Slowly Returning to Normal, or Some Similarities
With hindsight available as our measuring stick, it appears that sometime between March and April earlier this year things across the country really began to return to some type of normal.
As noted in our blog at street-cents.com and in the prior newsletter TSA throughput a measurement of airport travel looks to possibly eclipse 2019 highs later this year.
Restaurants began opening, some earlier and some much later, depending on the geographic location with patrons welcoming their reopening.
Uncertainty remains on the remote versus office environment. Most think the new normal will not be a complete office environment, but some blend of remote since it is readily acceptable and well tested.
Inflation, Here to Stay or Transitory?
As discussed in detail in our latest Q 3 2021 Newsletter, the most prevalent debate at this moment among market participants is the topic of inflation and it’s staying power, or just transitioning through. The importance of this subject is directly related to the FOMC, chaired by Jerome Powell and the timing of his reduced stimulus. All eyes are on the inflation debate and the timing of the decrease in stimulus and will be sensitive to timing changes.
Not surprisingly economic numbers roared as they met favorable comparisons from last year, but in very recent days, have given the appearance of a return to normalcy already, decreasing concerns of longer-term inflation.
Capital Markets being forward looking are now trying to see what is around the next corner. As earnings continue to return to normal, valuations are finally beginning to be decreased from extremely stretched proportions and as long as earnings outpace returns a continuation of this should occur.
Time is really our friend, and once again the good news is, this will all play out in quarters rather than years. Things can certainly change quickly, and it is not a time to swing for the fences, which we never do!
Have a terrific summer and talk to you at the beginning of fall.
John A. Kvale CFA, CFP
Lumber Prices Show How Supply Can Catch Up to Demand – Supply Clearing High Prices
There’s an old saying in many commodity complexes … “What will drive high prices down? High Prices … What will drive low prices up? Low prices” – the basic gist of this is that when prices get too high, demand slows and when prices are low demand picks up.
We first heard this saying in the oil patch but it fits across almost any commodity or other variable pricing asset.
Spot Futures Lumber Prices – Now thats a Clearing Price
For those of you that have not heard there are supply shortages in all parts of the economy. On a funny personal note …recently I had my golf clubs re-gripped and there were only a few options to have a complete set of the same grip ….all the other were back ordered to mid to late 2022. Part of the increased prices of used automobiles is a reflection of new automobiles being unable to be complete by shortage of semis.
We thought you would find this interesting and a great example of higher prices slowing demand. At one point in the most recent quarter, several publicly traded companies were completely shutting down certain aspects of their operations due to extreme high prices.
Trailing Three Year Spot Prices
Trailing Three Year Spot with Percentage Change – Up 530% Followed By Down 70%
Certainly tons of factors going into this move. BUT, if you are wondering how higher prices can in your commodity of choice (Bread, Wheat, Lumber, Semi’s….) look like when it eventually clears…. Here is a playbook!
Have a Great “Commodity Price Clearing” Day!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
jkfinancialinc
street-cents
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Posted in Economy, Investing/Financial Planning, Market Comments
Tagged Lumber, Supply Chain, Lumber Prices, Spot Lumber, Clearing Prices