Strategic Petroleum Reserve and Politics?

I have read a couple of times, where our leaders have asked OPEC and others to turn on the oil spigot to overcome some shortages of crude. I have even read where the president has "released" some crude out of the Strategic Petroleum Reserve (SPR).

On the other hand, "we are trying to talk" about reducing fossil fuel consumption, particularly now that COP26 is underway. I say trying to talk, because I doubt anything meaningful will be adopted, except for promises yet to be broken... again.

I am not the brightest bulb in the pack, but it would seem to me that a commitment to reduce reliance on fossil fuels would also consider a plan to reduce the SPR over time. While this might seem an odd thing to do, it would reduce the current inflationary effects of crude prices as well as send a signal that we are moving away from this fossil fuel. 

Naturally an argument could be made that this method would cheapen the market price of fossil fuels, which would prolong their consumption, while reducing the current state of semi-independence for imported fossil fuels. However, I would consider a gradual reduction to be in order. Something akin to a planned reduction of 170,000 barrels per day for 10 years.

Of course, there is the horse and buggy phenomenon.  I am referring to the period where cars started to become mass produced. The horse and buggy industry saw the writing on the wall, ceased expansion and began reduction of inventory, etc., which became very profitable for a brief period, until the industry virtually faded away. 

We are seeing the beginning states of this in the U.S. oil production companies, in my opinion. It is quite a tightrope to walk between keeping these producers operating at near net import/export levels or accelerating the reduction in U.S. Oil. 

The origins of the SPR are rooted in the 1970s and an oil embargo. Here is a brief overview, entitled... History of the Strategic Petroleum Reserve. Here is some SPR Quick Facts. Then there is the IEA, with The global oil market remains vulnerable to a wide range of risk factors. Which states in part...

In accordance with the Agreement on an International Energy Programme (I.E.P.), each IEA country has an obligation to hold emergency oil stocks equivalent to at least 90 days of net oil imports. 

Which brings me to current situation... (the upper cut off is the 90 day line, which was broken through at various times in the early 90s and has been above that threshold since 2-2012)

Currently, the total volume of SPR is 614.2 Millions Barrels. Here is the 4 week net average of imports/exports from the EIA. Whatever measure... the 90 day rule applies would indicate a net import of 6.8M barrels per day... a figure not seen that high in 8 years. Currently it is running in the 1M barrels per day and below range. 

Clearly, the internal production of the U.S. oil industry could begin to fall to the wayside, if crude prices were to fall, and it is understood that financing of the industry could begin to subside, but at some point near the end it would collapse. 

Hence the politics angle. Any suggestion of sizable reduction at this point would be a nightmare for certain D.C. politicians of both stripes. There are those beholden to the oil industry, which would receive a dramatic drop in prices and those beholden to the green energy sector, for allowing a drop in energy prices to prolong the use of fossil fuels. 

That is why I would suggest that slow drawdown over a long period. No one really wins.

But that is just my silly idea, and I realize the notion of releasing a fossil fuel during a global climate meeting is preposterous. Not addressing the SPR is kicking the oil can down the road, imo. Not unlike what the global community is doing with climate change.

Positive Spins?

Yesterday gave us the initial 3rd qtr. GDP reading from the BEA, and while it was far below original expectations, it could be explained away as an anomaly, due to the obvious drop in goods, maybe from reduced car sales, supply chain disruptions, etc. Meaning not all is lost for the 4th qtr.

Today gives us the Bureau and Labor Statistics release of Employment Cost Index Summary. It was good news for wages since 3 months ago, with wages up 1.5%, compared to about 1% in inflation (BLS CPI). Year over year is still lagging as wages are 4.2% over last year, while inflation is 5.4% (BLS CPI) over the same period. 

It could be stated with reasonable certainty that wages are on the uptick and outpacing inflation. They will need to keep a healthy rise, as forecast for October inflation results is in the 5.7%~5.8% range. Not sure if rising wages can keep up with that pace, as the producers are pushing the additional cost downstream. That was reflected in last month's PPI report from the BLS.

Then there is the matter of the BEA's Personal Income and Outlays, September 2021. The troubling number would be the inflation adjusted disposable personal income drop of -1.6% in one month (current dollars). This is explained away as a decrease in government social benefits. This as personal income also dropped -1.0% in one month, also in current dollars. 

Personal consumption expenditures slowed from the August increase of 0.6% (chained dollars) to September's 0.3% (chained dollars).

It is that inflation adjusted -1.6% drop in disposable income that should be concerning going forward. How does that translate to continued goods and services improvement? It should be noted that a large part of the GDP improvement has been borne by the consumer, with their pct. of total GDP rising during the past 6 quarters. 

I guess time will tell, but attempts to put a positive spin on all of this will just have to wait. 

Trying To Push That Proverbial Rope.

We are familiar or should be... with the causes of current supply chain problems.

Let's be clear... the bottleneck is EMPTY containers taking up room on chassis and spilling over into container warehouses, docks, etc. This is clogging up the system and creating situations where multiple movements of both empty and full containers beyond the normal efficient "just-in-time" movement cannot take place.

To keep the goods moving, more containers are being built and a premium is being placed on empty containers. Just as the goods traffic is snarled, so are the return of empty containers. This is why the major rails shut down for one week in July and have since started metering to their midwestern hubs. For every chassis laden with goods inbound to that midwestern hub, the port must take one chassis laden with either an empty container or outbound goods. Here's a sampling from Freightwaves.

Until such time as the hubs in middle America are "un" choked, the ports will remain congested. And yes, there are driver shortages throughout the system. Truckinginfo.

It was nice optics to have some politico state the ports were now going to function 24/7 and then get 24/7 news coverage of the statement, but saying that and doing that are very different things. Where is the in-depth coverage and follow-up?

COP26

A meeting in Glasgow is to begin soon, to discuss ways to reduce carbon emissions and achieve some targets. A noble cause and more power to them BUT... apparently China and India can't even supply the expected paperwork AND at least one of their leaders is simply skipping the conference.

The current goals are cutting emissions in half by 2030 and net zero by 2050. Considering China and India are nearly one half of current emissions... it would require the rest of the world to be net zero right now. As both China and India are having difficulty finding enough coal to currently generate electricity and driving prices of coal upwards... if they were the only emitters, that 2030 goal is toast, imo. 

This is no reason to give up on emissions reduction, but realism needs to be on the table. It is certainly admirable to hope for the best but... we need to prepare for the worst as well. 

It should be noted Jaguar Land Rover is furnishing 240 electric vehicles to transport these folks around. However, there is likely not enough recharging capacity available, so Diesel generators will be used to re-charge. But this is not going to be that dirty oil, but HVO (hydrogenated vegetable oil). The type in fryers. Presumably this makes everything alright... even these vegetable oils were grown and harvested with old fashioned diesel vehicles. Or maybe all farm vehicles in the U.K. are now electric. /s

Oh, and before I forget, this from Deutsche Welle - UN says national climate targets 'fall far short'. So the even promises are not making the grade and we should recognize that promises often fall short of expectations.  

Note: Article written on 10-16-2021 and links may no longer be viable OR behind a paywall.

Light At The End Of The Tunnel?

 

Courtesy of U.S.C.G.

We are awash in shipping containers, with railyards, rail lines, trucking companies, ports, harbors, etc. 

How did we get here and when will it end?

Covid did create a disruption and one the just-in-time inventory management system has struggled to adjust. It has taken about 35 years to develop what was a mostly very efficient, mostly smooth movement of goods. As this transition took place, the need for massive warehouses was reduced with the reduction of manpower required to keep those warehouses operating. 

As efficiency improved, the requirement for trucking, rails, etc. was also reduced... with the manpower required to maintain and operate. 

That was all and good, until Covid, which not only created shutdowns, uneven distribution, but also a massive shift in consumer spending habits. We had China nearly shutdown, which impacted industries and retailers in the U.S., which may or may not have taken advantage of impending goods shortages, to shutter operations for the good of their employees. This put a lot of stuff in the wrong place.

Then we had the so-called legitimate shutdowns, which were region by region and even county by county. A very uneven shutdown, to say the least. Then there was a very uneven re-opening, with some rushing to re-start, while others resisted these efforts. During all of this, there was a gigantic shift in consumer habits, which accelerated during all the stimulus period.

One only needs to look at the BEA's GDP numbers associated with good and services, and see a dramatic shift to goods, both durable and non-durable, with a sizable reduction in services. Goods have increased about 18% over 1st qtr. 2020, with about half being in 3rd qtr. 2020, holding steady in 4th, then accelerating in the 1st and 2nd quarters of 2021.

In addition, the importation of goods followed a similar pattern, with about a 12% increase over that period. Such surges are difficult to prepare for, in such a short period of time. Essentially... Just-in-time has been erased for the foreseeable future.

Clearly, the system while not broken... is in disarray. There are glimmers of hope going forward. Here are a few articles that seem to be clearing the fog of misinformation, imo.

• Containers Piling Up At U.S. Rail Yards Add to Port Strains
• More truckers won't solve US port congestion, supply chain issues: Harbor Trucking Association CEO
• Rail freight is at the center of the supply chain crisis
• UP metering domestic intermodal out of Chicago, Memphis

Even recognition of TOO many containers (Lot of empties) as a problem and potential action by the State of California... by executive order of the Governor.

Everyone is trying to avoid being the Grinch that stole Christmas. Not to mention it is important to shift blame to the average person for leaving the workforce at this time and proclaim "worker" shortage. 

From the St. Louis FED... THE COVID RETIREMENT BOOM. 

So we made the system more efficient by reducing the workforce and now proclaim we need more workers. 

Good Luck!

Not So Random Thoughts

Capitalism and Corporatism

We think our country is a capitalist country, but I suspect it has evolved into corporatism. As companies grew in size and captured more share market, they squeezed out competition required in a capitalist society. Obviously true capitalism was running rampant and needed to be held in check from their nefarious business dealings, oppression of workers and harm to consumers. 

The evolution of government controls led to smaller companies being overtaken by larger companies. 

As these industrial giants took over such vast swaths of their consumer spending habits, they found it beneficial to lobby for their own industry with the concept of "what's good for General Motors is good for America". 

You probably remember hearing that saying, but there is a major problem... that is not exactly what Charles Wilson said in full context. The context being that he once believed it, but no longer. 

In any case, we have the healthcare industry, the military industrial complex, the education industry, the law enforcement industry, the agricultural industry, the retail industry, automotive industry, financial industry, legal industry and every darn thing out there has an industry, complete with lobbyists and PR people speaking on its behalf and enticing their respective workforces to answer the call of duty. 

Any time there is an instance of misbehavior, cheating, lying, etc. they are all over it with the PR spin, which includes suggestive comments about the overall viability of the industry being threatened and the impact on those critical wage earners and how truly awful it would be if these poor hard working Americans are affected. How dare you point out any malfeasance!  Every industry is quick to point out their importance and necessity... true or false.

Journalism as an industry...

Ran across this example of corporatism... When the local newspaper leaves town: the effects of local newspaper closures on corporate misconduct (PDF)

This was a hoot. I don't care where that newspaper is located, its source of revenue is through subscriptions or advertising. The newspaper that does not adhere to the local citizens and advertiser's way of thinking... simply cease to exist. Even if the national news has a crushing expose on a company with a local footprint, that local news outlet will print large swaths of the paper to the company rebuttal, with assurances the company is benevolent and considerate to local needs. Casting dispersions on a local person's place of employ is not conducive to subscriptions and gaining advertisements. 

What has happened is these local sources have been swallowed up by larger companies and streamlined to internet platforms. BTW, please do not think journalists are unbiased. How else can you explain graduates of prestigious schools jumping from so called "left wing" news organizations to so called "right wing" news organizations. Just like any industry... you must conform to the ideology of the masters or risk losing that position. 

Once the American people had companies competing for their attention, and companies had to meet certain expectations or face the wrath of the consumers. There is no industry truly policing itself and competition is nearly gone. Just as Law Enforcement does an inadequate job of policing itself, so does every other industry... including journalism. 

Journalism might be pure in the world of academia and for a short period after graduation. Money tends to erode ethics. 

All those we are supposed to rely upon are... MISSING IN ACTION.

Note: Article written on 10-15-2021 and links may no longer be viable OR behind a paywall.

REAL GDP, ENERGY, INFLATION

You won't see it on the weather, but it appears a political hurricane is about to settle over the country and the eye of the storm will be D.C., where all will appear to be calm, bright and sunny. The spin outside the beltway will reach hurricane proportions.

There appears to be a shortage of black ink, but an amazing supply of rose tinted glasses and red ink.

The 3rd quarter is in the history books, but the data for that quarter is still rolling in, and with one week to go... the Real GDP is falling off a cliff. It started the quarter just north of 6.5% annualized and is now in the 0.5%~3.5% annualized range, with a week worth of data still to parse. Let's hope that optimistic 3.5% holds or even adjusts upward, although it is doubtful. 

I say doubtful as Real GDP is minus inflation and the inflation forecast for October is edging upward and now in the 5.7% to 5.8% range. If everyone gets their holiday shopping done early... then December will a real drag. 

As the forecasts stands now, the Real GDP is not really growing so much... we are simply paying a lot more, for a bit more goods. 

We can expect the Republican party to make hay out of next Thursday's GDP report and the Democrats to explain it away. Not real certain how the average American will react to a GDP report, as it may only reaffirm their waning consumer confidence. I would suspect the administration will continue to sell all these ills as signs of a growing economy, however slowly, and the believers will drink the Kool-Aid, at a higher cost... if there is any on the shelves. 

Not doubt the highly inflationary energy portion will be highlighted and the average American does pay attention to the cost of gasoline, as well as those heating bills, which have been played up as potentially staggering.

There may be disruptions to energy supply, stocks of crude oil (tight), gasoline (very tight), distillates (tight), propane (very tight) and natural gas (normal). 

• Excess is above 5 year range.
• Above normal is upper end of 5 year range.
• Normal is middle of 5 year range.
• Below normal is toward lower end of 5 year range.
• Tight is at the bottom of 5 year range.
• Very tight is below 5 year range.

Propane is the worrying component, as it is not only below the 5 year range, but days supply is at its lowest since October 11, 2013. Propane is not only used for heating, but is used considerable in the drying process during fall harvest. 

All of the above information is from EIA.GOV. Just as this chart data is derived from the same website...

Weird Stuff Roundup!

Some strange things on the internet...

 'Testicle bath' birth control device earns Germany's Dyson Prize

That is what you call "cutting" edge technology. You have to watch the video to get the full nuts and bolts of its workings. Shame on me.

Speaking of cutting edge...

Kentucky store earns Guinness record for world's largest pocket knife

How can it be called a "pocket" knife, if it won't fit into a pocket. Well maybe this lady's pocket... "Attack of the 50 foot Woman".

Where's your sense of humor?

If you don't like it... just turn away.

AP Photo/Radivoje Pavicic

This is love or something. 

Being the Northern Hemisphere, it only rotates clockwise. Think about it!!

Random Thoughts - 10-17-2021

Courtesy of CDC

Covid

It's been nearly 2 years, depending on the actual start. Here is some stats, courtesy of Our World in Data...

• 47.5% of the world population has received at least one dose of a COVID-19 vaccine.
• 6.65 billion doses have been administered globally, and 20.44 million are now administered each day.
• Only 2.7% of people in low-income countries have received at least one dose.

In the USA, we have achieved 68.4% fully vaccinated of persons 18 and over, per the CDC. 

Burrowing down, indicates my state (Kentucky) has 69.86% of that age groups full vaccinated. 

• The seven day average infection rate (KY) of 1, 932 compared to average daily rate from beginning of 1,265. 
• The seven day average death rate is 34, compared to average daily rate since the beginning of 16.

I eagerly anticipated the point where the 7 day death rate falls below the "since beginning" rate. 

The average age of infection and deaths has fallen since pre-vaccination, when the death rate was primarily over 60, with 92% of deaths above that range, with above 80 counting over half of deaths, 70~80 was about 1/4 and 60~70 was about 1/7. The average age was approximately 78, with infection's average age at 44. 

Since the start, the average age of death is now 74 and infections at 40, with the 7-day age of death at 66 and infection at 37.

The good news if such a thing is possible... both infections and deaths are dropping rather fast. However, this is a global pandemic and until that low income vaccination rate above improves... another wave of some new variant is not out of the realm of possibilities. 

The WHO has decried wealthier countries with plentiful vaccine access are...

Hoarding

Tis true, but food hoarding is starting to crop up... and I don't mean just in my pantry. There are countries that are net exporters of food and countries that are net importers. Whether you believe in climate change is irrelevant at this specific point in time. Weather has wreaked havoc on food importing AND exporting countries. Importing regions such as large swaths of heavily populated countries in Asia and most of Africa

The extent is some countries are beginning to limit exports, due to their own needs, just as countries that import are facing reduced crops. 

While it is likely food shortages will occur in some areas, much higher prices will be likely for all. It is no different than natural gas, petroleum, coal, etc. 

While I have received my booster shot and have a full to overflowing pantry, does not mean I am immune to the potential of societal breakdown on a global scale. If it comes, it will be due to a dearth of leadership. It is what fills that void, that is the worry. 

Of course, I am probably over reacting and everything is hunky dory!

Things Looking Up... Maybe!

The Census Bureau just released the ADVANCE MONTHLY SALES FOR RETAIL AND FOOD SERVICES, SEPTEMBER 2021.

Last Month, I stated the little upswing in inflation adjusted numbers were not a trend. We have back to back rises, so maybe... just maybe a trend is starting to form.

Of course we had a 5 month trend from May 2020 until August 2020, before tapering off. Sometimes year over year spending is seasonal, so September is an improvement over last year. On the other hand, a couple of months uptick going into the winter months does not a booming economy make. In fact the indicators for 3rd qtr. GDP are trending downward... rather sharply, imo. 

Consumer spending has altered so much the past 19 months (yes, it has been that long), the predictability is a stab in the dark. Just how many cars, freezers, refrigerators, TVs, etc. can be purchased until the consumer's desires are satiated? How full do the pantries become, as well. At what point does inflation quell the consumer's appetite?  Is inflation encouraging spending... to get that desirable item, before the price goes up? How much forward purchasing is due to the "supply chain?"

According to the GDP, the consumer is spending 18% more (inflation adjusted) on goods since end of 2020. Of that 28.9% more on durable goods; 12.2% more on non durable goods; 3.4% LESS on services. All of which are outside normal expectations.

A thought exercise... AA store in normal times sold about 10 freezers per month and could replace those within two months. There is 20 in the pipeline and the store pays as they are delivered. Just in time. 

Due to covid, the hoarders started buying 20 freezers per month and due to the supply chain congestion, the delivery time is 6 months. AA store now has 120 freezers in the pipeline, with payment due on delivery. 

The consumer reverts to normal... AA store cancels orders for the next 10 months, but still has to pay for those 120 freezers as they are delivered. By the end of 6 months, the supply on hand is 60 in the warehouse, that have been paid for AND the supply chain has been resolved. Far fetched, but this is exactly GM's problem circa 2009.

This is a very hard landing scenario with the freezer manufacture laying off people for long periods, the store dropping prices... in an attempt to stay afloat with operating expenses, etc. These things make the consumer very edgy and resistant to spending what money they have on hand and/or going deeper in debt. 

The question becomes... how to avoid a hard landing? If I am smart enough to consider this... you can bet the FED is thinking of it as well. Raising interest rates to quell inflation that may very well BE transitory, could upset the apple cart. 

I think that is referred to as "caught between a rock and a hard place".

Interesting times.

Producer Price Index for September-2021

 

As you know by now, it was ugly for consumer's future prospects of inflation. Yes, a lot of this will get passed on to us. It is a sellers market, especially in food and energy. Here is the full report from the BLS.

From the horse's mouth...

The Producer Price Index for final demand increased 0.5 percent in September, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices moved up 0.7 percent in August and 1.0 percent in July. (See table A.) On an unadjusted basis, the final demand index rose 8.6 percent for the 12 months ended in September, the largest advance since 12-month data were first calculated in November 2010.

Nearly 80 percent of the September increase in the index for final demand can be traced to a 1.3- percent rise in prices for final demand goods. The index for final demand services moved up 0.2 percent. 

Prices for final demand less foods, energy, and trade services moved up 0.1 percent in September after increasing 0.3 percent in August. For the 12 months ended in September, the index for final demand less foods, energy, and trade services rose 5.9 percent.

For those thinking the FED might raise rates, the highlighted number above, seems to indicate otherwise. The FED always looks at things other than food and energy to gauge the economy. 

However, note that trade services is listed in the highlighted number. The final demand excluding food and energy rose 8.3% YOY and up 0.5% unadjusted from August or 0.6% when adjusted. 

About a third of the way down the full report is final demand goods and here is a summary...

I have highlighted a few areas that are above the monthly and annual numbers. Some areas look better on the annual, but the monthly looks terrible in my opinion, and suggestive of continued inflation going forward. Energy is almost reflected in real time as we all know the gasoline prices raise immediately, so yes gasoline and energy are "volatile".

Current forecast for core PCE is 0.22% for September and 3.7% YOY. That report is due October the 29th. I place the numbers here to track any forecast changes. 

So it appears this transitory phase could last into May of 2022. But then I had previously thought the supply chain issues would be resolved and groceries prices moderating by this PAST March. 

What do I know?

Works of Fiction

From Deutsche Welle

Ran across this in Deutsche Welle... 

The fiction debut of the former US presidential candidate with mystery author Louise Penny has again stirred a discussion on what prompts politicians to write fiction.

How can I resist? Clinton and works of fiction. Politicians and works of fiction. I can find no satire tags in the article, but how can it be anything other than satire. 

So yes, I frequently observe foreign news websites, as everyone tends to favor their own government/ideology and what we see in the U.S. is not what others see. The truth generally "lies"  somewhere in the middle.

Many of those European papers are lamenting the U.S. shift to the Pacific and the need to possibly come together and form a European Union military alliance... in place of NATO.

Apparently this is due to the U.S. not seeking European consultation over Afghanistan, but rather seeking to further U.S. interests. The E.U. seemed to think that they could tell the U.S. what to do and somehow are deeply concerned the U.S. hasn't done what they are told.

Not sure how the EU arrived at their former illusion or should it be delusion. At what point did the U.S. indicate the EU held any sway over U.S. policies?

Good, bad or whatever, the U.S. under Trump stated the U.S. was leaving Afghanistan. Biden was in agreement, although attempting to blame it all on Trump. In any case, Biden made it clear the U.S. was leaving and gave hard dates. 

Granted the final exit was terrible and poorly planned, but for the EU to attempt to blame the entirety of the mess on the U.S. is ludicrous at best. These complainers had ample time to gather forces to secure a better outcome... but didn't. 

It's because they couldn't or wouldn't. Simply easier to blame someone else and say the U.S. has failed some obligation to the EU that never existed. The EU has had its weakness exposed and does not like it. There is a lot of talk, but nothing will ever come of it, imo. 

Until then, I will consider the discussion of a EU military as a work of fiction.

Consumer Price Index and Real Earnings for sep-2021

 

The BLS has released the September figures for inflation and the many headlines include...

• CPI- U:YOY increase of 5.4%
• CPI-U: Monthly increase of 0.3%
• CPI-W: YOY increase of 5.9%
• CPI-W: Monthly increase of 0.3%

This may be slightly above expectations, but not by much. I had expected the CPI-W increase of 5.9% and the C.O.L.A. at 5.9%

How does this stack up to my on cost of living over the past 12 months...

My results indicate 0.1% increase monthly and 3.3% YOY. Of course, there will be a Medicare premium increase, so that 5.9% will become more like 5.5% increase in real terms. Not bad, after years of falling behind. 

But, a lot of cost cutting took place during that period to get to my current situation. One worrying issue in my current success, is the rate of fall in Medical, which is a large portion of my expenses. I mean it is great on the one hand, but I cannot realistically rely on that becoming a long term trend. 

It should be noted that while the BLS numbers slightly exceeded the forecasts, those same forecasts project higher numbers for next month. 0.4% on the month and 5.7% on the year. Of course, the YOY is stretching back to a period of near stability in the numbers. 

Transitory, supply chain, etc. can be explained away until about February 2022. Below is an expectation of YOY inflation numbers based on two factors. The blue bars indicate the reports of yearly inflation, IF no further inflation is seen through June, 2022. November will be higher than current, before slipping back. The orange represents the yearly inflation based on a simple 0.2% increase per month (2.43% annualized). It indicates December will see a near 6.0% report, before easing back and seeing June as the timing for below 3.0% expectations.

For those drawing Social Security and having the Medicare premium withheld, the average after that premium was $1,594.50 monthly beginning in January. The erosion of purchasing power will result in a net loss of 4.11% of purchasing power ($787.30) over the year. Considering the after premium check from Social Security will be $1,687.34 starting in January... it will require 8 consecutive months of ZERO inflation to recover purchasing power back to level of January, 2021. It would require no more than 1.6% inflation through the entire year of 2022, to maintain purchasing power of January 2021. 

As for the those still in the labor force...

Real hourly earnings are on an uptick, and since the pandemic began is up 2.9%.

However...

Real weekly earnings are up 4.14% in that time period and are on an upswing... similar to hourly rates. 

Of course real earnings, are adjusted for inflation and are earnings before taxes. Just saying... it's like a treadmill at this point, imo.

Up next will be producer prices and this can give an indication of upward pressure on pricing going forward. 

Rebound or Last Gasp!

 

The Census Bureau has released the August Advanced Monthly Retail Sales. This release does not include inflation adjustments, so I have added inflation into the following graph, as well as Stimulus Payouts.

While the headlines noted a "rebound", it should be pointed out that one months does not make a trende. 5 months do appear to be trending down on both current dollar and inflation adjusted dollars.

The downward pressure continues from the Auto sector, which is down 8.0% from June. Clothing and clothing accessories down 2.7% from June. Sporting goods, hobby, musical instrument, & book stores down 4.6%. All unadjusted for inflation.

Overall, the report was down 1.1% from June... without factoring inflation, which would push it down 1.8%.

Most of that "rebound" is in the area of non store retailers, electronic shopping and mail order houses up 0.4% from June. General Merchandise stores also contributed to the "rebound" with 2.4% unadjusted for inflation.

Excluding the auto sector, the report indicated 0.077% boost over June, unadjusted. Adjusted for inflation, this sector rose 0.008%. 

I find it difficult to shoot for joy, with this report, as it appears more of a flat line with tendency downward. A lot of questions...

Is the stimulus boost waning, is it supply chain issues, is it the inflation?

Hoarding Update: 10-10-2021

 

Hoarding is a severe psychological disorder where a person gathers an excessive number of items and stores them. The reasons someone become a hoarder include altered brain connections, genetics, stress, OCD, environmental factors and altered levels of serotonin. 

I'm going with environmental as cause for mine, and genetics for my wife. 

So it is predominantly food supplies for us. I try to keep approximately 3~6 months of non perishables on hand. Replenishing these stocks on FIFO basis, does keep me busy. Freezer ready goods are mostly in the 4~6 weeks range. 

Admittedly there are some items from summer of 2020, but they are slowly being reduced in inventory. At current rate, maybe another couple of months will see replenishment at a lower pace. Refrigerated items are mostly replaced on a weekly basis.

Kroger, Walmart and Amazon are the principle curbside visits. There may be items missing one week, but generally in stock the following... thus far. No reason to panic, although some of the food choices by this method can be boring. Restaurant delivery, drive thru, or curbside seems to alleviate some of those urges. 

Staying warm...

With food in "good" supply, what about staying warm? It's either going to be warmer than normal or colder. It's either going to be wetter than normal or drier. Then there is the time period potential for all those swings. 

Ice is the wild card and could do lengthy damage to transmission lines, etc. In an all-electric house, that could be a factor. However, not going to go nuts over generators, etc. I could say blankets would be the way to go, but sitting around the house staring at each other could lead to altered brain connections and stress. Not to mention cold food and losses in refrigeration. Might need to rethink this whole thing. 

A long term freeze out might not be in the cards, as I do live in an area where high energy industries have priority on restart, imo. 24~48 hours at the most... I hope. There could be possibility of outages from transmission lines to substations and from there to individual neighborhoods. My neighborhood and the surrounding are buried lines... but are fed by overhead lines from substations. Again, the transmission lines to heavy usage industries will reduce the outage time, even to our feeder substations, etc. Or it should.

Food...

There may be plenty of food and access to food, but what about ice storm related outages? Restaurants and grocery stores might be down as well. I do have a gas grill, so some relief in that area, although trying to grill in such temperatures could be a challenge. I'll try if necessary. Otherwise... cold canned goods, snacks, etc. 

Now I'm working up some stress. Time to chill! After all, it is over 80ºF outside. 

Saving Social Security and Changing C.O.L.A.

 

via GIPHY

I have been reading about attempts to save Social Security of which I partake. Does Social Security need saving?

The short answer is no, as social security will not come to an end in 2033/34. Think of the S.S. trust as a bank account. You put money into the bank and the bank uses it to make loans, which is how the bank can afford to pay interest into your account. That is the basic foundation of S.S. from the beginning in 1935.

The issue is... your expenses are now exceeding the amount you are putting into that bank account as well as the interest being paid to that account by the bank.

At some point in 2033/34, the amount being withdrawn cannot exceed the deposits, which results in something like 80% of withdrawals compared to previous.

The ideas being put forth, while ignoring the likelihood of congress doing anything...

A. Raise the eligibility ages. Considering the longevity of the average American is now older... probably an good idea, but not a complete resolution. 

B. Remove the cap on taxable earnings or raise it substantially. Probably the best solution across the board and can take various forms to alleviate the issue going forward. Whether deducting only from the worker and continuing cap on employers, etc.

C. Change the method for calculating increases. This runs into changing from current Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to either Consumer Price Index for All Urban Consumers (CPI-U, which is current headline used) or Chained Consumer Price Index for All Urban Consumers (C-CPI-U) or Research CPI Experimental for Americans age 62 years of age and older (R-CPI-E). 

As an elder, I can narrow down the choice fairly quickly, based on which would have benefited me. The current method of CPI-W had fairly consistently moved with CPI-U and outpaced C-CPI-U on a historical basis. It does strike me as odd that the current CPI-W year over year is outpacing those two by a large margin. 

Historically, the following is based on typical rank of inflation (from highest inflation to lowest, based on August BLS release)...

• R-CPI-E (100=1982; current 297.114 (217.8=2007, 36.42% increase since 2007)
• CPI-W (100=1982; current 268.387)(205.777=2007, 30.42% increase since 2007)
• CPI-U (100=1982; current 273.567 (210.236=2007, 30.12% increase since 2007)
• C-CPI-U (121.295=2007: current 153.715) (26.73% increase since 2007)

Based on data from August BLS release...

• CPI-W (5.8%)
• CPI-U (5.3%)
• C-CPI-U (5.1%)
• R-CPI-E (4.8%)

So obviously for the long haul, I would have preferred the R-CPI-E, based on the above, but... since December 2016 until July 2021, the changes have been this by rank... (did not update to August numbers.)

• CPI-W: 13.8%
• CPI-U: 13.1%
• R-CPI-E: 12.86%
• C-CPI-U: 11.68%

Clearly something has changed since 2016 and the near term data favors the CPI-W. 

Until something better comes along, the CPI-W remains the best option as the E in R-CPI-E stands for experimental. Not sure why so many on the left are pushing the R-CPI-E. I understand the right's fascination with C-CPI-U.

The answer to the Social Security dilemma is a combination of A and B. While it is a fun task for me to opinionize about the matter, it still falls to a future congress to actually do something.

Congress does not move on major projects unless pushed into a corner. My guess would be about 10 years from now... that corner will come into view. Truly, I do hope to be around to see that take place.

Us Old Folks and Nonsense About Today's Youth

via GIPHY

I've belonged to various websites over the years and naturally gravitated towards those websites for older folks.

These are the websites where older folks frequently grumble about the state of today's youth. Nearly every comment has some merit, but given the nature and frequency of asinine comments about subjects other than the state of today's youth... we elders may be worse off in the intellect department.

Then there is the tiny matter of the state of our union and the whole hearted denial of that "state", unless the opposition party is in power.

The unending diatribes of how the constitution is being misinterpreted... usually by the opposition party in power.

The list goes on and on, but never mind that silliness... focus on the failings of today's youth and completely ignore the stupidity we created and indulge in, on a frequent basis.

Yes, today's youth are woefully unprepared for the world and could likely fail. WE created this current world and its condition is nearly irreversible.

So when you hear some of these folks lament the youth of today, instead of agreeing... look very closely at some of the other "stuff" they believe, such as...

• Flat earth
• Hollow earth
• One of my favorites..."global warming theory is just a theory and we all know that is not much more than just an opinion... not really factual".
• Craters on the moon are really fake, as it would be impossible for an asteriod to hit the moon on the side facing us.
• etc. etc.

Some of those examples (there are lots more) might be extreme, but the susceptibility of my generation to nonsensical ideas is on par with any of the zaniness of today's youth, imo.

Shame on us!!

Graphs, Charts and Other Nonsense

 

From EIA

Seems to be a lot of Natural Gas...

talk and how it might become high priced this winter and even potential shortages in other countries. 

Current supplies are within the 5 year hi/lo and only down -5.1% from 5 year average. Not seeing a great deal of worry for the U.S. unless the global market prices overly tempt our U.S. suppliers. I doubt anyone is watching those movements and it will be too late. when it crops up. I'm sure it will be blamed on the supply chain snarls, staffing shortages, government regulations, etc. 

Data from EIA

I've read where some crude might be pulled from the SPR. Not quite sure as to why, as there are easier options to alleviate any crude shortage, such as drill baby drill. I've read where simply capping exports would be another method, but not sure that is ethical, as we import largely from Canada. However, halting the pass through of Canadian Crude via Gulf Refineries could be an option, for a short while. Of course, the refineries would howl impending disaster. It's hard to see how the supply chain can be blamed or staffing shortages, but I am not being overly creative in my thinking. 

COAL...

Much has been made about Coal prices shooting up, due to China now on a buying frenzy. Lo and behold, the U.S. is being left behind due to Supply Chain Disruptions and staffing shortages. 

The Trillion Dollar Coin...

Every time there is a crisis over the impending debt ceiling, the trillion dollar coin crops up. It may or may not be legal, but based on current spending projections... might need to consider multiple coins of that value. 

When No Doesn't Mean No!!

 

I'm griping at you Kroger. 

Every darn week, I make my curbside order and every darn week, I check the do not substitute box for all items.

Every week, I receive substitution suggestions over my smart phone asking me to log in and decide. Almost every week, I catch that message in time and reply no substitution on page after page of suggestions. 

Sometimes I do not have my phone on me or I am late to reply. I then get crap I did not ask for and had previously stated no substitutions. I get charged for this stuff that ends up in the garbage. I DO NOT LIKE VANILLA BOOST!!! I WAS BARELY ABLE TO CHOKE DOWN THE STRAWBERRY VARIETY!!!

I have complained to all, with NO results. I have searched to internet and found YouTube videos of comedians questioning whether no really means no. I have ran across companies extolling the virtues of NO DOESN'T REALLY MEAN NO... as a reliable business model.

Just a couple...

• https://www.carolroth.com/blog/when-no-doesnt-mean-no/
• https://www.inc.com/howard-tullman/no-doesnt-always-mean-know.html

I certainly can't put my experience with Kroger on the level with a rape, but it is damn aggravating as hell. 

Hence this gripe on a blog that no one will likely ever see. It's just another avenue to vent sometimes.

Rules Are For Thee, Not For Me.

 

Granted I ran across this on a political website, but it reminded me of everyday America.

For some reason we each have our favorite rules, which we expect everyone to strictly adhere to and become indignant when we see these people not observing these rules. 

On the other hand there are rules each of us consider ridiculous, typically flaunt and utilize the excuse that everyone is doing it. 

It should be noted that major crimes should not fall into this category. There is, however, many rules/laws/ordinances/statutes that are routinely ignored by all, with minimal enforcement by authorities. (Notice how only an "I" distinguishes between ordnance and ordinance.)

I would say it is possible that there are too many laws to be enforced, but many of those laws were advocated by someone's constituency. That constituency would consider that rule you think is silly, as something near sacrosanct. 

At some point, I can see where society might begin to boil over and become rather testy. 

Outages...

Glad to see Facebook, Instagram, WhatsApp, et al are back on line. I was really worried the sun would not rise tomorrow. /s

Cost of Shipping Between China and the U.S. Plunges...

Every railyard in the U.S. is clogged, every port is clogged, ships are waiting off shore of every port, in record numbers. Big companies were paying big money to charter vessels and bid up containers to bring stuff over. China's ports are even more clogged that the U.S. 

Money doesn't always buy happiness, nor does it guarantee a just in time delivery, with the afore-mentioned in play. Is somebody starting to realize that?

Can It Be True??

The world is falling apart...

Or is it simply misdirection by the Media? Think back a few years BT (Before Trump) and it seemed that chaos ruled the day. Then the chaotic Trump became the focus of the day. He has mostly left the stage.

Now every global distraction makes headlines and the right claims it is misdirection to prevent focus on Biden. There may or may not be truth to any of this... that is contingent on a political point of view. If the media is trying to distract from Biden, they are sure doing a p$$$ poor job. He is the President and the buck stops there.

Iran, Syria, Afghanistan, Iraq, North Korea, Russia, Venezuela and China existed BT. China makes the news more than it did BT. Afghanistan is being scrubbed from the news. Iraq coverage is nearly non-existent. Russia is about the same as BT, as is Venezuela, North Korea and Iran. Syria popped up today and I had forgotten about it.

About the only thing I can say is... Trump provided comic relief from the ills of the world. Somehow that doesn't seem right.

Mortgage Rates...

Seems to be going higher and might impact the housing market. This is due to the possibility of the FED reducing purchases of mortgage backed securities. If interest rates were seen to be rising, the push will be on to finance before rates go up further, imo. 

That was once considered the rule. Buy something in today's dollars and pay it off when the future dollar is cheaper... relative to inflation.

Rationing Healthcare...

Apparently, due to being overwhelmed with covid, Alaska has implemented rules where Hospitals can now ration healthcare. Insurance companies had been doing that since... oh the beginning of health insurance. That is probably not a popular statement, but you know it is true.

It isn't an election year.

I ran across this on the AP Website... AP: States and cities slow to spend federal pandemic money. 

All manner of high sounding reasons were given for the limited usage of the pandemic money. They want to be sure it is spent wisely, it would be frivolous to just throw it out there, etc. 

I'm sure it will be sorted out and spent before the run up to the next election. People would forget about it, if it were spent now. But imagine the photo opportunities for politicians seen cutting ribbons or handing out really giant checks during the election campaign. Free publicity is the best publicity, imo.

Think I am being cynical? Doesn't mean I am wrong.

It's All in the Name... Comirnaty/Pfizer!!!

 

Madness is rampant and when a politico says maddening things, then how can one reasonably expect the populace to act differently?

I can't remember exactly where I read it, but suspect I know where (I do read across the political spectrum). As I am not 100% certain, all will remain nameless. Of course, I may have hallucinated the entire thing, as the idea a U.S. Senator would be so loopy as to defy imagination... almost. 

It would seem a nameless Senator questioned whether the Pfizer Drug has really been fully approved for use in the U.S. As I understand it, the Pfizer Vaccine is now called Comirnaty. So it might be technically correct, after a fashion, that the Senator could be correct.

However, there is nothing different except the name. Imagine the U.S. deciding to change the name of a dollar bill to something like turkey gobbler bills. The turkey gobbler bills are now being printed and will say one turkey gobbler. In the interim, the dollar bills will still be treated and exchanged the same as the new turkey gobbler bills.

I had a friend that once asked to borrow 20 bucks, I gave him 20 dollars. Later he said "here is the 20 bucks I owe you". I took it and never gave it a thought. 

So really no difference... a buck is still a buck or a rose is still a rose, whatever!! I would, however, suggest that Pfizer made a sad choice in the drug name. I can't help mixing it with comoriarity which associates with the villain in Sherlock Holmes. 

Both Holmes and Moriarity were much smarter than I, but they were also fictitious characters. Perhaps the idea of all Senators being smart is also a work of fiction. Comirluminati???

The Sky is falling!

Sulphur Dioxide is making news in Europe. Apparently the volcanic eruptions spewing lava into the ocean is saturating the atmosphere. I spent the better part of an hour researching Sulphur Dioxide. I found out it makes breathing difficult and causes people that eat a lot of healthy vegetables... burp. I really need to burp more and simultaneously avoid breathing Sulphur Dioxide!!! Oh yeah, it also causes acid rain. 

That's about all I can come up with for now.

The Good Ole Days Are Back!!?

 

Image by confused_me from Pixabay

Not really, but the PCE headline of highest inflation in 30 years, conjured back to a time 30 years ago when the PCE was the lowest it had been in awhile. It's all about the point of view or context or whatever.

A rational point of view...

Justice Kavanaugh tested positive for covid and is asymptomatic. Which brings me to why I am posting here. My old haunts have become so hateful and divided, some are wishing him the most horrible things. There are clearly some things far worse than Covid, imo.

United Kingdom...

The U.K is still experiencing petrol shortages and is still saying there is plenty of Petrol and to stop hoarding and purchase normally. Never mind the public had been purchasing normally, when the shortages began and nothing has really been changed.

Glad I live in a country where the leaders are always on the lookout for their citizens' best interest. ROFLMAO, c'mon... everyone could use a good laugh.

Debt Ceiling...

I read where Janet Yellen is proposing elimination of the "debt ceiling". May as well, as it always gets raised after much haggling back and forth. I get the idea of limiting increased debt, but each party drags their feet when the other is in power, etc. All in all, the debt just keeps on rapidly rising.

Problems with gas...

I see where China has ordered their energy companies to get supplies at any cost. At some point that has to be passed on to the customers, or the government (banks, etc) is stepping in to assist at any cost. It may not be passed on to the Chinese public, but likely to exporters. I wonder who that would be? Look out!

In addition, I read the price of natural gas is akin to $190 a barrel of oil, before this mad dash by China. Those kind of numbers would put a serious crimp in the economy, imo. How can coal prices be nearly double anything over the past 10 years, if we are moving away from coal? Oh wait... the Global consumption of Coal is not slated to start dropping until around 2030. So much for those Climate Change targets.

I owe, I owe, so off to work I go...

The U.S. International Net Position was released by the Federal Reserve. It ain't good...

It has rapidly deteriorated since last quarter. This can't end well. Of course I won't end well either, it is just which doesn't end well first. WHEW!!!

Not a lot else comes to mind and it is Friday afternoon. Back in to good old days meant the weekend was nigh. It's just another day for an old retired guy. BUT I was 30 years younger, 30 years ago and that is better than where I am now. Ugh!