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Noise & More Noise

05/20/2022

There is a lot of noise out there!  Inflation is running wild.  Shortages are everywhere, from cars to baby formula.  The sky is falling??  Why aren’t you more worried??

Of course, curbing inflation is critical, but I’m optimistic it will be largely controlled by year-end for several reasons.

First, the Fed may have been late starting, but they are now raising interest rates rapidly — the tried and true method to battle inflation

Second, they have also started “quantitative tightening” which is a bit complicated to explain, but I think it will be even more effective than rising interest rates.

Third, have you noticed that inventory levels are rising?  Inventories cost money to hold.  At some point, suppliers will cut prices to get rid of inventory.

Fourth, if inventories are already rising, what does that suggest about the supply chain?  Did you really think it was too complicated for entrepreneurs to figure out?

Fifth, the dollar has strengthened, which reduces the price of imports, a major component of spending.

Sixth, it is well documented that technology increases efficiency, which also reduces costs.  Why would that stop?

Maybe, I should just pretend to be scared silly?   Do I still . . . see the sky out there?

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