Would that be Four Seasons Landscaping in Philly? Ghouliani's favorite. Anyway just realized, besides a couple of typos in my last post to him, once I blocked him he won't see that one. But he'll get the message at some point.
Play on an old joke, look up cyclical in the dictionary and you will see a picture of a ship most likely a "rustbucket" one. Ocean cargo biz is notoriously cyclical boom/bust rinse repeat. Rates are going higher. Fuel costs too. If your selection factors in companies that are hedged properly and of course managed well overall prospects are probably pretty good for growth in the next few years. Who knows beyond and how much further Covid is part of the equation.
yep, I’ve got a great view of the port of Oakland and a bunch of COSCO container ships from my condo haha. Are you saying that rates are going to be higher than expected? Most estimates are for 2-2.5% by eoty. Would you short treasuries?
Freight rates, not bonds. But one caveat is sometimes rates go higher as a consequence of fuel costs going higher. I think it is a little of both - supply/demand of ships and fuel. Airlines raise rates somewhat when jet fuel rises, FEDEX/UPS too raise their rates but neither move as fast as Ocean Shipping companies which have clauses in their time charters effecting daily rates, and spot voyage trips jump just as soon as fuel is bought for next journey.
Ok— well same question. By next June are freight rates higher/unch/lower? My understand is that in the early part of the recovery freight rates rise due to 1) ships being parked during a downturn 2) crews disbanded or on leave just as demand begins to pick up. This is sustained through the early cycle as demand for goods picks up. In the early cycle, businesses invest in efficiency (software and minor goods) and not capacity (capital goods and construction). As we shift from early to mid cycle, businesses begin to invest in capacity driving demand for capital goods and construction materials. So container ships drive the first leg up, and dry bulk drives the next leg. Obviously the economy doesn’t work in precise cycles, but variations in real gdp growth, inflation, backlog, consumer inventories, and interest rates are helpful in describing the economic regime we’re currently in, and what the next regime will likely be. So my expectation is that once inventories build up, container freight rates will stabilize and move lower. The only reason why inventories wouldn’t rise is if there are new tariffs/trade war stuff or further exacerbation of supply chain issues or a significant acceleration in level of demand. Trade and supply chain issues are real, but acceleration in demand from here is unlikely because of the deflationary overhang (declining pop, moderate productivity, high amount of debt). There would need to be an investment in the US economy worth 1-2x US gdp within a short period of time (3-5 years) for that to happen, which isn’t likely to happen unless 1) aliens or 2) ww3. Transient inflation happens all the time in various things. A good example is surge pricing on Uber. That is transient inflation. Because if a normal $5 route surges to $50 for years there would need to be a structurally constrained amount of Uber drivers or a vast (like 100000x) increase in the demand for that route. What’s more likely is that the $5 route surges to $50 and comes down both as 1) demand cools off and 2) new drivers come in. Monetary driven inflation would be that there is no change in demand or supply yet prices rise.
Higher - my guess. Agree with almost all until you lost me near the transitory bottom. Of course. Although with this morning's further pull back in 10 year yield my EW wave count is in doubt so .... when things change I change. News at 11.
My point was that to claim inflation beyond a transitory phase, you need to be pointing to a specific phenomena occurring in demand or supply. And by that's a billion-dollar trade if you are seeing something, lol. But monetary inflation is clearly not happening, because the amount of demand has increased (monetary driven inflation is when demand and supply have not changed, but prices have risen purely due to money supply).
This is the conventional thinking. I agree with it; yet we must always stay in touch with our innate fallibility.
Happy, there is TEN pages of comments, but I see none of your responses. Happy, this is the time to ask questions to ALL these people... Or watch: Hopefully, you don't end up like the dude in the above movie...
The Fed, as an institution and contrary to what many people believe, is not independent from the Governament. It responds to the congress as per the 1913 Federal Reserve Act, and thus it is implicitely bound to political mandates (and agendas). Therefore... There is zero chance, literally zero, that the Govt will let the Fed raise rates to any significant level considering that the US is the world's greater debtor, its debt-to-GDP is 130% and raising, and the debt level of the average american is higher than pretty much any other western country. To say nothing about zombie corporations that survive only because of the artificial ZIRP. Look at what happened in 2018 when the Fed felt brave and hiked rates above 2%. The markets tanked, and someone at the Fed got an angry call from someone at the Govt. Result: rates were back at zero within months. Unfortunately, our economy has been chugging along through the 2010s only because financing has been pretry much free. If money had a historically standard cost of, say 5%, the picture would have been rather dire. Any change in rate policy (to the upside) would annihilate the US economy with the largest deflationary shock since 1929. Until the debt-to-GDP ratio goes down to a more managable level, say 60%, I cannot envision any other scenario through the 2020s decade other than keeping the current policies. The Govt is, unfortunately, forced to inflate the debt away (or devaluate its fiat money) since the other organic secular deflationary forces play against them: aging population, technology, globalization, yadda yadda. The Govt+Fed just cant let that happen, thus they are forced to continue doing what they have been doing: the Fed keeping rates low, even controlling the yield curve, while prolonging its Quantitative Easing programs for years to come. and the Govt continueing with its helicopter fiscal policies, perhaps all the way to UBI (God help us!). I dont know man... I am really not optimistic given the current macro framework