by stylishskunk
I posted several months ago about how inflation will cause a downturn in the stock market. Too many of you autists thought that the market was a good hedge against inflation and I was wrong. Wrong! It’s a good hedge against forecasted future inflation…until inflation actually affects earnings, consumer demand, and interest rates.
But what you don’t understand is that government inflation data is seriously time lagged. Let me give you an example in the industry I am in…automotive. We make parts for vehicles. Component level. These get into sub assemblies and then final assemblies.
The cost of steel has gone up for these components 80% since Jan 1 2021.
The cost of labor has gone up 15%.
The cost of packaging including skids has gone up over 100%.
The cost of oil is up 40%.
The cost of transportation is up 45% for domestic and 85% overseas.
Many of these costs have not even found their way into the cost of cars due to contracts. Secondly, costs are continuing to rise at exponential rates.
In 2022 our steel costs will increase by another 40% by Q2. Our packaging costs have already increased an additional 10%.
What your seeing from government data is time lagged info from more than 6 months ago from a component level.
By end of 2021, our component pricing increased on average 12%. By mid-2022, it is expected to rise another 20-40%.
There are now appearing significant insolvencies in the industry.
You guys have no idea what is coming…future annualized inflation to exceed 10%-15%.