The 2nd Wave of Inflation is Coming | Supply Chain DISASTER.

now we gotta talk about Supply chains

look Supply chains are the biggest

concern that people have that we are

going to face the Michael burry double

dip recession is the Michael burry

double dip recession going to happen

consider what's happening in the

environment from not only the

perspective of earnings calls but also

the perspective of companies like

Goldman Sachs and institutional Bankers

looking into Supply chains and that's

what we're going to do in this right to

now let's go ahead and start by looking

at Goldman Sachs estimates for Supply

chains and where we sit with Supply

chains then we'll look at some other

information because again if Supply

chains end up getting congested again

because we have a Chinese reopening or

people continuing to spend more money

like American Express saying that

premium customers are spending through

the recession people are using and

taking up more personal loans at Sofi to

support their spending people are

probably using a firm more than ever

especially gen Z because they're stupid

and haven't been educated that you

should not use buy now pay later and

don't get me wrong I've been a fan in

the in a bull market of buying out pay

later Services I think it is stupid to

use them but I don't think that stupid

people watch my channel okay I think

using find out pay later is generally

stupid you should not use it and if

you've used it before hey maybe there's

a reason well one off time it makes

sense okay I'm not trying to offend

people here I'm just saying it's stupid

you should pay off your debts every

single month for consumer goods

guaranteed that's different obviously if

you buy a house you should really never

pay off your real estate unless you're

going into retirement uh ideally you

want to pay off equipment like uh like a

car right ideally you want to pay that

off because it'll restrict you to buying

a less expensive car and it'll let you

buy more real estate right but of course

if you're a company that buys equipment

like machinery and you finance it that's

a little different right that's part of

your cost of goods sold but anyway when

it comes to buy now pay later it's all

right you shouldn't use it but people do

and so people are supporting they're

spending like crazy and there's the

thesis that all it's going to take is

China reopening and that that's it as

soon as China reopens boom we're going

to turn inflation back on but the

reality is that's not what's happening

in fact Starbucks thinks which has just

basically doubled the amount of stores

that they have in China they see the

Chinese reopening as gradual but not

only does Starbucks see the reopening as

gradual but Goldman Sachs tells us the

following gulbasack supply chain

congestion scale this was released

yesterday evening and they show us at a

level of 2 out of 10. 10 being a full

bottleneck one being fully open two is

the congestion scale that they put us at

for Supply chains on a weekly bottleneck

scale our weekly bottleneck scale were

made at two this week as the absolute

level of congestion index declined 14.5

percent exhibit one let's look at

exhibit one for a moment this is exhibit

one

our weekly composite of Supply chains

this is basically a chart showing you

that right now Supply chains are as

bottlenecked as they were August of

2020. in other words barely bottlenecked

at all we had a massive skyrocketing in

the chart in uh early 2021 and then a

serious a bottlenecking at the end of

2021 and this is what led to the insane

inflation that is almost all but gone

away so if you're looking for a

disinflationary argument my friends it

is the supply chain congestion gauges

the supply chains are not muddying up

and notice how even over here the first

few weeks of January which would

Encompass the Chinese Lunar New Year

there's no pickup the opening has been

very gradual in China at least in terms

of good spending so what are the Chinese

spending on well I actually read uh the

the the chat I try to read Chinese news

coverage because well first of all it's

like really biased uh and they try to

really talk up what's going on in China

so you have to be really careful in

general you want to be skeptical of all

the mainstream media you're listening to

but when I read news in China you know

what they're talking about what the

Chinese are spending money on travel

baby travel and entertainment and

Leisure they're traveling like freaking

nuts and that's great because it's not

murkying up Supply chains at all which

again and we've talked about this I just

want to reiterate it the expiration the

expectation according to no more

research is that Supply chains are going

to lead or or the the reopening of China

I should say is going to lead to a 700

billion dollar set of spending that

compares to about the 2.1 trillion

dollars of excess savings we had in the

United States for our reopening but keep

in mind China has like four to five

times the population that we have so

when you actually calculate this out on

a per capita basis the United people in

the United States had an extra six

thousand dollars of money to spend

thanks in the reopening the Chinese on

average have an extra 500 to spend and

so far what are they spending it on

travel and we're not actually seeing

Supply chains back up in fact listen to

this y'all remember all those complain

complaints about ships being stuck off

the coast of the Port of Los Angeles and

having to wait months just to basically

disembark their crap well look at this

the number of container ships waiting to

Dock and unload Goods along the entire

West Coast has remained at zero for the

10th consecutive week and the East Coast

backlog has declined from 17 to 22.

let's see that's exhibit six I want to

see exhibit six exhibit 6 is here wow

look at that complete collapse of

backlogs of ships even though there's

still a backlog of 17 ships on the East

Coast that is down from a backlog of

over 100 ships last summer and it is

following a very similar path albeit a

little bit delayed from the West Coast

uh uh declines is following a very

similar plummet of the backlog just

disappearing this is a fantastic piece

by the way by Goldman Sachs shout out to

y'all at Goldman Sachs uh encouragingly

chassis dwell times fell 23 these are

like the things that hold uh containers

for semi trucks uh wait times or dwell

times fell 23 week on week on average

you have a loosening of of uh congestion

at ports you also have ocean container

shipping rates down 90 in the past year

January's bottleneck scale is down 75

percent

you've got uh labor and Equipment

availability improving look at this

labor folks labor availability is

improving what have I been saying no

wage price spiral Starbucks Chipotle

finding it easier to retain workers

finding it easier to uh uh not only

retain workers but find new workers this

stands in the face of the argument that

we are running into a massive wage price

spiral it stands in the face of that now

don't worry don't get me wrong this was

a problem

back in uh in in uh at the beginning of

2022 the wage price spiral was a severe

concern uh and that is essentially that

wages were rising at a level higher than

the rate of inflation and the belief was

that that could continue uh and that's

scary we don't want that to happen uh so

but thankfully so far it does not seem

like uh we are seeing that issue uh at

least not uh here on the Goldman Sachs

piece so that's great uh and uh it's

also not what we're seeing in earnings

calls let's keep going here on this for

a moment see if there's anything else

that's a really fantastic we've got uh

BNSF Intermodal traffic down 15 this

week minus 17 year-over-year for last

week note that initial January

Intermodal traffic has decelerated

versus December levels we've got uh rail

Intermodal traffic down down down down

down relative to last year we have

what do you hear this is chassis dwell

times they basically chart all the the

stuff that they summarized at the

beginning so they give us all the

various different uh charts showing

container weighted average well-time

plummeting for San Pedro Bay rail

container wait time plummeting rail

container wait time down at about five

days uh which uh which is basically in

line with the lows that we've seen over

the last couple years Big Three West

Coast Port inbound loaded containers

down 20 year over year we're in the

negative area door-to-door shipping days

plummeting down to 52. still not at the

lows of about 40 that we saw in 2019 but

uh trending towards that direction here

manufacturing Supply delivery times

plummeting basically the supply chains

are strengthening while at the same time

Supply chains are strengthening we're

not seeing companies complain about

actually things getting worse and we're

not actually seeing this idea that oh

there's going to be so much Goods demand

again that we're going to murk up Supply

chains again if anything most companies

are telling us that we're probably not

going to end up getting this big boom of

spending again uh until probably the

second half of the year in other words

you might have another complete six

months to go before we end up getting uh

you know Supply chains that maybe would

even face the risk of higher demand and

another six months of these Supply

chains repairing hey you know what

that's not bad that that that is good

especially since we're seeing this

incredible plummet already of uh of uh

supply chain tightness and this is very

good but in addition to that you're also

seeing slowing Warehouse construction as

well as an inventory pickup at retailers

now this I thought was very interesting

you have a Walmart inventory uh level

levels up 12.5 year over year in the

third quarter in 2022 on average

inventory levels were up 25 uh and so

you still even going into the fourth

quarter see companies that have more

inventory than they've previously had

before and what's this leading to it's

leading to lower orders it's the same

thing the chip manufacturers are telling

us they're telling us look we're not

actually seeing this inventory really

get drawn down and leading to new orders

just yet even Energizer batteries was

telling us look we're not getting as

many orders as we used to because we

think companies like Target and Walmart

are basically just going through their

inventory more so they're not reordering

batteries from us it's the same thing

that you're seeing warned at companies

like AMD or IBM or or what you're seeing

at even a company like Tyson meets I

mean I just went through batteries chips

and meats look well let's look at these

a few these just so you could see what

I'm talking about but we go to Tyson

meat for example what does Tyson tell us

from their earnings call yesterday well

Tyson tells us that meat packing

Executives thought that chicken would

need to fill an expected Gap in overall

meat supplies in other words in this

Reuters piece that sort of summarized

what was happening in earnings for uh

for for Tyson me we ended up seeing

companies think oh we're going to have

to invest a lot in our supply chains

there's going to be so much meat the

meat's going to get so large our backups

you know like the demand for meats can

be huge everybody's gonna want me it's

gonna be so much pee pee in me and uh

here what ended up happening was the CEO

says we ended up getting hit in the

mouth in q1 because all the protein on

their Market q1 is is there is basically

our calendar Q4 and so beef production

was surprisingly High leaving Tyson to

resell excess chicken at a discount and

spend money moving it so it's you've got

batteries complaining about less battery

demand you've got meat complaining about

less demand for meat and you've even got

companies like AMD investing a billion

dollars into Supply chains here's Lisa

Sue one billion dollars going into

Supply chains in 2022 and now they're

talking about having done a very good

job in supply chain risk mitigation we

don't believe we have risks to supply

chain issues because of future covet up

outbreaks and as it relates to the

Chinese recovery I think we're going to

benefit from the Chinese recovery and

essentially they go on to suggest that

hey look we don't think we're going to

have new supply chain interruptions we

invested a lot of money into better and

stronger Supply chains and we actually

are excited about the reopening of China

because we're ready to meet that demand

this goes back to my scrunchie of a

rubber band example that the companies

are saying hey we're ready we're ready

to go it's the same thing as Taiwan

semiconductors who has a substantial set

of new new equipment from asml but

they're actually not running at full

capacity they're not running at full

capacity because they don't have the

kind of demand they were hoping to get

in fact you look at even uh IBM and they

tell you the same thing IBM is telling

you exactly the same thing like we're

ready to meet the new demand but we're

not at that level yet where we have the

demand relative to the amount of Supply

that we have and that's actually a

really great thing because it says that

Supply chains are built up and ready to

support a boom in spending again and

that's fantastic because there are so

many people that are so worried that

inflation is going to keep running and

running and running and the reason it's

going to keep running and running and

running is because as soon as people

across the board start going to spend

again that's it inflation's going to go

to heck and we're all screwed uh I

personally don't believe that I'm not of

the believer that the reopening of China

is going to do much at all for inflation

and I think if anything the reopening of

China what it really does is it it leads

to what a lot of companies are calling

for uh and what a lot of companies are

calling for is a very strong second half

almost every earnings call and I don't

know if they're just punting that that

is a risk who knows maybe they're just

punting but it seems to me like every

company that I've been reading into

whether it's it's Hershey it's the chip

makers it's uh the gaming companies it's

Pinterest it's the advertisers it's

Google it's Apple doesn't matter almost

every single company I look at even

Procter and Gamble uh you name it most

companies are telling us that we expect

inventory or sales to recover in the

second half of the year and we're ready

to meet that demand that's fantastic

we're in a fantastic place in terms of

Supply chains moderating right before

the hope that in the second half of the

Year things are going to get better and

that's at least how I'm investing I'm

investing in the belief that we're not

going to have this massive crazy second

wave of inflation now you don't have to

agree with me that's just what I'm doing

but here's just another example I mean

people just to show you how nervous

people are there was this belief that

Russian aluminum was going to get banned

uh and and that nobody was going to be

able to buy Russian aluminum what ended

up actually happening is the United

States government came out and put a 200

percent tariff on Russian aluminum which

basically means if you sell aluminum for

100 bucks the United States is going to

tax you 200 so now all of a sudden that

aluminum costs you 300 right instead of

a hundred dollars for per whatever unit

of aluminum you're buying

so initially people like oh my gosh this

is going to lead aluminum prices to

Skyrocket well guess what actually

happened aluminum prices fell why did

aluminum prices fall because Traders

thought aluminum was just going to get

outright banned from Russia so as usual

markets are looking at things from this

worst case scenario point of view and

they're not really looking at the

reality uh keep in mind Russia is the

second largest aluminum aluminum

producer China is number one uh before

the Russia Ukraine conflict Russia

represented about 10 percent of United

States aluminum Imports now Russia is

doing about three percent of U.S

aluminum Imports so you're still seeing

them the EU banned Russian oil to cut

its Reliance on on Russia now of course

they're coming back with sort of price

caps right uh uh and Russia is obviously

there's a big Arbitrage opportunity for

countries like China and India and all

that sort of stuff but the point is

across the board when we look at Supply

chains and the disruptions that are fair

third relative to what's actually

happening it's just not that bad so

pretty incredible in my opinion so let's

see here Steve suggests here the second

wave of inflation will happen it may not

happen for a year or two but it's coming

I mean what you're doing if you're

suggesting that the second wave of

inflation is definitely going to happen

is you're really suggesting that the

great moderation that the pattern of the

last 40 years is broken and essentially

we we can't rely on the deflation uh

that we saw over the last 40 years

because that's it we've we've let the

genie of inflation out of the bottle and

it's going to come back uh and and Steve

you're not wrong to say that yes the EV

markets are going to create supply chain

disruptions you're not wrong about that

but Steve we should take this over to

the course member live stream which is

where we are heading right now