Things are getting out of hand: look at what just hit the highest level since 1975!
More Inflation
June 1 (King World News) – Peter Boockvar: Crude oil is the story this morning as it breaks out to the highest level since October 2018. In this whole transitory or not debate on inflation I’ll emphatically say that what is permanent is a lower base of oil and gas investment in the coming years/decades. If you are a CEO of an oil and gas company and every single day you are hearing from environmentalists, shareholders that own no more than .02% of your stock, Danish courts, EV producers, etc… there is no way you are notably lifting your oil and gas investments. You will run your business for cash and do your best to shift to wind, solar, biofuels, hydrogen, carbon capture, etc… So, renewables are all well and good for our future but the transition will be expensive. I remain bullish on oil and gas stocks, something I’ve been since last year pre Pfizer vaccine news.
Crude Oil Price Highest Since 2018
Inflation Pressures
Not that we needed another reminder of the current price pressures being experienced but hat tip to Jeff Cox and CNBC for these quotes last week from Costco’s earnings call:
“Inflationary factors abound. These include higher labor costs, higher freight costs, higher transportation demand, along with the container shortage and port delays…increased demand in various product categories some shortages, various shortages of everything from chips to oils and chemical supplies by facilities hit by the Gulf freeze and storms and, in some cases, higher commodity prices.”
I’ll say this about the explosion higher in the use of the Fed’s reverse repo facility and how the bizarre a path the Fed’s QE has taken. We know the Fed is buying $120b per month of Treasuries and MBS and that comes in their front door in return for cash to the banks that end up back at the Fed in reserves. Out the back door are these same exact securities right back to the banks in return for cash via their RRP facility. We hear again from a bunch of Fed members this week…
Billionaire Eric Sprott bought a 20% stake in a mining company
to find out which one click here or on the image below
Supply Chain Problems And Inflation
Boockvar had this to say about pressures in the supply chain and inflationary pressures: Backlogs, not surprisingly at this point, rose again and now sits at 70.6, the highest on record dating back to 1993.
Backlogs Highest In History Dating Back To 1993!
The Problem
The problem of course right now is delivering on these backlog orders. Inventories at the manufacturing level rose 4.3 pts to 50.8 after losing the same amount last month but inventories at customers remains anemic at 28, a new low.
Available Product Inventories Crater To All-Time Low!
Highest Since 1975!
Reflecting the long lead times, Supplier Deliveries rose 3.8 pts to 78.8, the highest on record dating back to 1975.
Prices paid did recede by 1.6 pts but at 88, it can’t go much higher as 100 is the upper limit.
Prices Paid At 88 Out Of 100!
Here is what ISM said on labor:
“Worker absenteeism, short term shutdowns due to part shortages, and difficulties in filling open positions continue to be issues that limit manufacturing growth potential.”
ISM summed up the month by saying:
“The manufacturing economy continued expansion in May. Business Survey Committee panelists reported that their companies and suppliers continue to struggle to meet increasing levels of demand. Record long lead times, wide scale shortages of critical basic materials, rising commodities prices and difficulties in transporting products are continuing to affect all segments of the manufacturing economy.”
The Bottom Line
In addition to what I included above with respect to the work force. Of the 18 industries surveyed, 16 saw growth. My bottom line, there are stagflationary situations reflected all over this report.
Also just released: Multi-Billionaire Hugo Salinas Price – Gold Is Back! As BIS Caves Under Pressure From Putin And China CLICK HERE.
Also just released: Greyerz Just Warned People To Get Out Of The Financial System Now CLICK HERE.
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