WOW! Is it just me or have prices sky rocketed on gear?

I keep hearing "it's temporary / only due to the supply chain taking time to get back to normal", but I'm skeptical of that idea and remembering way back to my economics teacher explaining how hi prices are "sticky" and "what goes up, does not easily come down" even with reduced demand or increased supply

Yeah, exactly. This is what I'm most afraid of - I'm not sure how it is in your country but wages are certainly not going to come up like this.
 
I keep hearing "it's temporary / only due to the supply chain taking time to get back to normal", but I'm skeptical of that idea and remembering way back to my economics teacher explaining how hi prices are "sticky" and "what goes up, does not easily come down" even with reduced demand or increased supply

Up like a rocket and down like a feather.

The other one I always remember, with respect to using interest rates to stimulate/cool the economy...lowering interest rates to stimulate the economy is like pulling on a string. Raising interest rates to cool the economy, is like pushing on a string.
 
yes - and raising interest rates to cool down the economy will be interesting for those folks who needed to take out 500k+ mortgage at 2% to buy just a regular sized not-so-special 3bdrm family home in many cities - interesting times
Oh, absolutely. It's going to be a complete disaster in Canada. Where I live, the price of a home went up by 21% in a year. The average price now is over $800,000 and rising.

People were carrying so much debt before this all started and now, like you said, taking out mortgages of 500k and up to pay sometimes 100k over asking on a home that, in some cases, needs 10's of thousands of dollars in work.

I'm afraid it's going to be like the 80's again when mortgage rates here hit 19+% and the prices of homes dropped. People walked away from their homes and left the keys in the front door because they owed more on the home than what it was worth.
 
CPI is a joke. Replace beef with chicken since more people are buying chicken (because beef is too expensive)? What will they do when chicken is too expensive? Price in cockroaches?

Real CPI right now, measured 1:1 as in the 70's during last known stagflation, should be north of 20%.

That said, don't hold your breath on rate hikes. Some IBs are calling for up to 7 hikes around 2-3%, but keep in mind those estimates are coming from bond guys. Equity guys don't see eye-to-eye, where the consensus is closer to one hike between 0.25-0.5% causing the market to vomit and the Fed to instantly get very dovish again.

Under normal circumstances, bond guys are the smart ones in the room. What they don't realize this time is that the 60/40 portfolio has been dead & buried for a solid decade, most managers are WAY out on the risk curve to meet mandates, and a massive glut of that AUM belongs to pensions and other main street beneficial owners.

...crash the stock market and you end up with a lot of very poor old people. And old people vote.
 
I keep hearing "it's temporary / only due to the supply chain taking time to get back to normal", but I'm skeptical of that idea and remembering way back to my economics teacher explaining how hi prices are "sticky" and "what goes up, does not easily come down" even with reduced demand or increased supply
Prices won't come back down. All this "Quantitative Easing", which is just a euphemism for printing money, has doubled the money supply in 10 years. This, in turn, has effectively devalued currency by 50%.
 
I don't see why some people get upset about this - cuz who would buy a used item for more than one could buy a brand new one?

Moral grandstanding, and self-righteous chest thumping is kind of a thing, no? That and we are monkeys
who seem to have a proclivity for throwing turds when we feel any inkling of disgust. :)

I personally find the comments entertaining, because they end up being so self-revealing.
 
Oh, absolutely. It's going to be a complete disaster in Canada. Where I live, the price of a home went up by 21% in a year. The average price now is over $800,000 and rising.

People were carrying so much debt before this all started and now, like you said, taking out mortgages of 500k and up to pay sometimes 100k over asking on a home that, in some cases, needs 10's of thousands of dollars in work.

I'm afraid it's going to be like the 80's again when mortgage rates here hit 19+% and the prices of homes dropped. People walked away from their homes and left the keys in the front door because they owed more on the home than what it was worth.

It's crazy to do unless you have to sell your home right now. Given that it's gone up an estimated $350k in two years, I'm okay if it goes back down. Even if it went down $500k, I need a place to live, and as long as I can still pay the mortgage, I'll keep doing that. Walking away just seems like a crazy move unless there is no choice.

We have similar numbers here for houses. They get bought up immediately unless they are truly overpriced. Some of the multi-million dollar places here have sat, and often gone for significantly under asking. Others sell immediately for 3 million. Lots of people with crazy amounts of money right now. One behind me sold for 2.5 million, and nobody has even lived in it for six months. The owners stop by occasionally, but it's obviously just a vacation home or something.
 
yes - and raising interest rates to cool down the economy will be interesting for those folks who needed to take out 500k+ mortgage at 2% to buy just a regular sized not-so-special 3bdrm family home in many cities - interesting times
Home buyers are yet another set of victims of the Fed's excess liquidity. Institutional ownership of detached single family homes was rare 20 years ago; today Blackrock is the largest buyer of such properties in the US and there are many, many others at all scales. Too much money chasing limited supply and driving the lower middle and middle class out of the market and into their rentals.

Same with farmland here. Today the market is around $3600/ac and rising rapidly. But an operation of median profitability would hit a negative cap rate on purchases beyond ~$2200/ac. Its not institutions directly in this market but little guys who've sold apartment complexes, rental homes, or retail / light industrial real estate (often to institutions) and who want to avoid taxes on those sales while parking their money somewhere stable for a few years.
 
…as long as I can still pay the mortgage

That was the problem, the people that had to refinance could no longer afford to pay their mortgages. Here’s a snapshot of what mortgage rates did in the time period I was referring to. Let’s say you bought a house in 1977 or 78 @ 8 or 9% and then had to refinance in 1981 @ 18-19% because your term was up. Those people now had mortgage payments that were a lot higher.

The other problem was that a lot of people couldn’t refinance their mortgages because they lost their jobs. Unemployment almost doubled from 7% to 13% In the same time period. Fortunately, so far, the unemployment rate is trending down In Canada.

There are a lot first time home buyers that paid a million or more for their home that won’t be able to manage a mortgage rate increase of a couple percent when they have to refinance.

1645407359644.png
 
Last edited:
Inflation is far worse than official numbers. The CPI basket of goods is supposedly "adjusted" to reflect consumer impact but it's really adjusted to make the numbers look better than they really are. If we were still measuring inflation the same as we measured it 40 years ago the numbers would probably be well into double digits.

Me and several friends believe it to be at least 25, if not 30+ percent. The reported numbers are bogus.
 
Another way to look at it: what produces stuff or “supply?” Work, people doing productive things. There’s been a lot less of that going on in the last two years, so there is less supply. The government has been printing and handing out money, so we have plenty of demand. Econ 101: when supply decreases, prices go up.
 
Bubble is about to pop. Equity P/E ratios are double historical norms. In 18 months gear will be cheap as people struggle with their $700,000 mortgages sans employment.
I’m not convinced PE ratios alone will move much of anything. Apple has a historically horrible PE ratio and they have more money than most countries in Europe. They’ll never stop selling iPhones or making money. Rinse and repeat for other tech stocks like Microsoft, etc etc.
 
Ye i just bought ESP FR 7 E-II, it was 2349 euros.... now its 2916 euros, lol, ernie ball majesties went up in prices too...
 
Bubble is about to pop. Equity P/E ratios are double historical norms. In 18 months gear will be cheap as people struggle with their $700,000 mortgages sans employment.
Don't put all your eggs in that basket.

P/E "norms" must be considered relative to concurrent macroeconomics... the playing field tips and turns. What was normal when Shiller started pumping out CAPE signals doesn't mean much with dirt cheap money and record repurchases. More often than not, you see this as a byproduct of companies manipulating their EPS.

Only real question is whether you're banking on inflation or Hunt's deflation. If the former, equities have a better track record of purchasing power preservation than gold. Strong infrastructure holdings, usually with a value bent (but not always) are a solid play. Late stage growth is not. If the latter, replace value with growth + access to capital and/or heavy FCF.

...and stay away from the idiots on Reddit.
 
I miss my old job measuring precision optics. Sometimes you get the measurement results and know it can't possibly be right because it doesn't make sense. Kind of the same thing. Don't trust the people doing the measurements.
I've been in this business for nearly 40 years. One thing I can say with absolute certainty, raw data has no agenda, those wishing to gain from data manipulation are found in nearly every company I've worked.

One company (I worked for) paid big bucks for a 3rd party analysis of our power grid and where "unreliability" will go in the next 20 years (keep in mind this was based on a small data set). My department was tasked to preempt power grid failures by being proactive and replacing aging infrastructure before unplanned power outages occurred. The data gathered showed the largest culprits of failure, and, to @FractalAudio 's point, over 30% of all grid failures were due to cables breaking down (so it just just doesn't apply to guitars). We analyzed the the most at risk cables and proactively replaced or repaired them. Once this work was well underway, it was now my job to report future unplanned outages to the Public Utilities Commission (PUC). Problem is, if I underestimated (or overestimated) the "unreliability," we were fined for not performing due diligence. In order to accurately estimate unreliability out for a year required some serious analytics to model reliability predictions. My model, using ARIMA techniques, was accurate to ±1.8% of the predicted value, IOW quite accurate as I tested it on previous true data as well.

Now, this is where it got interesting, since we were being proactive in replacing aging infrastructure, our unreliability went down and our reliability went up. Sounds logical right? Nope. My boss wanted me to falsify reliability data reported to the PUC because he sold the rate case dollars to our customers claiming he needed vast sums of capital for years going forward in order to maintain reliability. He stated my reliability numbers are going in the wrong direction, the reliability should be going down and unreliability should be increasing.... :oops: So I asked him "are you suggesting I falsify reliability data?" He said "No. Of course not. I'm just saying the trend needs to go in the other direction."

I resigned shortly after and cited the reason for my resignation was due to corporate fraud.... yeah, nothing happened either...corruption is everywhere.
 
Back
Top Bottom