My Investing Muse

Is the macro so bad?   What is the macro (economics)? According to Investopedia: Macroeconomics is the branch of economics that deals with the structure, performance, behavior, and decision-making of the whole, or aggregate, economy. The two main areas of macroeconomic research are long-term economic growth and shorter-term business cycles. Gross Domestic Product (GDP) For a start, 2 successive quarters of GDP decline in the US is a good start on why the macro is bad.   US GDP (2018 - 2022) Source: https://www.bea.gov/news/2022/gross-domestic-product-second-quarter-2022-advance-estimate According to the US, this alone does not imply recessions.  However, we are expecting earning compressions in the coming earnings reports. With the recent PMI coming out from China, the demand for production is slowing down.  China is one of the big producers and this should imply a drop in global demand too. Inverted Yield Curve An inverted yield curve shows that long-ter...

Surge in Oil prices Oil sits at the start of inflation as the energy resources go into every part of the market. Fuel costs cascades down into the energy, utilities, supply chain and then into products & services.  For businesses that can pass additional costs to customers, they will pass the costs increase to the customers.   Let us look at oil for a start and how this commodity can create an inflationary impact whenever the crude oil price surges: Oil price increase > fuel price increase > utilities cost increase > supply chain costs increase > goods and services price increase.  (This leads to inflation as costs go up.)  We need to understand that the challenge in the USA is not really due to the oil supplies but rather the bottleneck in the refinery capacity. US petroleum consumption will reach 20.51 million bpd (barrels per day) in 2022 US refinery capacity is short by 1 million barrels per day as per EIA chart above To meet the s...

The world is facing an energy crisis. With energy prices soaring, it leaves all fearful of the coming winter as heating is needful in the households. With OPEC+ not increasing their supply, this has led to oil prices hitting recent highs. Russia has yet to increase their gas supply to Europe as Europe's utility bills continue to climb. In fact, some countries turned to coal (a more affordable) energy source. In the US, gas prices have increased 42% from September 2020 to September 2021. CPI has hit a high of 5.4% on top of other notable increases in prices (from Sep 2020 to Sep 2021). This includes  car rentals up 42.9%, steak up 22%, Lodging up 19.8%, bacon up 19.3% and more. Though there was some retracement of commodity prices from a recent all-time high, the pinch is felt throughout the economy. This has left many to wonder how long will inflation remain  transitory . In fact, several have started to call for the Fed to address the problem of inflation - to start the taper...