AMC-Dashboard

Inflation Sooner Than We Think???

From a Raymond James report:

I am a large volume importer of industrial hardware, mostly out of Asia. I just received my April

ocean freight rate update. Container cost up 5% from March and up 21% from April 2009. For

my products, the YOY increase represents a 3% increase to cost of goods. Cost of steel as we know is

going up significantly and these price increases for us—contrary to what the popular spin may be—

are effective immediately. Obviously, as we are replacing fast-turning inventory, we are

passing on these increases immediately…

Now, business is still terribly slow but inventories have been depleted to the point that shortages are

occurring. These shortages are exasperated by the fact that no one is buying any significant volume of

replacement inventory. Our statistics would show that our purchases in March (for delivery this

summer) are up about 400% from any given month last year BUT are still only about 30% of our

peak going back before all hell broke loose. Can you imagine how this data can be spun by focusing

on the former and conveniently ignoring the latter? We feel that we have hit bottom and have

reasonable expectations to survive this debacle simply because we have downsized to about 20-25%

the company we once were. Our domestic competitors and vendors overseas basically report the

same… (The) bottom line is this: no one is (all that) busy but prices are literally

skyrocketing. Smells like stagflation to me. Anyone who tells me that there is no inflation on the

horizon is delusional and in for one hell of a shock.

Banks are lending again?

Andy Lees, UBS:

The Fed balance sheet expanded 1.3% w/w to a new all time high. US commercial bank cash liquidity fell heavily to 9.85%from 11.1%. Actual cash levels plunged by USD126.3bn, but the reason was the money was clearly piled into assets which jumped in value by USD233.3bn. Overall bank assets are now at their highest since July 2009 and just 3.75% off their all time high, presumably indicating sufficient confidence that the banks are willing to blow the cobwebs off their wallets once again. This may well explain why the Fed’s balance sheet is expanding again; it is not being driven by its own monetary expansion but rather by the commercial banks actually starting to take the lead again and expand credit. Other positive data showed credit card delinquency rates falling. More consumers have cash on hand from tax rebates and put the money towards holding down debt.