DEFLATION: Comin-in strong

[errolanderson]

WHAT IS DEFLATION?

1. Falling consumer prices . . . check
2. Decreasing asset prices . . . check
3. Reduced consumer spending . . . check
4. Lower wages . . . incoming
5. Reduced business investment . . . check
6. Tightening credit conditions . . . check
7. Hoarding of cash . . . incoming
8. Central Bank rate cuts . . . incoming

China which consumes more than 50% of global commodities is now in deepening recession. This will overpower OPEC’s oil supply manipulation (IMO). Saudi’s have to be concerned as they need high oil prices to finance massive new projects.

Evergrande now appears to be China’s Lehman Bros event. Money printing gig is now out-of-fashion as impact continues to worsen economies.

Central bankers chasing the inflation rabbit while making the debt crisis far worse. A true gong-show . . . .

[bucket]

WHAT IS DEFLATION?

1. Falling consumer prices . . . check
2. Decreasing asset prices . . . check
3. Reduced consumer spending . . . check
4. Lower wages . . . incoming
5. Reduced business investment . . . check
6. Tightening credit conditions . . . check
7. Hoarding of cash . . . incoming
8. Central Bank rate cuts . . . incoming

China which consumes more than 50% of global commodities is now in deepening recession. This will overpower OPEC’s oil supply manipulation (IMO). Saudi’s have to be concerned as they need high oil prices to finance massive new projects.

Evergrande now appears to be China’s Lehman Bros event. Money printing gig is now out-of-fashion as impact continues to worsen economies.

Central bankers chasing the inflation rabbit while making the debt crisis far worse. A true gong-show . . . .

Nothing I spend money on has deflated to prices prior to the recent 3 year run up.

Vehicles, fuel, equipment , inputs , nothing has come down enough to say we are in a deflationary period on this farm.

However , the prices I receive for anything I grow has magically been reduced. I would say my income is deflationary.

[jazz]

Slower inflation is not deflation errol. Deflation would be for prices to fall below some long established trendline, like the decade before. Oil would be a marker of that, but its on its way to $100.

There is still inflation in the RE sector because people are now locked in their homes and rates so supply is dwindling. And new builders wont build until new owners can qualify. There is a big rollover of mortgages on homes and commercial RE coming in the next yr. The fed is going to have to cut rates by 5% to stop a mass default. That I agree with. But I doubt they act until there is absolute blood on the streets.

[Taiga]

I was quoted a price for a new home build on my property yesterday. Gas and electricity there, nice flat site.
Just a 3 bedroom single story house on slab. Kids will be gone in a few years.
Was quoted $1.2M-$1.7M budget range. $500-$700 per finished sqft.
In 2008 I built a house twice the size by the best in demand local builder for $600k.
No way I am spending that on a house build! Can buy more land for that and it will appreciate, the house will be a loser.
Only a handful of builders left here, most have closed their doors. I don’t see any new construction either, but maybe there is in town, I wouldn’t know.

[jazz]

Just a 3 bedroom single story house on slab. Kids will be gone in a few years.
Was quoted $1.2M-$1.7M budget range. $500-$700 per finished sqft.

Where is that at Taiga, seems very high. Maybe add $500k to the build and put the kids in the back half. They will never touch a home at those prices.

[Taiga]

In the Peace, blew me away, only 20mins from town too. I will buy a house in Maui for less. Should be safe from another fire for a while?

[TOM4CWB]

Hundreds of insurance wildfire residential rebuilds going on in BC… NWT, Northern AB…the builders can extract big time premiums for near term new construction… on top of the pressures millions of migrants Trudeau has enticed into Canada are exerting on the residential housing resources.

This is very far from deflationary…. Ukraine, Eastern Europeans… Central and South Americans… Canada is the land of sweetness and opportunities compared to the vast majority of the rest of the planet.

Covid has totally changed work mentality…. Good luck finding people who will work… like auto workers… demanding 40% increase in wages. A very raw , cold….wake up call…

Blessings and Wisdom

[shtferbrains]

Unions always think they can demand wages that appear to be out of line.

When they get out of line business moves somewhere more attractive.

That's why Detroit is mostly a wasteland.

They don't do history well either.

[ajl]

Yesterday, (Sept 29) the black Friday action in wheat prices was highly deflationary. Back in the 1980's, deflation was in the outputs, not the inputs just like now. i remember selling wheat for 9.21 a bushel in Feb 2008. That looks good right now. I am thankful that Errol's warning has kept me pulling the sell trigger this past year. I should have pulled it more as these wheat prices put the crop in the red for '23. Barley and canola will compensate unless they too go further down.

[Old Cowzilla]

Hundreds of insurance wildfire residential rebuilds going on in BC… NWT, Northern AB…the builders can extract big time premiums for near term new construction… on top of the pressures millions of migrants Trudeau has enticed into Canada are exerting on the residential housing resources.

This is very far from deflationary…. Ukraine, Eastern Europeans… Central and South Americans… Canada is the land of sweetness and opportunities compared to the vast majority of the rest of the planet.

Covid has totally changed work mentality…. Good luck finding people who will work… like auto workers… demanding 40% increase in wages. A very raw , cold….wake up call…

Blessings and Wisdom

And anybody who has paid there insurance for there home in the rest of the country lately will tell you who's paying for it.

[errolanderson]

Commodity selloff continues starting October. Global demand issues now haunting oil market. More oil tankers floating awaiting unload, up 12% in September. Demand is king in commodity markets, not supply. WTI oil now off $5.50 per barrel from last week’s blow-off top.

Gold still in free-fall, but technically quite oversold. Dec. breaking $1,845 per oz, off another $20 per oz today.

Copper also swooning on China demand concerns and deepening global recession. Industrials remain under heavy selling. China in deepening recession. Evergrande collapse final straw rippling globally impacting commodities.

Meanwhile central bankers don’t seem to have a clue what’s going on with economic reality and commodity markets. Talk of further rate hikes eventually could force bankers to race to the exit door. Equities?

Errol’s Commodity Wire on substack.com . . . .

[corey890]

Ive been a quiet observer for many years but just have to weigh in now. I dont understand Errol for the last 5 years its been doom and gloom coming and watch out the market is going to crash. Meanwhile our land prices have doubled, machinery prices have doubled, inputs have sky rocketed. but our selling prices have gone up substantially. I suppose at some point you will be right but the negativity is getting a bit much.

[sumdumguy]

At some point he’ll be right- they all are right twice just like a stuck clock.

[blackpowder]

Last year I knocked it out of the park. Went into winter with mostly empty bins and cash in the bank.
This year because of dry spring and inaction through over caution, I'm going into winter with full bins and a possible cash advance for the free interest.
All the while I'm sending money to my sister in the city who is cash strapped due to inflation. Interest rates are going up and inflation won't stop with talk of minimum wage increase to $17.80.
Whatever Errol is or isn't, we should at least listen. This scenario isn't going away for a while. As landowners we've been sheltered in our day to day but even that can come home to roost.
Meanwhile, Maclean's magazine travel section is full of $650/night destinations. The upper and lower income spreads keep widening.

[jazz]

Ive been a quiet observer for many years but just have to weigh in now. I dont understand Errol for the last 5 years its been doom and gloom coming and watch out the market is going to crash. Meanwhile our land prices have doubled, machinery prices have doubled, inputs have sky rocketed. but our selling prices have gone up substantially. I suppose at some point you will be right but the negativity is getting a bit much.

Simply put, QE sent Austrian economics for a loop. They couldnt imagine a scenario with that much money printing but here we are.

All the while I'm sending money to my sister in the city who is cash strapped due to inflation. .

Thats interesting BP. I am buying a quarter off my parents this winter and they are giving my sister her inheritance early so she can pay off her house too. The regular worker is just getting hammered. Must be depressing opening your pay check these days.