fire sale 4 of 4

FIRE SALE 4

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Inflation is fixing to hit us out of the blue, Obammy Health Care style.  Unemployment will continue to rise as companies are so far in debt they can’t make a profit and layoffs, cutting into meat and bone-the fat long gone, just continue regardless.  More folks work less hours so their employer can avoid health insurance, but still pay more out in fines as the earning maximum to avoid them is far too low for any of us to survive on ( I could live on less than gross $10k a year quite easily, but it isn’t much of a life at all.  Rent, food and helping out my kids are all about $200 a month each, nobodies idea of splurging, and that leaves me less than that amount for myself.  Add in taxes and you are already at $10k ).  And last but not least, purchasing power is declining.  Package size shrinks, something that you bought a pound of for decades suddenly selling in 15oz sizes.  What used to be real foods are now monstrosities ( pink slime in hamburger, wood cellulose a bonus ).  More and more is plastic rather than metal, leaving simple parts to break that ruin the whole item ( cheap plastic holding in batteries under tension, the loss of the door leaving no way to provide it ).  As cars increase in price, their plastic parts becoming more and more fragile and expensive.  Transmissions now costing what a car did twenty years ago.  And on and on.  The point is, desperation is guiding these decisions.  Again, profit margins are razor thin for everyone but central bankers.  Who can afford to mark down anything?

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So, why wouldn’t that change in the future?  Did you see any houses marked down drastically in ‘09?  Of course not.  They didn’t sell them, so as to keep prices high.  Just like with the out of date foods.  Everyone is maxed out in debt and nobody can afford to cut wages or cut prices.  Why would that change just because sales declined?  Sales have been declining.  For a long time.  Yet, no one in business is slashing prices.  Employees are getting slashed.  Quality is being slashed.  But not prices.  This is your inflation, disguised.  It isn’t higher because of the other cuts.  Now, throw in REAL inflation, after the petrodollar collapse.  Prices raise.  No sales.  Prices just go up.  The best you can hope for is prices lag a little here or there in their increase.  If nobody is living below their means, nobody can slash their income.  Prices are income.  Inflation is going to get worse, not better, and there are more than one kind of inflation.  Like resource contraction inflation.  Debt driven inflation.  You haven’t even seen pure monetary inflation in a truly horrific amount.  Not yet.  You will.

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Buy tangibles now, not later.  Later the prices just go up.  Resource contraction and the failure of capitalism due to energy decline ( the decline in oil price is short lived due to the “surprise” of global demand contraction.  It will go back up once the low prices drive out producers.  Why a fire sale in oil and no where else?  It is a perishable commodity to some extent, dictated by storage capacity.  Most other commodities have a longer shelf life or just are not created if demand declines.  Will other items behave like oil, at least on the short term?  Perhaps, but these low oil prices are a one-off event.  A consumer can’t stockpile much gas.  But houses can sit, as can auto’s or what have you.  There isn’t the immediate pressure necessitating a fire sale like with oil.  Also, oil was until recently, higher priced.  The profit margins were not razor thin so prices could fall.  Most other saleables don’t have that leeway ) are putting relentless pressure upwards on prices.  It isn’t a guarantee, but a clear direction I wouldn’t bet against.

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