“Larry Summers: A Recession Is Almost Inevitable”
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Today I saw a dozen (fancy, pasture, organic etc) eggs for $11.49! Crazy. Gas here is $6.50 per gallon.
Restaurant prices have gone up. Quality and service is down. The average roadside hotel (Hampton, Holiday) is $140. with poorer quality ‘free’ breakfast. I wonder when or if quality standards will improve in dining/travel or if the current state is here to stay.
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What I am saying is your observations are a small part of the overall picture.
There are many who believe that it has more to do with decisions made in DC than “collusion” by oil and gas companies. Both oil and gas are complex markets with national and international factors weighing into the price paid by consumers and companies.
100%@bluebayou. Wishful thinking and poor planning don’t get one to their destination, IMHE (experience). I hope I’m wrong and we avoid recession and prices for commodities and energy prices also fall. But I seriously doubt that. We are going in the wrong direction and the map we are using has not been updated and is missing many streets.
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There have been campaigns to push public pension schemes to disinvest from oil and gas investments. Fortunately most of the legislative efforts to ban investment haven’t yet succeeded (even in California https://amp.sacbee.com/news/politics-government/the-state-worker/article262741417.html) but I wouldn’t be so sure that these schemes are well positioned to benefit from the run up in commodities.
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Wow, my farm neighbor sells them for $5.00 and I can see the chickens running around in her backyard/farm. You do have to bring the boxes back.
In NE, it’s $200 and usually not available. Most are $249-300. Not name brand places or great locations either. Don’t know if it’s more pent up demand, inflation or both.
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Yes, some public pension funds have been subject to political activism to divest from the fossil fuel industry. But I don’t think many of them had done so yet before the start of the current inflationary cycle (fortunately for them from the financial performance perspective). These funds may also have investments in metals (including precious metals) and other commodities that have also done well but aren’t subject to political pressures.
I assume you’re in CA.
CA has new regulation about pig farming that has increased the cost of bacons dramatically, so don’t expect bacons for breakfast at these hotels.
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A couple of things about public pensions and municipal finances.
Almost all state and local municipalities budgets are in part either directly or indirectly funded by municipal bonds. Interest rates for General obligation bonds are approximately 200bp higher then their recent lows while revenue bonds are in excess of 250bp higher. These incremental funding costs will have to be subsidized out of ongoing operating budgets which are facing inflationary pressures.
In terms of these pensions they are typically only modestly 10% or less in commodities. They do invest in or with PE and HF. These investment vehicles tend to utilize a combination of leverage, early investment, and ultimately public markets “take outs” to realize their “enhanced” returns. In addition these investment vehicles typically have long tail “lock ups” which preclude their returns from being used for ongoing needs.
While unrated or Pre public investments are tough to measure performance for the best measure is likely the High Yield or distressed sectors. As you would anticipate these sectors suffer the most in a rising interest rate environment as they fledgling ventures are typically required to pay a steep premium (if they can find it) for capital.
This dynamic is evidenced by HY being the worst performing sector of a generally dismal fixed income market. Layer on top of that the fact that typically pensions maintain between 50-60% of their portfolios in equites (although they have pulled back) and you will realize that at a state and local level tough decisions will be required in the very near term.
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Thanks. So informative. Tells one a lot why pensions often have big issues. I had no idea they were only 10% invested in commodities. Wow. I can feel my property taxes rising.
We have free range pasture chickens. To be honest, I need at least $3-4/dozen to cover the cost of feeding them in the winter and housing them. We just have them for fun, but yeah input costs have gone up exponentially for us.
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I wasn’t suggesting public or municipal finances are doing fine in the current inflationary environment. They’re almost certainly taking a hit. Because of their diversified investment portfolio including alternative investments, their portfolio performances may not correlate as highly as we may assume based on equity market performances lately.
High yield market (including the distressed sectors) is much more correlated with the equity market, however. Their investments in that market is understandably doing poorly, even if interest rate doesn’t rise (correlations between credit spreads and interest rates are much less straightforward). Rising interest rates will hurt the sectors further, but their main issues are credit spreads, which correlate much more highly with equity prices.
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I have to shop suspiciously. Shopping is like trying to juggle the least amount of “suck” for your money. Wal-Mart’s prices are good, but the lines are long and the food is almost inedible. The grocery chains aren’t a step up at all. I can get quality food at Whole Foods and Trader Joes, but the prices are atrocious. It’s the same with household items. Wal-mart, you get what you pay for. Target always seems to be a dollar short stocking their stores. Costco? Forget it…that place is a zoo! I worry that my 5ft 2in wife will get trampled to death! Sams Club? Well…it’s owned by Wal-Mart. Amazon seems to have halfway reasonable prices, and I don’t have to deal with lines.
I noticed that our food shopping shifted to mostly Costco and TJ. I know precisely when we need to hit these places to avoid the crowds. Our favorite cut of meat that makes great kabobs is still $8.99 a pound at Costco, but the rest of their beef now costs more than comparable level seafood (such as New York steaks v halibut). So we eat less red meat now and way more fish! 
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It probably depends on where you are. Here in NJ, halibut still cost way more.
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That may have been a “Fluke”.
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Halibut was $34.99/lb yesterday at the fish market. The swordfish that I purchased was $16.99/lb, a bargain.
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I just looked up the current prices at Costco:
USDA Choice New York Steak $9.99/lb
USDA Prime New York Steak $14.49/lb
They don’t have halibut at the moment, but I recall it was at least $25/lb the last time I saw it.
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Trader Joes has some real redeeming qualities. My teenager is out with her friends so often, we hardly eat as a family. We set aside one night a week for a weekly Trader Joe Kung Po chicken night. Shopping there can turn any ordinary cook into a chef!
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Probably better for your health (and probably the environment if the red meat was beef or lamb).
I was joking and apparently poorly. Fluke as in flounder.
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