Morning Update

Random Data from the Macro Madness of MidYearCrisis2022:

–  Last week Lumber took a nose dive.  This means cost of new builds will drop, pressuring housing prices down another leg.  Lumber often acts as a signal for equities; when lumber is down so are risk assets.  This leg down on Lumber will not help CPI sticky inflation data because shelter data is based on rental prices.

–  CPI data is never straight up or down, and looking over decades of data it is clear that when inflation has had such a parabolic move UP, it often takes a break down, but that the next inflationary data should gain a tick higher.  We should not be surprised that CPI does not continue to decrease at the rate it did last month, and we might see a higher rate than 8.5%.

– Agro costs: at the moment drought is killing the nutritional value of grass, alfalfa, etc., for animal feed.  A lot of farmers are being forced to send stock to slaughter early, which means the meat density will be much lower in the coming months/year.  This also means that the number of female animals do not have sufficient nutrient and food stocks going into calving/birthing season, so many farms are reducing the number of newborns they’ll have going into the coming season.  This is not just a problem of fertilizer, but a significant water problem across the US and Europe.  At the moment, some farms are having to drive in feed for their animals from across countries in spite of the high diesel prices. 

– Chip costs: the production of chips is extremely energy intensive, and the amount of mining and energy consumption chip companies require is often down played in the conversation of “electrify everything,” and current droughts are definitely impacting mining and chip production.

Morning Update – August 22nd, 2022

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