“In Hinduism, Shiva is a deity who represents transformation. Through destruction and restoration, Shiva reminds us that endings are beginnings, and that our world is constantly undergoing a cycle of birth, death and rebirth.” – Karen Salmansohn In properly functioning markets, prices move based on order flow within reasonable ranges, the last price being the foundational anchor for the next. Market makers stand between buyers and sellers, smoothing out price and ensuring decent execution in exchange for a small spread. Like all metastable systems, markets sometimes break, with massive order imbalances leading to previously unthinkable prices. Such black swan events happen with a decent enough regularity that we’ve become accustomed to assuming means will be regressed to and life will go on as normal.
How does this work with labor? Aren’t labor costs what led to off-shoring to begin with? Off-shore labor is not only cheaper, it allows manufacturers to bypass regulation, healthcare, retirement, a whole host of nettlesome labor related issues they can more or less forget about by off-shoring.
How'd it work back in the late 40s and 50s, before the offshore revolution?
Labor had more disposable income, and so could afford higher ticket items. People bought smaller volumes of more expensive but higher quality goods.
Both sides of the ledger must be considered...yes, aggregate goods value will increase. But presumeably so will household disposable income. Offshoring masked a lot of the low real wage growth by decreasing costs of consumer goods during that period. In order for onshore to work, the era of negative real wage growth must end.
This. Who is going to pay for this? Given 10x costs from on-shoring and 10x inflationary pressure - who is going to pay 100x the price? Or hyperinflation will make everyone equal?
During this beginning of the energy crisis, I've noticed smart people have resigned themselves and talk about 'climate change' and 'global warming' as if it's just fait accompli. All of the fraud behind that movement, information that is easy to find, seems to be impossible to mention. This is part of the reason why good, rational people fail, why "green" energy won the day in Germany, and why citizens will suffer or die if this winter is a cold one.
Sure, I plan on doing well in Uranium, Coal, Nat Gas, and oil. But someone besides Mark Mills needs to say that 'climate change' is a manufactured movement with nefarious motives, and is scientific nonsense. Hell, even Goehring and Rosensweig (sp) talk about 'climate change' like it's legit. Someone needs to speak up and say the emperor has no clothes.
The energy prices here in Europe have many roots - European green deal (we all know that when bureaucrats are involved, the situation will got worse), not enough wind for the 'green' energy sources, Russia can't supply (at the moment, I believe next few weeks the issues will be resolved) enough gas and Germany stopped most of its nuclear power plants. Maybe there's even more things I don't know, but the main issues of European energy sector are nothing more than stupid politicians. I don't believe the same thing could happen in US too. On the onshore ports - you probably missed the situation in UK where you don't have enough truck drivers. I expect exactly the same situation in all EU countries if there's major relocation from offshore to onshore.
It strikes me that this increased emphasis on "just in time" inventory systems also pervades personal finance. Why would one pay off their mortgage when they can put those $ to work in the stock market (of course, stonks only go up). Individuals and families have very little raw material (cash) to weather a supply chain (income) interruption.
To be fair, that cash depreciates at somewhere between 2 and 5 % every year. From perspective, it's not really wise to hold too large a portion of one's net worth in cash or cash equivalent assets. Which is kinda the point of a low-rate high-inflation policy: push any and all excess savings into investment. Problem is...Americans don't actually invest in productive assets. They push savings into speculative assets. Even real estate has tumbled into that category.
I hold a mortgage because, at current inflation rates, the bank pays 200 basis points to hold it. The cash I would use to liquidate the debt is better utilized by acquiring cash-flowing assets. If rather not put such a huge % of my net worth into a single piece of real estate (ie my primary residence).
Wonderful article and a great interview on Grant-Williams! Just to add a few more thoughts that come to mind:
1. We could see a serious breakdown of supply chain systems causing all manner of price rises which we never thought could happen given how connected the world is (already happening and may likely accelerate)
2. US withdrawing troops from everywhere (cue..Peter Zeihan) will exacerbate the supply chain issues with global order suffering with regional hegemons (Turkey, China, Iran, India, Germany, Russia) and the global hegemon (for now anyway) - the US - contributing to the chaos by cornering supplies as they did with Vaccines
3. This could force supply chain realignments from Just-in-time inventories to Just-in-case inventories - this will cause some manufacturing to shift to US and some to countries other than China (read India, Thailand, Mexico, Easter Europe, Latin America)
4. These changes are likely to lead to unforeseen demand for industrial complexes, base materials and all kinds of commodities including oil/gas (supply being destroyed before demand)
5. Further with money printing across the globe, all currencies are likely to be devalued with a vengeance.
6. Tech - which has helped optimize things till now for the consumer (same day/ 30 mins delivery) is likely to lose its significance. Tech will have to realign to solve real issues...like availability of food/energy where needed.
7. Green tech and IOT will lead the tech transformation in the next decade. They are likely to be enablers for industrial/supply chain/materials/mining companies while consumer tech will likely take a back seat.
Yes winter is coming, but only for those who bet on the past 20 year winners.
Love your work...but you believe there will be a staggering wave of onshoring? Meaning, for example, the US will begin building out better energy infrastructure (coal, oil) to ensure that this "crisis" will "never" happen to them? Or that the EU will begin doing the same? Perhaps I am missing something as I know you don't believe that to be true :)
The US will build out all manner of manufacturing, including in the energy sector, but not before a terrible crisis befalls us in the coming months. We are trying to look past the imminent crisis and plan for what follows.
When do you think society will have collapsed? As in when do you think most of the people in the first world will be struggling for survival?
How does this work with labor? Aren’t labor costs what led to off-shoring to begin with? Off-shore labor is not only cheaper, it allows manufacturers to bypass regulation, healthcare, retirement, a whole host of nettlesome labor related issues they can more or less forget about by off-shoring.
How'd it work back in the late 40s and 50s, before the offshore revolution?
Labor had more disposable income, and so could afford higher ticket items. People bought smaller volumes of more expensive but higher quality goods.
Both sides of the ledger must be considered...yes, aggregate goods value will increase. But presumeably so will household disposable income. Offshoring masked a lot of the low real wage growth by decreasing costs of consumer goods during that period. In order for onshore to work, the era of negative real wage growth must end.
This. Who is going to pay for this? Given 10x costs from on-shoring and 10x inflationary pressure - who is going to pay 100x the price? Or hyperinflation will make everyone equal?
During this beginning of the energy crisis, I've noticed smart people have resigned themselves and talk about 'climate change' and 'global warming' as if it's just fait accompli. All of the fraud behind that movement, information that is easy to find, seems to be impossible to mention. This is part of the reason why good, rational people fail, why "green" energy won the day in Germany, and why citizens will suffer or die if this winter is a cold one.
Sure, I plan on doing well in Uranium, Coal, Nat Gas, and oil. But someone besides Mark Mills needs to say that 'climate change' is a manufactured movement with nefarious motives, and is scientific nonsense. Hell, even Goehring and Rosensweig (sp) talk about 'climate change' like it's legit. Someone needs to speak up and say the emperor has no clothes.
The energy prices here in Europe have many roots - European green deal (we all know that when bureaucrats are involved, the situation will got worse), not enough wind for the 'green' energy sources, Russia can't supply (at the moment, I believe next few weeks the issues will be resolved) enough gas and Germany stopped most of its nuclear power plants. Maybe there's even more things I don't know, but the main issues of European energy sector are nothing more than stupid politicians. I don't believe the same thing could happen in US too. On the onshore ports - you probably missed the situation in UK where you don't have enough truck drivers. I expect exactly the same situation in all EU countries if there's major relocation from offshore to onshore.
It strikes me that this increased emphasis on "just in time" inventory systems also pervades personal finance. Why would one pay off their mortgage when they can put those $ to work in the stock market (of course, stonks only go up). Individuals and families have very little raw material (cash) to weather a supply chain (income) interruption.
To be fair, that cash depreciates at somewhere between 2 and 5 % every year. From perspective, it's not really wise to hold too large a portion of one's net worth in cash or cash equivalent assets. Which is kinda the point of a low-rate high-inflation policy: push any and all excess savings into investment. Problem is...Americans don't actually invest in productive assets. They push savings into speculative assets. Even real estate has tumbled into that category.
I hold a mortgage because, at current inflation rates, the bank pays 200 basis points to hold it. The cash I would use to liquidate the debt is better utilized by acquiring cash-flowing assets. If rather not put such a huge % of my net worth into a single piece of real estate (ie my primary residence).
Those of us who live in Florida don't necessarily see a deluge of New Yorkers as a "win" for us. ;-)
Texas is getting it from California, and it is probably just as bad or worse.
Just keep them down there and out of our NC mountains lol
Wonderful article and a great interview on Grant-Williams! Just to add a few more thoughts that come to mind:
1. We could see a serious breakdown of supply chain systems causing all manner of price rises which we never thought could happen given how connected the world is (already happening and may likely accelerate)
2. US withdrawing troops from everywhere (cue..Peter Zeihan) will exacerbate the supply chain issues with global order suffering with regional hegemons (Turkey, China, Iran, India, Germany, Russia) and the global hegemon (for now anyway) - the US - contributing to the chaos by cornering supplies as they did with Vaccines
3. This could force supply chain realignments from Just-in-time inventories to Just-in-case inventories - this will cause some manufacturing to shift to US and some to countries other than China (read India, Thailand, Mexico, Easter Europe, Latin America)
4. These changes are likely to lead to unforeseen demand for industrial complexes, base materials and all kinds of commodities including oil/gas (supply being destroyed before demand)
5. Further with money printing across the globe, all currencies are likely to be devalued with a vengeance.
6. Tech - which has helped optimize things till now for the consumer (same day/ 30 mins delivery) is likely to lose its significance. Tech will have to realign to solve real issues...like availability of food/energy where needed.
7. Green tech and IOT will lead the tech transformation in the next decade. They are likely to be enablers for industrial/supply chain/materials/mining companies while consumer tech will likely take a back seat.
Yes winter is coming, but only for those who bet on the past 20 year winners.
Great minds must think alike. I wrote about the idea of manufacturing come back to the US a couple days ago on my blog here: https://baerlocherbearing.substack.com/p/soft-data-and-hard-facts.
Why not invest in Mexico?
Love your work...but you believe there will be a staggering wave of onshoring? Meaning, for example, the US will begin building out better energy infrastructure (coal, oil) to ensure that this "crisis" will "never" happen to them? Or that the EU will begin doing the same? Perhaps I am missing something as I know you don't believe that to be true :)
The US will build out all manner of manufacturing, including in the energy sector, but not before a terrible crisis befalls us in the coming months. We are trying to look past the imminent crisis and plan for what follows.
I agree, a terrible crisis is needed first as a wake-up call to everyone - customers, politicians, and so on.
As long as companies have to compete for "cheaper cheaper cheaper", the pendulum has not swung. And cartels are not the answer.
Charles Hughes Smith. Is that you?