Skip to main content

Wall Mart as an inflation indicator

Last week Wall Mart announced that they were cutting price on 10,000 items!  To give you a sense of what this means, the CPI is calculated on less then 6,000 items!  Also last week the FOMC released its March 16, 2010 minutes.  Not much has changed from the previous meeting, but one thing has, inflation expectations were revised downward.  Those who have been looking for inflation were disappointed AGAIN! 

But then on the face of a contraction of the M2 by $11.7 billion and the MZM by $5.2 billion the M2 is contracting at a rate of 2% per annum, while the MXM is contacting by 7.2%.  The Feds have allowed the monetary base to shrink (a first), so while rates are low, the abundance of money supply is beginning to recede.  Finally bank credit continues to shrink by $13.2 billion, or 8% per annum – another record, banks instead are playing the yield curve, borrowing short term money from the government and lending it back at a much more attractive rate.   

          Teranet - National Bank of Canada 
          National House Price Index

Ok so that’s the US, up here in Canada inflation seems to be stronger – housing for one is up rather dramatically, in fact Canada is one of two OECD countries that has not yet had a housing recession (the other being Australia).  Some are pushing the inflation diffusion index, where producers are looking to increase the price of their goods – good luck with that, with dollar parity, it will be easy for Canadian to compare prices in the U.S. 


Producers will soon discover that there is a big difference between wanting to increase prices and being able to increase prices!  Most Canadian live within 160 km of the U.S. border and the penetration of the internet is very high.  Already vehicle dealers are getting nervous (cars in Canada are 20-30% more expensive than south of the border). 

Finally this morning from David Rosenberg of Gluskin Sheff: 

THE PROFIT PICTURE — THE REAL STORY

Total U.S. corporate profits rose 30.6% YoY in Q4, a huge swing from the -25.1% trend a year ago. Almost the entire story is in the financial sector where profits have soared 240%, which is unprecedented. With the banks shrinking their asset base, the surge in earnings has been due to the ability to ‘extend and pretend’ post the FASB 157 changes a year ago and the ability to play a super steep yield curve. Financial sector profits have accounted for 85% of the overall increase in corporate earnings. Total non-financial earnings are up the grand total of 5.2% on a YoY basis, though this is still much better than the -17.9% pace a year ago.

ON GREECE:

I really enjoyed the $60 billion "bailout" for the EU & IMF for Greece, once again it's less than meets the eye!  Any drawing under the new facilities will require unanimous approval of all members (Angela still has wiggle room after all).   As was discussed this morning on several blogs that money helps Greece's liquidity but does nothing to solve the problem of solvency!

Comments

Popular posts from this blog

Ok so I lied...a little (revised)

When we began looking at farming in 2013/14 as something we both wanted to do as a "second career" we invested time and money to understand what sector of farming was profitable.  A few things emerged, First, high-quality, source-proven, organic farm products consistently have much higher profit margins.  Secondly, transformation accounted for nearly 80% of total profits, and production and distribution accounted for 20% of profits: Farmers and retailers have low profit margins and the middle bits make all the money. A profitable farm operation needs to be involved in the transformation of its produce.  The low-hanging fruits: cheese and butter.  Milk, generates a profit margin of 5% to 8%, depending on milk quality.  Transformed into cheese and butter, and the profit margin rises to 40% (Taking into account all costs).  Second:  20% of a steer carcass is ground beef quality.  The price is low, because (a) a high percentage of the carcass, and (b) ground beef requires process

21st century milk parlour

When we first looked at building our farm in 2018, we made a few money-saving decisions, the most important is that we purchased our milk herd from a retiring farmer and we also purchased his milking parlour equipment.  It was the right decision at the time.  The equipment dates from around 2004/05 and was perfectly serviceable, our installers replaced some tubing but otherwise, the milking parlour was in good shape.  It is a mature technology. Now, we are building a brand new milk parlour because our milking cows are moving from the old farm to the new farm.  So we are looking at brand new equipment this time because, after 20 years of daily service, the old cattle parlour's systems need to be replaced.  Fear not it will not be destroyed instead good chunks will end up on Facebook's marketplace and be sold to other farmers for spare parts or expansion of their current systems. All our cattle are chipped, nothing unusual there, we have sensors throughout the farm, and our milki

So we sold surplus electricity one time last summer...(Update)

I guess that we will be buying an additional tank for our methane after all.   Over the past few months, we've had several electricity utilities/distributors which operate in our region come to the farm to "inspect our power plant facilities, to ensure they conform to their requirements".  This is entirely my fault.  Last summer we were accumulating too much methane for our tankage capacity, and so instead of selling the excess gas, that would have cost us some money, we (and I mean me) decided to produce excess electricity and sell it to the grid.  Because of all the rules and regulations, we had to specify our overall capacity and timing for the sale of electricity (our capacity is almost 200 Kw) which is a lot but more importantly, it's available 24/7, because it's gas powered.  It should be noted that the two generators are large because we burn methane and smaller generators are difficult to adapt to burn unconventional gas, plus they are advanced and can &qu