Where the HELL is the inflation?

[flintlock]

Re: Where the HELL is the inflation?

In fact, when you think about it, unless these units [those depicted in graph below] are either totally unlivable or in the most unpalatable areas of the country, why do we need any new building of homes or apartments for the next several years? Of the 130.8 million housing units in the United States, 18.7 million of them are vacant. With net household formation running barely above 800,000 annually, there is actually more than 20 years supply of real estate units on the market right now. In a word, we call that a "glut".

This sums it up in a nutshell. Expect lower or perhaps steady rents until the glut is resolved. With rising unemployment I see no reason to expect that to happen soon. Immigration should continue to slow as well considering the job market. No immigration means little to no population growth. No need for more homes. Then throw in all the adult children moving back in with Mom and Dad due to financial reasons.

I too have seen homes go for rent on my street which was unheard of a few years ago.

[kingcopper]

Re: Where the HELL is the inflation?

This sums it up in a nutshell. Expect lower or perhaps steady rents until the glut is resolved. With rising unemployment I see no reason to expect that to happen soon. Immigration should continue to slow as well considering the job market. No immigration means little to no population growth. No need for more homes. Then throw in all the adult children moving back in with Mom and Dad due to financial reasons.

I too have seen homes go for rent on my street which was unheard of a few years ago.

This is exactly why one should never invest in rental property outside of the hip-urban areas of a major city where there is NO MORE GROUND. Our rents have been climbing steadily since late 2007 as exowners decide to make the shift to renting small affordable units within walking distance to shopping, work, and public transportation.

It reminds me of a comment my coin dealer made about swiss watches when I was looking through his collection. Everyone that WAS anyone borrowed in the boom to buy a Rolex. They are now selling for as little as a tenth of MSRP. On the other hand, Pateks are still very rare and very valuable. He commented that outside of the victims of guys like Madoff, people with Pateks don't have to sell and won't. The Patek's rarity is worth much more than our bonars. Great inflation hedge I guess.

[goadam1]

Re: Where the HELL is the inflation?

ej's latest puts a final nail in the deflationists' coffin...

Cost push inflation seems evident. Wasn't the bailout meant to "steady" prices. But supply crash inflation seems a little sparse. We had lobster deflation when the crash happened and I'm sure the lobster glut has been taken care of and now some lobster suppliers are out of business and lobster will rise. But how much of that kind of inflation will we see. No airline has gone out of business and until a couple do, those prices will stay at least on par with each other. But the Barnes and Noble closed across from me and Amazon is selling stuff even cheaper. It's not a linear as Cost Push inflation

Heres a story on Lobster. It has elements of globalization, bailout, subsidies, deflation, bankruptcy and dare we say evidence of future supply crash inflation.


“We can’t fish for less than $4.50 per pound.”
Lobster News Lines: A Crystal Ball and the 2009 Lobster Season
Lobster News Lines: A Crystal Ball and the 2009 Lobster Season
Trying to predict the outcome of Maine’s 2009 lobster season is something akin to predicting the stock market’s profitable performance, however, as the old timers say, “Watch the market and you’ll know how lobsters are moving.” That’s a heck of a start! Despite the uncertainty, there are a number of indicators we can look toward in an attempt to determine what lies ahead. The variables are numerous, including more than enough “ifs”, although providing the “mix” along with recent developments is a beginning point.
As always in the Maine lobster industry, what happens in Canada impacts our future, therefore information on Canadian inventories, both frozen and live, as well as how their spring catch is shaping up, the supply & demand factor, are essential ingredients in the forecast.
World production and markets, also remain factors in the 2009 equation. The lobster producing counties, such as Australia, Nicaragua, Ireland, South Africa, etc., are all players in the lobster fishing business, affecting markets in which the Maine lobster must compete.
And of course, consumer sentiment remains a huge obstacle in 2009. The Economy will, in all probability, be the singularly most important, deciding factor upon how Maine’s 2009 Season unfolds. If retailers, wholesalers and restaurants maintain the high-margin strategies they’ve previously employed, there won’t be a 2009 Season. Consumers simply don’t have the extra money to pay three or four times boat price and then some.
And finally, I’ll finish off with speculative conclusions: What can we, as Maine fishermen, expect to hear from our buyers and bait dealers? How are we going to turn a profit in a down-sided economy, let alone make ends meet? These thoughts incorporate the “ifs” of our Industry.
Canada’s Economic Predicament:
As of the beginning of March, Lobster pounds in Canada held 3 million pounds of live product. Maine pounds remained stocked at 2 million pounds. The high-end, 1 ½ lb, tubed lobster where sold-out in February, as a result of higher than expected Valentine’s Day sales. A CBC.ca report (March 19th) indicated PEI processors still retained $30 million in frozen tail inventory, requesting government subsidization. Processing plant employees voiced concern, questioning if, their spring jobs would be available. Ocean Choice, Ltd is considering alternate employment options should the lobster processing plants remain idle.
A Canadian Sales & Marketing campaign is currently taking shape, in which $500,000 has been allocated toward an effort to alleviate the inventory backlogs and promote Canadian product. Their goals include marketing lobster from the angle of a non luxury, inexpensive, omega 3 packed food source; increasing Canadian Branding, specifically in order to differentiate it from the Maine lobster brand; exploring new markets in the Pacific Rim & Asian countries and developing new products for the mass market.
In December, Nova Scotia lobster giant, Clearwater Seafood, Ltd, renegotiated a $50 million dollar refinancing package, restricting the incurrence of additional debt, agreeing to limited expansion efforts and to the non-payment of shareholder dividends. Clearly, the Company has been negatively impacted by a world economic downturn.
We’re also on the doorstep of spring fishing in Canada. Captains have voiced their concerns in regard to price, stating, “We can’t fish for less than $4.50 per pound.” There is some indication from news reports, many boats will forego setting out rather than fish on flimsy and/or negligible margins. They may have to, if their buyers remain backed-up with last year’s product and unable to add to current inventory levels. Watching the Canadian fishing effort in the next couple/few months will spell it out for the Maine lobstermen.
World Markets:
In an e-mail from the managers of an Australian commercial fishing website, crayzone.com.au/, it was indicated processors are complaining of product being backed up and extreme difficultly finding markets. The rock lobster boat price, normally in the vicinity of $20-$30 dollars per pound has fallen to a season low of $9 per pound, placing all Captains in financial jeopardy. The exact processing inventories are unavailable.
A recent article regarding Nicaragua’s spiny lobster, suggests $20 million dollars in frozen tails, destined for US markets, are currently being held in freezers. Another 1 million pounds of lobster & shrimp were unmarketable due to economic conditions. Processors, in desperation, were looking toward Russian and Iranian markets to unload their inventory backlogs.
Ireland’s lobster industry is in the setting out phase, however, according to a February issue of The Irish Skipper, an old and established commercial fishing magazine, “…lobster prices are very poor and fishermen are disillusioned and angry. Not only are long term holding facilities being put in place here, (but) also in the UK and throughout Europe, which are believed to be behind the poor prices currently being received. Also, new technical and scientific advancements in lobster rearing, has meant that lobster farming is now feasible.”
Across the globe lobster fishermen are facing increased financial pressure and declining prices. France remains the only country importing above average product, via Canadian companies.
The Down-Sided Economy:
The Economy will make us or break us this year. As usual, we depend upon Maine’s summer tourism industry to absorb millions of pounds of lobster through restaurants, festivals and summer “lobster feeds”, but this year is anyone’s guess. News articles indicate bookings are holding their own, although it’s a year of uncertainty, maintaining a “wait and see” attitude.
In 2009 we simply cannot depend upon Canada as a primary market to continue “flipping” 18-20 million pounds of our shedders. The capacity is not there! The market is not there! The money is not there! Leaving Maine dealers who have been dependent upon the Canadian Processing market at an extreme disadvantage, as well as the boats fishing from those wharfs.
What’s To Be Expected?
Price! Forget it! Judging from the world’s lobster fishery, we will not see a sustainable boat price this year. We all need income after last year’s poor fall, but to think we can set out 800 traps, haul 300 a day, take a break on Thursday and begin again Friday, is utterly irrational. The market just won’t be there! Nor will it be! Niche companies like Bill Atwood, Pete McAleney, the Looks and Linda Bean’s new Port Clyde efforts, those who have developed long lasting accounts and are focused on the future, will suffer, but prevail. We might squeak by during the height of the tourist season, but watch out during fall fishing.
Many dealers will fall by the wayside in 2009, unable to find solid & profitable markets for their product. Cash flow and payment will be high on their list. This will drive boat prices downward, creating an excess supply in a world supply chain filled to the brim. I believe it’s possible we may ultimately see “allocated & allowable” fishing days, perhaps 3 days a week, in order to curtail a “glut”. Buyers will simply stop buying in an effort to reduce production.
Bait? The same as last year, as NMFS limits remain imposed upon Area 1A. However, if fishing effort is reduced, quotas will be left unmet and quite possibly the seiners will fish less hard, leaving the TAC open throughout the year. Anybody’s guess? Cheap bait will be welcomed, if we can use it.
It’s somewhat disconcerting to see Canada spending a half million dollars in an attempt, among other things, to take on the Maine Lobster Brand. They are the economic world super power when it comes to lobster, last year selling 43,500 tons, bringing in $910 million dollars. The possibility exists, they are repositioning themselves for the future market, due to the impending changes we face here in Maine, specifically trap reductions and the Moseley Group’s April report, aimed at saving our industry. Their strategic moves are certainly worth keeping an eye on.
Accompanying the low price, it’s my belief you’ll see more “lobster vs. bologna” promotions (another Canadian idea) in supermarkets, restaurants and by way of roadside vendors. The news media will be our greatest public relations asset, keeping the public abreast of the Industry’s sinking situation and promoting lobster.
In conclusion, I wish I wasn’t writing this article, because I’m right in the thick of it too. I need to finish up painting the buoys, look around for a 100 or so traps, but I’ve got to tell ya, “I’m not sure it isn’t throwing good money after bad?” This year! Let’s hope the Crystal Ball Lied! Good Luck to you!
Tags: 2009 lobster, canada impact, outlook, predict, season, world market
Posted by JayP lobsterman's Blog Subscribe to RSS feed

[lalla]

Re: Where the HELL is the inflation?

My only hope is that my town is a Patek-like entity. No more ground, no more water, and supremely liveable with natural beauty up the wazoo. Are these advantages going to lose their value too? I keep thinking the Chinese will prefer to live here , especially after someone posted that photo of the Chinese beach. Hordes of them will come seeking California real estate?

[GRG55]

Re: Where the HELL is the inflation?

Am waiting for this "Tidal wave" of inflation?

Mike

Here's some inflation for ya!

Just booked a short-haul seat sale ticket on our local "Southwest Airlines" style regional carrier.

Ticket price: $158 return


Taxes & fees:

• Nav Canada fee [privatized air traffic control system] $36.00
• Departing airport "improvement fee" ["privatized" airport] $21.00
• Arriving airport "improvement fee" [another "privatized" airport] $10.00
• Air traffic security charge [probably to pay for "privatized" body searches] $ 9.34
• Goods and Services tax [to support the people's govt. that privatized everything] $11.71
• Travel agency charges [the only legitimate private charge of the lot] $42.00
• TOTAL Taxes and fees $130.07

...which is a cool 82% of the ticket price. "Deflate" that, Studley...:p

BTW: When I spoke with my travel agent [who does all my complicated travel bookings to the Middle East, etc] she said that her business is up measurably over last year :eek:. Go figure. [but her husband who is a contractor is spending more time at home, so at least some things are working "normally"]

[Slimprofits]

Re: Where the HELL is the inflation?

Prices for a lobster roll have certainly not come down. I was gone from New England for three years. This summer it seems everyone is selling the roll including chain restaurants such us Pizzeria Uno. Up and down the coast, they're on menus for $15 - $17.

[strittmatter]

Re: Where the HELL is the inflation?

In terms of EJ's supply crash induced inflation scenerio:

Per my experience lately, wholesale steel well casing pipe prices had fallen as much as 50% since Q4 08. It has leveled off as of late and some sizes have bumped 3% - 4% over the past couple of weeks.

Total (mostly oil and gas) drilling activity is at a comparisoned crawl and I know several mills have cut back production, yet I take it that there remains a moderate pipe inventory at the port in Houston. Maybe the middlemen, the paper pushers, have developed a picture of what isn't/therefore is in store going forward.

All I know is that steel pipe prices certainly seem to have found a footing.

Why?

[loweyecue]

Re: Where the HELL is the inflation?

In terms of EJ's supply crash induced inflation scenerio:

Per my experience lately, wholesale steel well casing pipe prices had fallen as much as 50% since Q4 08. It has leveled off as of late and some sizes have bumped 3% - 4% over the past couple of weeks.

Total (mostly oil and gas) drilling activity is at a comparisoned crawl and I know several mills have cut back production, yet I take it that there remains a moderate pipe inventory at the port in Houston. Maybe the middlemen, the paper pushers, have developed a picture of what isn't/therefore is in store going forward.

All I know is that steel pipe prices certainly seem to have found a footing.

Why?

Time to bring out the Bullwhips

[flintlock]

Re: Where the HELL is the inflation?

This is exactly why one should never invest in rental property outside of the hip-urban areas of a major city where there is NO MORE GROUND. Our rents have been climbing steadily since late 2007 as exowners decide to make the shift to renting small affordable units within walking distance to shopping, work, and public transportation.

I pretty much have the same thoughts on rental property but even hipster in town properties may lose their appeal in a depression with high crime. My cousin wanted to live in Atlanta close to all the action. He's into the urban lifestyle I guess you could say. He has been broken into 3 times in the last year. Usually just harmless crack heads so far. I was watching the evening news one night and there he was being interviewed about it. The neighborhood he moved from ( Grant Park) had a TV stealing crime wave last year. They'd just pull up and yank the TVs off the wall in seconds and be gone.

[flintlock]

Re: Where the HELL is the inflation?

In terms of EJ's supply crash induced inflation scenerio:

Per my experience lately, wholesale steel well casing pipe prices had fallen as much as 50% since Q4 08. It has leveled off as of late and some sizes have bumped 3% - 4% over the past couple of weeks.

Total (mostly oil and gas) drilling activity is at a comparisoned crawl and I know several mills have cut back production, yet I take it that there remains a moderate pipe inventory at the port in Houston. Maybe the middlemen, the paper pushers, have developed a picture of what isn't/therefore is in store going forward.

All I know is that steel pipe prices certainly seem to have found a footing.

Why?

Well every product has a price bottom below which its simply no longer profitable to sell at any volume. Perhaps that point has been met? If the price leveled off AND sales volume is up then you can probably read something into it.

We've seen the same thing with autos. The discounts are supposedly there, but they seem to have leveled off and some vehicles like pickups have gone up since last fall.

[pwcmba]

Re: Where the HELL is the inflation?

Anecdotal evidence in Chicago: I just negotiated my rent down in my lease negotiations. A glut of for rent signs in the neighborhood and no one biting.

I concur with this comment. It seems for every for sale sign that came down recently 2 for rent signs went up!

[BigLandbaron]

Re: Where the HELL is the inflation?

Prices for a lobster roll have certainly not come down. I was gone from New England for three years. This summer it seems everyone is selling the roll including chain restaurants such us Pizzeria Uno. Up and down the coast, they're on menus for $15 - $17.

I've seen a few mom & pop stores selling fresh ME lobster rolls here in ME for $7. I can buy fresh live lobster for $4.25/lb (the local price would average $7.50/lb at this time of year during FIRE). Some lobstermen have organized co-ops to bypass the middlemen in order to improve their own margins. No inflation here.

[kingcopper]

Re: Where the HELL is the inflation?

I pretty much have the same thoughts on rental property but even hipster in town properties may lose their appeal in a depression with high crime. My cousin wanted to live in Atlanta close to all the action. He's into the urban lifestyle I guess you could say. He has been broken into 3 times in the last year. Usually just harmless crack heads so far. I was watching the evening news one night and there he was being interviewed about it. The neighborhood he moved from ( Grant Park) had a TV stealing crime wave last year. They'd just pull up and yank the TVs off the wall in seconds and be gone.

I can't disagree with the crime aspect. In our town there are quite a few neighborhoods that have crime problems and are still considered both hip and urban. We only purchase in areas with victorians that were chopped up in the last depression. These beauties have been converted back into single family residences over the past thirty years (think fire econ years!) which has led to less residents per square mile and much lower crime rates. The bonus is that every conversion from a rental to sfh leads to more demand for small, inexpensive rental units in an area that is 100% built up. Unless the sh*t really hits the fan, I'm not too worried. I'm on Itulip quite alot and thus worry about our day of reckoning.

[sishya]

Re: Where the HELL is the inflation?

EJ is forgetting one key point when he talks big inflation -
Demographics. With baby boomers winding down and
having lot of wealth but aggressively saving due to loss of
real estate and paper wealth, I see more deflation also taking
into account excess world capacity. Demographics should be
an important component, I think. Also in food prices here in
California, iam experiencing real deflation since last fall 2008

[rjwjr]

Re: Where the HELL is the inflation?

EJ is forgetting one key point when he talks big inflation -
Demographics. With baby boomers winding down and
having lot of wealth but aggressively saving due to loss of
real estate and paper wealth, I see more deflation also taking
into account excess world capacity. Demographics should be
an important component, I think. Also in food prices here in
California, iam experiencing real deflation since last fall 2008

sishya,

I don't believe that EJ and the gang forgot or ignored the effect of demographics on inflation. There are simply other factors that are going to be the cause of the inflation, even to the point of overwhelming any underlying deflationary affects caused by less demand. I'd suggest you heed EJ's prediction and prepare yourself for a fairly severe inflation ahead (in prices, not in wages).