe’s Jeffrey Jones and James Bradshaw write that the banks’ qualms about the Glasgow Financial Alliance for Net Zero, or GFANZ, are coming to light as some of their U.S. counterparts consider leaving the organization over fears they could face legal action stemming from antitrust concerns if they are required to divest from some high-emitting sectors in their efforts to decarbonize. JP Morgan Chase, Morgan Stanley and Bank of America have signalled they could quit, which would deal a serious blow to the group’s credibility. Senior officials at Canada’s six largest banks also recently expressed misgivings about legal risks tied to their GFANZ membership. The banks joined the alliance in 2021, agreeing to sign on only after months of discussions to gain assurances they would not have to abruptly abandon high-emitting industries that make up a large portion of Canadian exports, including oil and gas and mining.
© 2022 Canjex Publishing Ltd. All rights reserved.

#22 Wrk.dover on 10.01.22 at 12:04 pm

The used car fleet is a year older, and a year further in neglect. That’s a good reason to explain the lower pricing, lack of demand is not lowering values.

The cars that were not manufactured during the pandemic, will not show up as almost new-used cars either, neither lifting the used price average nor supplying the peeps that regularly buy one or two year old cars.

Nor are the twice used cars those peeps would have traded at two or three years old for the one to two year old cars, showing up in the stats.

I conclude the used car average price is down on fleet average because of the above, but any used car older than a few years old, is worth just as much for it’s age in model years as last years comparable same age offers would have been…or more!

Therefore, I call used car prices up, with the trickery removed from the news release calculations.

#23 Mark on 10.01.22 at 12:31 pm

All of these macro forecasts / analyses I see seem to somehow ignore the fact that the markets ran up insanely on the backs of trillions of dollars of free month. That has not been unwound yet. If the S&P went up 30% from here, it would be back at the all-time top and therefore would be pricing in the fact that tightening not only has not happened, but is likely to reverse imminently. Sorry, not going to happen.
It’s the same story from the housing analysts – “omg house prices have dropped 15%, they wont go any lower, a 30% drop would be insane!”
well in a normal world perhaps yes BUT..they ran up 40-100% over the past 2-3 years, and that all needs to unwound because money is not free anymore…so..how about we stop covering our eyes and ears and ignoring the important bits of macro context when coming up with these narratives?
How does that make any sense at all?

#24 Flop… on 10.01.22 at 12:39 pm

Robax, I believe the U.S is already in a deep, long recession.

How else do you explain Cameron Diaz coming out of retirement…

M48BC

#25 Ustabe on 10.01.22 at 12:40 pm

Hey IHCTD9…video starts out in Prince Rupert and goes to things to do in your shiny Silver Streak boat.

https://www.youtube.com/watch?v=97-lGXczn18&ab_channel=DestinationAdventure

Guy is worth the sub too…

#26 IHCTD9 on 10.01.22 at 12:43 pm

I’m definitely an “elastic” consumer. Not just groceries either. Can’t always escape, like my recent dryer repair where I had to pay 220.00 for a part that cost 80.00 pre Covid. But the install was no cost and tax fee.

#27 Sail Away on 10.01.22 at 12:43 pm

#8 Father’s Daughter on 10.01.22 at 10:16 am

Does anyone else find it bizarre that food is shipped so widely all around the world?

——–

It makes perfect sense. In its simplest form, transport always works both ways with the product and the backhaul. In reality, it’s much more convoluted with massive networks of traders vying for the available space.

So when a container is shipped out with Canadian product, it’ll return with another product.

#28 WTF on 10.01.22 at 12:45 pm

#8 “Does anyone else find it bizarre that food is shipped so widely all around the world? Amazed at how far removed from our own food production that we are? How a meal may contain products from 5+ different countries? I find the whole thing to be strange, and sad.”
—————————————————————
Yes buying fruits and veg this Jan will be onerous.

Additionally The Citrus and Banana crop from PEI was wiped out this year due to the Hurricane.

The winter tomato crop also expected to be impacted by ……….snow

Yeesh

#29 Shawn on 10.01.22 at 12:54 pm

Thoughts…

S&P is down partly due to recession fears but perhaps mostly due to higher interest rates which logically drives lower P/E as some have said here.

Inflation report October 13 will likely show deflation month over month but still high inflation year over year. Certainty for headline CPI and possibly deflation month over month in core inflation too.

If so, will the market and the FED then focus on the great month over month number or continue to focus on the year over year figure? Hard to say but we may certainly not be out of the woods yet. Hold on and hold tight?

#30 crowdedelevatorfartz on 10.01.22 at 1:16 pm

@#23 Quinty’s Quirks
“A quality of a true leader…”
+++
Or he’s just a condescending elitist snob….?

#31 Broader Mind on 10.01.22 at 1:31 pm

Your analysis makes sense but then again it made sense when you made your new year predictions .The problem is all outcomes are controlled by Central Banks . They poured money out at an unbalanced rate and now they want it back. When they fill up they will let us have some again. Rinse and repeat.

#32 Elon Fanboy on 10.01.22 at 1:39 pm

Anecdotal tales.

My wife’s employer (a very well known international charity) cannot get staff for a relatively well paid lob with benefits. Been trying for months.

My new truck purchase was timed perfectly it looks like. Ordered end of Feb, delivered end of June. Paid sticker price -$500. Partially financed at 0.99% (Ford Financing). For my trade in the dealer gave me what I paid for it 2 years (and 70000km) ago. 3 months later it’s still sat on their lot, they just knocked a $1000 off it.

On the other hand…..

Truck was brought to tow a custom ordered 5th wheel trailer we have a deposit on. Over a year wait list. Price of said 5th wheel has increased 3 times and is now 35% more than a year ago.

#33 crowdedelevatorfartz on 10.01.22 at 1:47 pm

Well.
Glad I don’t live on the Vancouver street formerly known as “Trutch” and have to spell the new name to someone over the phone.

https://vancouver.citynews.ca/2022/09/30/vancouvers-trutch-street-renamed/

#34 Quintilian on 10.01.22 at 1:48 pm

26 IHCTD9 on 10.01.22 at 12:43 pm
“I’m definitely an “elastic” consumer. Not just groceries either.”

IHCTD9, based on your posts, I think you are skilled, and resourceful, most consumers are not to the same degree as you.

The inelastic components of core inflation are controlled by big business, oligopolies and monopolies, and they are not going to let go of the higher margins that pricing gains have gifted them in recent times.

Not until the CB’s break something, and so far, demand powered by employment has not budged.Even with the most rapid rate increases in recent history; although, it is from an artificially low base.

Interest rates my have to go up a few hundred more BPS, I know what I am saying does not bode well with the realtors and gamblers-oops I did it again, I meant stock market investors.

Tick Tock, Tick Tock

#35 Retired on 10.01.22 at 2:02 pm

Let’s be honest. The central banks might want inflation back to a lower rate, but borrowing too much at every level needs to be paid back (not likely) or inflated away (likely). Inflation is a shamefully effective tool for whitewashing leveraged excess.

#36 canuck on 10.01.22 at 2:04 pm

Let’s wait 90 days and see how energy and commodity prices are then. It’s going to be a very cold and expensive Winter.

#37 Sail Away on 10.01.22 at 2:08 pm

With such food inflation, I’d suggest getting a versatile hunting dog. The proper breed is a complete package grocery getter. With our Munsterlander, one-on-one hunting is absolutely lethal- he moves slowly and methodically, I follow quietly, the game stays put watching him, not me, and the freezer stays full. Like magic.

Tonight’s haggis is a testament to his excellence. Then Montana elk at the end of the month with a stop-off for family time, and pheasant hunting, in Red Deer.

#38 Søren Angst on 10.01.22 at 2:12 pm

#28 WTF

Why I moved to Italia.

Seasonal eating, something spoiled Canadians have not yet learned. Have to have their avocados, bananas and kumquats year round. Why they have many shipping containers to/from Canada.

——————-

I ‘dunno Doug.

https://fred.stlouisfed.org/graph/?g=1ED0

FOUR Things I get from this chart (if present day not show, input 2022-09-01 for the To date:

1. POSSIBLE to whack down inflation in a couple of years.
2. To WHACK inflation down you have to raise rates to near DOUBLE the inflation rate.
3. To STABILIZE inflation, rates kept high for a LONG TIME e.g., 1982-1992, 1995-2001 (rates yet again 2X inflation).
4. Rates only DROP precipitously on BLACK SWAN event: 9/11, GFC and Covid.

Your 1974 (expand above chart to MAX for that year), 1980 and 1994 RALLIES had ONE THING IN COMMON:

Fed Rate 2X Inflation Rate

creating the expectation that Inflation would be tamed. Mr. Market happy. Real growth expected.

————

US (or Canada) NOWHERE near that now. I’d say put the rally on hold for awhile.

SAD NEWS for the Immediate Gratification crowd (Realtors, Cdn RE speculators, indebted, the rally is coming, the rally is coming investors, etc.). *

* Garth points out many times BoC raises rates with the US Fed 90% of the time (Purchasing Power Parity).

PS:

The GMO Capital of Europa, The Netherlands (a well run country), where they grow everything in Green Houses just announced their inflation rate

17%

It ain’t over. Rally on hold.

#39 Bill zufelt on 10.01.22 at 2:19 pm

#17 Doug Rowat

I got 3 pensions coming in, in a couple years–very little in stocks.Not timing or anything but if markets come off another 10-20% by TFSA season may throw it in—if not I’m content staying out of what could be a lost decade.If Drunkemiller(who has never had a losing year says that)my ears perk up like a little doggie lol.5% is okay and if inflation goes higher the stock market will get hit harder while I happily clip my coupons that will only get juicier.

#40 Joe Lalonde on 10.01.22 at 2:29 pm

Imagine if your not physically holding it.

https://www.zerohedge.com/technology/gone-30-minutes-next-europes-doomsday-list-collapse-cell-phone-networks

Shazam…magically disappeared…

#41 Søren Angst on 10.01.22 at 2:39 pm

#37 Sail Away

pheasant hunting, in Red Deer.

——————-

Any Albertan like me will tell you that Brooks is by far better and if memory serves, no Albertan hunts pheasant in Red Deer unless …

you are hunting defenseless tame farm pheasant released onto the bald Prairie for your boasting rights … like Pelee Island, ON (where they come up to your car looking for hand petting and not a #7 shell shot in the head).

#42 PeterfromCalgary on 10.01.22 at 2:43 pm

” If egg prices are up 40% y-o-y, which they are, then consumers will find cheaper alternatives. ”

Eggs are still a pretty good value even with the huge price increase. If their is a actually a cheaper alternative source of protein it is lost on me. Plus they are really easy to prepare.

#43 Hopium is an awesome drug on 10.01.22 at 2:47 pm

Don’t worry about a thing
‘Cause every little thing gonna be alright
Singing’ don’t worry about a thing
‘Cause every little thing gonna be alright

Rise up this mornin’
Smiled with the risin’ sun
Three little birds
Pitch by my doorstep
Singin’ sweet songs
Of melodies pure and true
Saying’, (this is my message to you)

Singing’ don’t worry ’bout a thing
‘Cause every little thing gonna be alright
Singing’ don’t worry (don’t worry) ’bout a thing
‘Cause every little thing gonna be alright

Rise up this mornin’
Smiled with the risin’ sun
Three little birds
Pitch by my doorstep
Singin’ sweet songs
Of melodies pure and true
Sayin’, this is my message to you

Singin’ don’t worry about a thing, worry about a thing, oh
Every little thing gonna be alright, don’t worry
Singin’ don’t worry about a thing, I won’t worry
“‘Cause every little thing gonna be alright

Singin’ don’t worry about a thing
‘Cause every little thing gonna be alright, I won’t worry
Singin’, don’t worry about a thing
‘Cause every little thing gonna be alright
Singin’ don’t worry about a thing, oh no
‘Cause every little thing gonna be alright

#44 PeterfromCalgary on 10.01.22 at 2:48 pm

I hope you are right about inflation peeking but their are still a lot of inflation risks out there. Energy is a big one especially with unknown countries now blowing up important pipelines. A tit for tat energy sabotage contest between countries would be really bad.

#45 Linda on 10.01.22 at 2:58 pm

Doug, I don’t disagree that some costs are abating but must point out that gas prices jumped nearly $0.20 cents per liter recently. Just came back from a ‘discretionary’ meal out – breakfast/brunch place. Cost per plate for just about everything on the menu ranged from $18 to $21 for mains. Most of the optional sides were $5 or more. Condiments were portioned out, no bottles. The coffee was still a refill for as long as one wanted, but milk/creamer was portioned out as well. They did an excellent job of providing quality but were definitely working just as hard to ensure the cost of doing so was in their favor. So I wouldn’t expect the menu prices to drop even if fuel, transportation etc. does.

#46 Flop… on 10.01.22 at 3:25 pm

Well, it’s not all gloom and doom, Australia Post is looking for 6000 workers.

There’s only one reason I can think of that these jobs will go unfilled.

Paper cuts…

M48BC

//////////////////////////////////////////////////////

“Australia Post puts call out for staggering 6,000 jobs.

Christmas is just under three months away and retailers are recruiting workers to join their companies, for what is expected to be a huge cyber sales period.

Australia Post is looking to recruit up to 6,000 new permanent and casual team members in every state and territory, for a variety of roles.
They are specifically calling on school leavers and seniors to join their team.

“We offer certainty around shifts for the coming peak period and competitive salaries for a wide range of roles, many of which need no previous experience,” executive general manager people and culture Susan Davies said”

https://www.9news.com.au/national/christmas-casual-jobs-2022-list-everything-to-know-places-hiring-australia/9bfdf738-9a85-4b61-aa98-ea3b2ce47a24

#47 SW on 10.01.22 at 3:38 pm

I think it’s a bit early to tell what energy is going to do. Not so sure oil has peaked. Let’s get through this winter…

#48 Dragonfly58 on 10.01.22 at 3:39 pm

#8, so thats why absolute mountains of unneeded sea cans end up being sold as surplus all up and down the West coast ? Made the trip to North America with ” stuff ” , but better to sell as dry land storage containers than ship back empty. Some are damaged and not fit for further use at sea, but lots of ” one trip only ” ones available at a slightly higher price as well.

#49 Sail Away on 10.01.22 at 3:40 pm

#41 Søren Angst on 10.01.22 at 2:39 pm

Any Albertan like me will tell you that Brooks is by far better and if memory serves, no Albertan hunts pheasant in Red Deer

———

You know that feeling when you’ve experienced something the exact opposite of what you’re being told, and you are just, like, ‘Um, but, but…’, then you realize there’s no point, so you change the subject?

Nice weather here on the island today. How’s Italy?

#50 Flop… on 10.01.22 at 3:43 pm

I get the bulk of the information I present on here for my Flop Drops from Greaterfool Alumni, Realtor Adam Major, he’s been a good ally the past 6 or 7 years.

Anyway, former president of the Real Estate Board of Greater Vancouver just tweeted this message below.

I’ll keep pushing, hopefully, eventually we add Vancouver Island to the mix…

M48BC

———————————————————————

“We had access to all the sales data but now to strengthen public trust: REBGV is displaying historical home sale prices for active listings on http://Realtor.ca”

https://mobile.twitter.com/philmooreRemax/status/1576280977701474305

#51 Doug Rowat on 10.01.22 at 3:53 pm

#45 Linda on 10.01.22 at 2:58 pm
Just came back from a ‘discretionary’ meal out – breakfast/brunch place. Cost per plate for just about everything on the menu ranged from $18 to $21 for mains. Most of the optional sides were $5 or more. Condiments were portioned out, no bottles. The coffee was still a refill for as long as one wanted, but milk/creamer was portioned out as well. They did an excellent job of providing quality but were definitely working just as hard to ensure the cost of doing so was in their favor.

—-

In researching this post I randomly came across articles related to how restaurants are fighting inflation.

‘Trash audits’ to reduce food waste was one strategy. Sounds like the least enjoyable restaurant job.

I hope you tipped well.

—Doug

#52 @J on 10.01.22 at 3:54 pm

Doug, how dare you use data and rational analysis to justify your position ;)

Of course, the data you are using is historical, and show the trend up to this point in time. I think a big question in many people’s mind is will these positive trends continue or are they going to experience a reversal over the next 6-12 months.

As Mark Twain has been quoted, “Prediction is difficult- particularly when it involves the future.”

As such, my family just continues to invest $ when we have it with a very long time horizon.

#53 Summertime on 10.01.22 at 4:27 pm

The greatest investor of all time – Stanley Druckenmiller stated recently that there is a high chance of us facing a lost decade for stocks.

Peak inflation in US is arguable. In Europe it is still accelerating. Besides that we are facing a prolonged period of negative real rates as increase in nominal rates is constrained by the debt while real inflation may stay elevated for quite some time above the nominal rates.

With all my respect I trust Stanley Druckenmiller.

There was some funny article some time ago (I think by the Ryan proponent of ‘peak inflation’ and ‘bull market in stocks’ about the ‘resilience of the UK markets.

Dear Ryan, the ‘official’ CPI in UK is above 11 %, real inflation is 20 %+ , even with flat markets you have technically lost 20 % of the purchasing power on your ‘investments’. Inflation in UK is horrific.

Enough with this bull market BS.

#54 Summertime on 10.01.22 at 4:36 pm

Credit bubble create peak assets valuations and inflation.

Asset prices expand on steroids.

To fight inflation, credit needs to contract and rates to rise that drives asset prices down with the same ferocity as they were increasing before.

Houses at 450-500 k in GTA/Vancouver, stock markets at 50 % from current valuations sound approximately right, if we were to fight inflation in any shape of from.

In any other scenario inflation will be the killer and the last think you would worry about is stock market returns.

We are in deep, smelly doodoo and it is hitting the fan.

#55 David W2 on 10.01.22 at 4:52 pm

Great post and info. Hopefully portfolio bounce back soon.

#56 Elon Fanboy on 10.01.22 at 5:08 pm

#51 Doug Roowat “In researching this post I randomly came across articles related to how restaurants are fighting inflation.”

‘Shrinkflation’.

Anyone had a Timmies Chilli recently? Their ‘medium’ size is what use to be their small. And you only get half a bun now.

Nuts. Not falling for that one again.

Did a Costco run on Wed afternoon. Thought it would be relatively quiet. Wrong. Was the busiest I’ve ever seen it, outside of the week before Xmas. Parking lot was completely full, including around the sides and rear. Not much evidence of a recession there!

#57 willworkforpickles on 10.01.22 at 5:40 pm

BANNED (Abusive)

#58 CJohnC on 10.01.22 at 5:57 pm

I don’t think that inflation is peaking, but it will be interesting to see what that massage parlour statistics Canada has to say in their next release.

For a fact, greed-flation is still on a healthy roll.
As an example, large food stores like Save-on-Foods in the past would quietly lower the price on an item on the shelf if a competitor advertised it cheaper. For instance, if their nabob coffee was $7.49 and the competition advertised at $5.99, then quickly the large store’s marked price changed to match.
Not any more. Not only has the regular price climbed astronomically, the sale price is now what used to be the regular price. Again with nabob coffee. The large store has it “on sale” at $7.99. The competition at $6.49 but no quiet changing on the shelf anymore. A better example which I saw today was LeClerc chocolate digestive cookies. Used to be always on sale somewhere for 2/$5.00. Today the competition has that price back finally, but The large store is holding at “on sale” for 2/$9.00. Again no quiet matching anymore.

Greed-flation is more of a problem than inflation

#59 Ed on 10.01.22 at 6:10 pm

As easily seen by reading many posts here ,most will ,as usual, miss another great buying opportunity.

Of course in 2 years from now everyone will have claimed to have loaded up the truck in Oct/Nov 2022.

#60 albertaguy in ab on 10.01.22 at 6:15 pm

26 IHCTD9 on 10.01.22 at 12:43 pm
I’m definitely an “elastic” consumer. Not just groceries either. Can’t always escape, like my recent dryer repair where I had to pay 220.00 for a part that cost 80.00 pre Covid. But the install was no cost and tax fee.

…..
Washing machine quit mid wash a couple weeks ago..called trail appliance asked for quote to replace my 15 yr old w/d set

$2300 plus delivery and it will be 2 weeks

Instead …$.03 zip tie washing machine repair
https://youtu.be/7pGPWFq-HSk

#61 The Great Gazoo on 10.01.22 at 6:26 pm

Doug, I don’t disagree that we may have come off peak inflation, but I think inflation will remain stubbornly high for next couple of years at 5% give or take. I offer the following to support my position.

First, you said gasoline prices have come off 25%.

“First, much of the cost of food relates to the cost of shipping it and with gasoline prices dropping sharply upward pressure on food prices will likely abate. US gasoline prices are now down 25% from their June high of US$5.02/gallon.”

True enough, but the important question is where are they going from here?

I think oil (and by default gasoline) for the medium and long term will move back up for the following reasons.

Historically, Russia has supplied 10% of world oil supply at 10 million bbls/yr. With sanctions on technology and equipment, it is going to be next to impossible for them to maintain supply at those numbers. If by some miracle they can maintain production, I would suggest there is a real risk Russia may decide to voluntary cut production – as a way to strike back at the world. This would hurt their revenues for sure, but a real risk non the less.

Even if there is a miracle and Russia maintains supply at 10 million/day, OPEC will take action (cut supply) to get the price back to something in the $80-100/bbl range in my view. They will do this for obvious reasons. This will put upward pressure on oil (and gasoline) prices in the near and medium term (2 years give or take).

So, in my view there is much more downside risk to the future outlook for oil/gasoline than upside over the next couple of years. I think you are being overly optimistic in this area.

Yes, gasoline prices are off by 25% TODAY, but let’s check back in in 6 months – 1 year to see where they are at. My prediction is they will be back up to a level much higher than today. I will suggest oil prices in $80-100/bbl range with a mid point forecast of $90/bbl. But honestly, I think there is real risk the numbers will be higher.

With respect to natural gas prices. With Russia cutting supply to Europe, this will put upward pressure on World LNG prices – that is for the component of LNG suppliers that are not locked into fixed supply contracts.

Clearly NA natural gas prices will be nowhere near the prices in Europe, but I believe there will be modest support from this to push up natural gas prices in North America from where they are today. I think the impact of higher natural gas prices will be modest – much less than oil prices over the next 2 years.

Second major point. US and Canada job vacancies are about 11 and 1 million respectively. Yes, higher interest rates will cool the economy and reduce these vacancy numbers, but not eliminate this demand. I would suggest there will be strong upward pressure on wages over the next 2 years that will contribute to higher core inflation. I think wage increases of 3-5% for the next 2 years is in the realm of thinking.

To summarize, I believe we are looking at inflation running stubbornly high at 5% give or take for the next 2 years – above their 2% target. That will force CB’s around the world to keep interest rates high.

What impact will that have on stock markets, I will leave that to the folks at Turner Investments.

#62 yvr_lurker on 10.01.22 at 6:42 pm

‘Trash audits’ to reduce food waste was one strategy. Sounds like the least enjoyable restaurant job.

I hope you tipped well.

—Doug
——–
Tipping hopefully goes to the server and not the establishment, but one never knows.

The way that consumers can fight back is to just simply curtail the eating out and have people over for a potluck brunch etc… Why would someone spend 20+ dollars for a brunch entree (omelette, or whatever)…. Put the wallet away for these activities and prices may come down when restaurants realize that the customer base is shrinking…

#63 yvr_lurker on 10.01.22 at 6:49 pm

#33 crowded
https://vancouver.citynews.ca/2022/09/30/vancouvers-trutch-street-renamed/

I live 6 blocks away from the street formerly known as Trutch. I did not expect that the city would actually change the name, as it would entail a rather large cost of going block by block removing the old signage and replacing with the new signs. Frankly, it is as ridiculous as it comes. Voting time is in a few weeks and this time around I am voting for the right-of-center Candidate and his team…. a complete opposite to what I did last time…

#64 Flop… on 10.01.22 at 7:08 pm

So I looked into it a little, it seems like the most plausible places to shake things up a little on the island are Nanaimo or Victoria.

Nanaimo being the smaller of the two markets might be easier to focus on.

I’ve been asked on here before where to get information in real time for Vancouver Island, to my knowledge for the average pleb you have a minimum of a 2 month lag.

Anyway I went to my current source, they are showing sales information up to late July.

I clicked on a few listings, some went recently for exactly assessment value, some above, then I came across an anomaly.

I tugged on the thread and this is what I got.

551 Nova Street, Nanaimo, is assessed at 583k.

According to REW it sold on 15th of July for the much lower sum of $291k

I went to BC Assessment to confirm, they haven’t updated the information yet, which I always find weird.

REW and others get their information from BC Assessment, so it is in the system somewhere but during The Pink Snow Tribute Project I’ve seen them take up 9 months to update the information, which is almost useless in a fast changing market.

Dunno, not much I can do from here, says it got sold as a 3 bed, 1 bath house, looked in reasonable condition on street view.

Maybe someone over that way can take the dog for a walk and shout out, hey , what the hell happened, as they walk by…

M48BC

#65 IHCTD9 on 10.01.22 at 8:30 pm

#25 Ustabe on 10.01.22 at 12:40 pm
Hey IHCTD9…video starts out in Prince Rupert and goes to things to do in your shiny Silver Streak boat.

https://www.youtube.com/watch?v=97-lGXczn18&ab_channel=DestinationAdventure

Guy is worth the sub too…

——

Man, such a beautiful place. I’d have a heart attack seeing whales on the fish finder. That little creek filled with salmon!! I think I could somehow learn to love the rain…

Such a massive difference from Ontario, you’d never guess it’s the same country.

#66 THE DANDADA on 10.01.22 at 8:44 pm

Bunch a “Lawn Bowlers” right there.

LMFAO

#67 Doing my Part on 10.01.22 at 8:44 pm

Hi Flop,
I live in Victoria and always enjoy your posts, friendly, factual and/or funny.
Hope you are having a great weekend.
thanks for the info/entertainment.

#68 maxx on 10.01.22 at 8:52 pm

Rising costs……

No one seems to want to work any longer. Earlier this year, we were invited to a well-known Ottawa restaurant for lunch. The restaurant went as far as contacting our hosts a day prior to arrival to be certain that we´d be there. We arrived at the appointed time to….crickets. Lights off, not a soul in sight, nada. Not even a sign in the window as to why. What a disgrace. I noticed long ago that far too many in Canada are lazy-a$$, unproductive hosers. It´s even worse now.

Fast forward to yesterday. I was at a store, turning into a aisle when I noticed a 60+ worker on all fours cleaning under a shelving unit. The manager had told her that she did not have to do that. I said that she was a rare pearl. Her reply (with a smile): ´I like my job.´ What a gem. Here´s an idea: If the TFSA is a widely accepted device for improving our lot, why not create Tax Free Wages for Working Seniors…TFWWS? They are vastly better than the entitled junk currently running the show.

Many of us have seen the absolute dreck that passes for workers during this COVID era. I sincerely hope that employers are now busy creating or finding ways to punt as much staff as possible for their future ops. Those who refuse to work, quiet quit, etc. now can simply sweep the streets later on.

Today, a cashier was smacking a wad of gum loudly as she served me, grotesque really, like chewing cud¨.

Employers are so desperate for people that they hire anything that can fog a mirror and it ain´t pretty. Incompetence and derisive time-wasting reign supreme.

Today and going forward, every single task that we can do ourselves, we do. We avoid ¨services¨ like the plague now. It gets far too complicated and outrageously pricey. We bypass so-called services at all costs.

Our quality of life has increased dramatically since we decided to learn to do as much as possible without the intervention of ¨services¨.

Let the cost of money rise. That might ignite a dose of reality under the sloths´ butts.

Let´s see, future interviews might run as follows: What have you done since COVID restrictions ended? Uhh, well, I worked here, there and there. How long for? Why did you leave? Oh, you were let go because you didn´t show
up? Eight times in a month? Oh, you felt sort of sick and weren´t sure if it was COVID. OK, we´ll call you when interviews are over.

Crickets…….

#69 Ponzius Pilatus on 10.01.22 at 8:54 pm

#36 canuck on 10.01.22 at 2:04 pm
Let’s wait 90 days and see how energy and commodity prices are then. It’s going to be a very cold and expensive Winter.
————–
Does not have to be.
Turn down the thermostat.
Drive less.
Put on warm clothes.
Cook a big pot of stew that lasts a few days.
Remember,your in charge.
Not the other way around

#70 IHCTD9 on 10.01.22 at 9:03 pm

#34 Quintilian on 10.01.22 at 1:48 pm
26 IHCTD9 on 10.01.22 at 12:43 pm
“I’m definitely an “elastic” consumer. Not just groceries either.”

IHCTD9, based on your posts, I think you are skilled, and resourceful, most consumers are not to the same degree as you.

The inelastic components of core inflation are controlled by big business, oligopolies and monopolies, and they are not going to let go of the higher margins that pricing gains have gifted them in recent times.

Not until the CB’s break something, and so far, demand powered by employment has not budged.Even with the most rapid rate increases in recent history; although, it is from an artificially low base.

Interest rates my have to go up a few hundred more BPS, I know what I am saying does not bode well with the realtors and gamblers-oops I did it again, I meant stock market investors.

Tick Tock, Tick Tock
————-

Well, you don’t need an engineering degree to replace a dryer timer, I’m pretty typical for a guy my age. I am naturally inclined mechanically which makes that kind of stuff a hobby, and also allows me to fix the car (not a hobby).

I think the BOC has done plenty of damage, but we’ll have to wait a while to see how it shakes out. The main thing they need to do is hold those rates up after inflation sinks. WRT stock market investors, we can escape Canadian markets, unlike the house humpers.

#71 Ponzius Pilatus on 10.01.22 at 9:04 pm

#42 PeterfromCalgary on 10.01.22 at 2:43 pm
” If egg prices are up 40% y-o-y, which they are, then consumers will find cheaper alternatives. ”

Eggs are still a pretty good value even with the huge price increase. If their is a actually a cheaper alternative source of protein it is lost on me. Plus they are really easy to prepare.
—————
Agree,
Eggs, bananas and milk have not moved up too much.
Add a vitamin/mineral supplement.
And you’ve covered the basics.
Everything else is gravy.

#72 IHCTD9 on 10.01.22 at 9:08 pm

#37 Sail Away on 10.01.22 at 2:08 pm

Tonight’s haggis is a testament to his excellence.

————

So how was it laddie?

#73 Oakville Rocks! on 10.01.22 at 9:33 pm

Speaking of ways to save & fight inflation, someone tell Vancouver Island Man about this…

https://www.nytimes.com/2022/10/01/nyregion/the-great-guinea-pig-giveaway-has-begun.html

It seems humane societies are overrun with surrendered guinea pigs and other small animals taken on as pets during the pandemic.

I wonder how many guinea pigs one needs to “adopt” to put up a side of pork.

And while he is there, Vancouver Island Man can “adopt” a bushel or two of chinchilla to upgrade the carpeting in the den.

#74 TurnerNation on 10.01.22 at 9:40 pm

Blog dog Dharma Bum has dropped from his flower-power induced haze and comes here spitting out the red pills.
Never too late. Keep it coming.

#75 IHCTD9 on 10.01.22 at 9:44 pm

#60 albertaguy in ab on 10.01.22 at 6:15 pm
26 IHCTD9 on 10.01.22 at 12:43 pm
I’m definitely an “elastic” consumer. Not just groceries either. Can’t always escape, like my recent dryer repair where I had to pay 220.00 for a part that cost 80.00 pre Covid. But the install was no cost and tax fee.

…..
Washing machine quit mid wash a couple weeks ago..called trail appliance asked for quote to replace my 15 yr old w/d set

$2300 plus delivery and it will be 2 weeks

Instead …$.03 zip tie washing machine repair
https://youtu.be/7pGPWFq-HSk

————

Haha! That’s what I’m talking about! I had the lid switch go too a few years back, still pretty cheap without the zip-tie. Our old clunkers turned 21 this year – I think it’s going to be parts availability that finally puts them out to pasture.

#76 crowdedelevatorfartz on 10.01.22 at 9:50 pm

@#63 yvr lurker
“….Voting time is in a few weeks…”

+++
I’m sure that Mayor Stewrat didn’t use Reconciliation Day for a crass, opportunistic shot at free publicity just before a close election.
He did it out of the goodness of his heart.

Hopefully Ken Sim will garner enough votes to toss Kennedy back into the NDP ranks.
I’m sure Kennedy will come out of his municipal dalliance very well.
Jaggy owes him big time for surrendering his safe NDP seat.
I expect a Senate appointment for our Mayor Stewrat in the near future for being the loyal ball player he is.
Jaggy rewards his pals and Trudeau needs a happy Jaggy to also play ball…
Nauseating but true.

#77 kommykim on 10.01.22 at 10:24 pm

RE: #62 yvr_lurker on 10.01.22 at 6:42 pm
‘Trash audits’ to reduce food waste was one strategy. Sounds like the least enjoyable restaurant job.

I hope you tipped well.

—Doug
——–
Tipping hopefully goes to the server and not the establishment, but one never knows.

=======================================

Excessive tipping just signals to the restaurants that they aren’t charging enough.

#78 The real Kip (Ret) on 10.01.22 at 10:30 pm

Fuel costs have decreased due to stimulus in the form of 1m/bpd from the Biden administration pulled from the SPR. In other words, low fuel price is manipulated to win an election in November. Once that election is over the stimmy will dry up and once again there will be a reality check.

#79 yvr_lurker on 10.01.22 at 11:30 pm

#76 crowded
I’m sure that Mayor Stewart didn’t use Reconciliation Day for a crass, opportunistic shot at free publicity just before a close election.
He did it out of the goodness of his heart.
—————————–
I might have been too harsh. Indeed if the city council votes to change the name of the street, so be it… let’s change the name…. everyone living on that street will have to tell all of their contacts (credit card companies, etc.. mailing list) the new street name, and there will likely be lots of confusion in the interim period…. so be it, people just suck it up

How much did it cost for the city to contemplate this with all the managers, council deciding on this name change, and then all the signage swapped out…. so be it…

However, isn’t there much more urgent and pressing needs that should be at the forefront? hastings/main, opiod problem, petty crime busting shop windows in gas town/china town that nobody on council seems to give a rip about…… This is where the focus should be; but alas these are hard (and some potentially intractable) problems that don’t stage well at a photo-op with the media… This is where we need a change… I don’t know where Stewart goes and which of his pals gives him a job, I just want him and the greens on council long gone…

#80 Flop… on 10.01.22 at 11:45 pm

#67 Doing my Part on 10.01.22 at 8:44 pm
Hi Flop,
I live in Victoria and always enjoy your posts, friendly, factual and/or funny.
Hope you are having a great weekend.
thanks for the info/entertainment.

///////////////////////////////

Thanks, I’m not sure if you know my history on here, but I have a habit of doing something until the dam bursts and something changes.

This won’t help you out, but I was a little surprised to see another house I had clicked on in Nanaimo one or two houses after the original one had taken a significant percentage loss, when I thought the market had been ripping on the island.

The details…

110 Woodhouse Street
Nanaimo, BC,

Someone paid 265k for it back in late 2018.

For whatever reason they were forced to sell it for 200k late last year, close to 25% loss before expenses, looks like a starter home or maybe even a bulldozer project.

I thought even all the land was going up in value over there, post Covid.

In Vancouver detached has switched to a buyers market.

Condos, the sellers still hold the big bat, Townhouses, who cares, too many stairs.

The weather has been great here this summer, but before long it will be a long cold winter here for me, maybe my winter project will to try and find allies to get more updated information on the island, I don’t see myself ever living there as I’m allergic to BC Ferries.

Some people do 1000 piece jigsaw puzzles to pass the time in winter, I like to shake the cages of real estate boards.

Thanks again for the compliment, and yell out if there’s something you either need help with, or want to draw my attention to.

I haven’t looked at my latest collective bargaining agreement, but I think it’s in my contract to put up 3 junk posts a day on here, some days I overachieve…

M48BC

#81 Km on 10.01.22 at 11:50 pm

@#2, enough with the young people not wanting to get their hands dirty and not work. Every young person I know works and usually not just one job but several and is in school here in the LM. No staff is a result of retirement on a huge scale. My friend just retired from BC ferries, he said they have know for years they were losing up to 30 percent of their work force the last few years to retirement. I have heard the same from trade unions we work with as well as unions within the grocery sector. Sure plenty have moved on from the menial low paying jobs but that is how it goes when you move on and up. Stop blaming the lack of staff on young people it is ridiculous to say the least, let’s look at actual facts shall we.

#82 Karlhungus on 10.02.22 at 2:12 am

Hey Doug

Is the unemployment rate a leading or lagging indicator?

#83 Chicken hearted on 10.02.22 at 4:15 am

17 bucks for a chicken rice in NY which can be had for 1-2 bucks in SE Asia.

Maybe this should replace the Big Mac index

https://www.insider.com/singapore-hawkers-react-expensive-new-york-chicken-rice-2022-9

#84 Steven Rowlandson on 10.02.22 at 8:06 am

Real estate still has a long way to fall until whatever the labor market wants to pay workers look good. Example:
An allegedly cheap $500,000 home. 500,000/ 6,000-man hours = a minimum wage of $83.34 per hour. the down payment would be $125,000. Who can do that besides lawyers, members of parliament, doctors and corporate executives and other super earners. Multiply this by 2 or 3 if dealing with homes costing more.
The wages of your union $20 an hour grocery store worker or a $17 an hour stair builder is 50 to 60 years out of date for buying a home at the cheap end of the market near their job. Inflation is caused by government deficits and real estate price appreciation plus other debt causing a general increase in debt which is an increase in what most of you all call the money supply.
The butcher, the baker and the candle stick maker getting an insignificant pay raise and most of the time no raise at all didn’t cause inflation as the super debtors claim. Contracting debt = official currency creation. That is inflation. Higher prices require higher levels of borrowing… Wages have not kept up with the need for higher income. This will lead to a debt related financial crisis. There are not enough rich workers and taxpayers to support the demands of governments and real estate investors/ owners. If the past is prologue, we will see a rerun of the crises experienced by the German Weimar Republic with the Covid deficits being the same as the money printing due to the French army occupying the Ruhr Valley in Germany triggering a general strike and putting the nation on the dole.
It took 3 or more years to end and it wiped out all savings in the official currency, rendered the value of work null and void and resulted in much misery and abnormal behavior including suicide. In the end they had to reset the currency and muddle along until 1933 when the NSDAP formed a government and put an end to good times for bad people and their policies.
Work, moral and fiscal order became important or if you like old school values were reintroduced.
The rest of the world didn’t like that and 12 years later Germany was a moonscape, and the surviving criminals were liberated. The result was that the western world is now a collection of Weimar Republics doing the same thing over and over expecting different results.
Some people would call that insanity.

#85 mattbg on 10.02.22 at 9:06 am

If the only point is that inflation has peaked, it’s an interesting and convincing technical analysis and on paper I agree with you.

But if it’s meant to imply that the inflation concerns are on the way out, it feels strongly biased toward “it’s never different this time” and feels like something is missing regarding what is going on in the labour market (especially regarding skills and experience), how globalization is unravelling, and how what is going on with Russia-Ukraine and China-Taiwan signals a shift in global dynamics over the longer term.

I think I agree with you that we’ve reached a peak in inflation. I don’t think that this means that inflation goes steadily downward from here on. But, I’m of course subject to recency bias just like everyone else and I’ve been amazed that inflation took this long to appear.

#86 Dharma Bum on 10.02.22 at 9:57 am

Inflation?

It’s over hyped.

Not as bad as it was a half century ago.

High Interest rates?

Pfffft. Gimme a break.

They are still ridiculously LOW.

We are living in super good times. Best it’s ever been.

A lot of things are even much cheaper today than they were decades ago.

https://bestlifeonline.com/products-cheaper-today-than-20-years-ago/

https://ca.finance.yahoo.com/news/10-things-cheaper-today-were-110035962.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAKtqXehB8LfwxycHF41OQiRPuDrykpP_7lJwhDbnLu_I4oo_TvxGbKEBDayxu_PHuAIVnoHh3HEi1J2TdDWBpNuD1fXomTo5sE-ufVj1Z7JVJ8rZrtdONK0OhLMxgq2ksC-3wHiQOw5yPIC8kVGgyP4lTTiV3fUg1osXDbRb7Y26

Even house prices are getting cheaper (isn’t that what everyone wanted?).

Stocks are cheaper too. Bargains galore.

Inflation? Fake News.

#87 crowdedelevatorfartz on 10.02.22 at 9:58 am

@#65 IHCTD9
“Such a massive difference from Ontario, you’d never guess it’s the same country.”
+++
Yep.
I used to work for a company with headquarters in Montreal.
I was down there during the Separation referendum when Parizeau was joking about lobsters in a pot.
When Quebecers were arguing about leaving Canada I would say, ” What? You want BC to be part of another country? Are you nuts?”
The few that had visited BC agreed.
Lets see if the separatists come crawling back out into the light during another Recession.

#88 Shawn on 10.02.22 at 10:36 am

There’s a new King in Town.

For the economy cash was never really King.

Credit is and has been King.

Do I even have to explain why?

Higher interest rates are a mere annoyance compared to what happens when companies and people can’t find a lender at all. Don’t wish for that, you won’t like it.

#89 Shawn on 10.02.22 at 10:38 am

Too many retirements?

As at BC ferries and everyplace?

We created generous pensions to encourage early retirement. Whoops.

#90 Linda on 10.02.22 at 11:39 am

We did tip well, though as other commenters have pointed out we have no way of knowing whether said tip ends up in the server’s pockets.

#62 ‘yvr’ – North Americans are used to low prices for food. I think that after better than 2 years of Covid the prices on the local restaurant menus reflect the increase in cost for providing same. Commercial establishments are not shielded from cost increases; buying in bulk only goes so far. Plus, if providing a ‘living wage’ is the goal, then naturally the cost of a meal out will reflect those higher wages.

As for boycotting eating out, all that would do is ensure restaurants shut down permanently. Utilities, property taxes, insurance etc. still have to be paid even if no income is being generated. Given that the average cost of opening a new restaurant is north of one million dollars can’t see anyone being willing to take the risk if consumers can’t be counted upon to patronize the establishment.

#91 Doug Rowat on 10.02.22 at 11:41 am

#78 The real Kip (Ret) on 10.01.22 at 10:30 pm
Fuel costs have decreased due to stimulus in the form of 1m/bpd from the Biden administration pulled from the SPR. In other words, low fuel price is manipulated to win an election in November.

—-

That’s what politicians do. But this is certainly not the sole reason fuel prices are lower.

—Doug

#92 Shawn on 10.02.22 at 11:46 am

What recession?

Canmore Alberta this weekend. Expensive. And very busy.

#93 WTF on 10.02.22 at 12:01 pm

#38 #28 “WTF Why I moved to Italia.
Seasonal eating, something spoiled Canadians have not yet learned. Have to have their avocados, bananas and kumquats year round. Why they have many shipping containers to/from Canada.

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Yes spoiled. We should enjoy or diet of root vegetables and no fruit all winter and spring so we can “seasonally eat”

Apparently, the Canada you claim to have lived in has the same latitudinal growing season/crops as Italy?

Might be a bit difficult to adhere to your fantasy dining dogma this year.

https://www.bing.com/videos/search?q=Italy+crops&docid=608048996011572878&mid=2739FF91ECF8229C5E5E2739FF91ECF8229C5E5E&view=detail

#94 PBrasseur on 10.02.22 at 1:11 pm

Peak inflation is a possibility but that doesn’t mean what follows is as simple as repeating the past.

So much is different today compared to the 70s, 80s and 90s, demographics to begin with the boomers heading massively to retirement, then off the charts debt levels, suicidal energy policies, massive QE and asset bubbles, the imminent demographic and economic decline of China which is never again going to drive world growth, etc…

With governments growing bigger and fatter all the time who is going to grow wealth?
What could possibly go wrong?