Cool Down

Posted on Sunday, June 13th, 2021

Last week’s blog was all about my need to warm up. It is ironical that this week was all about cooling down. The main floor AC unit went. If any of you have replaced one of these you just said “ouch”. It went on Sunday and my reliable AC guy (Neese Jones) was here on Monday to come out and fix it. He said he could replace the part and it was $600. Hundreds are better than thousands so I said okay. He looked at me kind of funny and I knew. How much more am I going to put into this thing? It had lasted 24 years! The thing that tipped the scales in favor of purchasing a new AC unit was when he told me the price. It hurt – $12,500! Why did that convince me to do it?? He told me they just raised the price by 13%. What if they raise it again? Inflation is now endemic. I made a purchase thinking it would be cheaper now than it would in 6 months to a year. That is the total opposite of the environment we have been in for decades.

Once inflation cycles start, they gain momentum on their own. That is because price cycles force changes in firms’ pricing, ordering, inventory policies, and workers’ wage demands.

Inflation cycles end badly, even when everyone is aware of the problem. Investors are the biggest fans of the “doing nothing” approach of the current generation of policymakers. Yet, if past inflation cycles are a guide to the future, investors will soon become the Fed’s loudest critics. –Joseph Carson, former chief economist at Alliance Bernstein

Inflation is getting sticky and may hang around for awhile.

Unemployment benefits are drying up in the next 30 days as republican states lead the charge of going back to work. While some employers have been paying up we have a feeling that most large scale blue collar employers have tried to be patient. They have tried to hold the line on raising wages with the knowledge that unemployment benefits would dry up eventually. That could help bring inflation back down as more unemployed rejoin the work force. That could also test investors resolve in staying in the inflation trade as markets perceive lower inflation. We think it will only slow inflation temporarily as behaviors are changing, global supply chains are shrinking and there is just too much money chasing too few goods.

The market feels like we are in a slow motion melt up as it appears as if everyone has gone to the beach. The bears have two weeks to get the market down or the bulls may press their case. The first two weeks of July is historically the best two week period of the year.
I think we aspire less to foresee the future and more to be a great contingency planner… you can respond very fast to what’s happening because you thought through all the possibilities, – Lloyd  Blankfein

A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty. – Winston Churchill

 

To learn more about us and Blackthorn Asset Management LLC visit our website at www.BlackthornAsset.com .

 

Disclosure: This blog is informational and is not a recommendation to buy or sell anything. If you are thinking about investing consider the risk. Everyone’s financial situation is different. Consult your financial advisor.