Santa is generally a jolly fellow, but that doesn’t indicate he doesn’t enjoy meting our well-deserved penalty to the greedy.
Absolutely nothing is more predictable than a stock market rally starting in early November and running into mid-January– Santa’s rally. And given that it’s so predictable, why not front-run the rally by packing up on stocks in October?
Here’s the problem: Santa does not take kindly to punters front-running his rally. It resembles opening your presents in October, which’s the equivalent of sucker-punching Santa. Santa’s revenge will be served cold: no rally for you, front-runners. And nothing in your equipping or under your tree, either.
Instead of give front-runners a swelling of coal (that’s been bought up by China), Santa will provide trillions of dollars in losses, much to the surprise of the front-runners depending on wonderful gains galore.
An amusing thing took place on the way to Santa’s 2021 rally: a disintegrator beam swept through the entire worldwide supply chain. Whatever is now limited other than euphoric confidence in more stock market gains and more central bank stimulus, NFTs, quadrillions in cryptos, and users who dislike Meta, which I’m guessing is an acronym for me eat the addicts.
What’s definitely out of stock are 1) stability and 2) the means to restore worldwide supply chains to their previous working order. Unbeknownst to the huge herds consuming the goodies packed in those 8,000 containers per ship, the entire supply chain has been optimized to work within a really narrow band. Once it veers out of than band, it unravels really quickly and can not be restored to its previous optimization.
There are a variety of reasons for this failure to put Humpty-Dumpty back together again.
1. Whatever that’s needed to bring back stability has actually been removed out by optimizing earnings. Redundancy, excess capability, stockpiles, multiple sources, domestic sources– all those expense money and are for that reason the mortal opponents of increasing revenues, so they have actually all been removed out of the system long back.
2. There is just enough of whatever to work in the enhanced band, and adding more capability quickly is difficult. There are just enough gasoline/diesel tankers to make the optimal deliveries, and no surplus tankers to contribute to the network. And even if there were super-costly tanker-trucks collecting dust in a lot, there wouldn’t be any surplus drivers with the credentials and experience to drive them.
When a solvent go out since among the only two producers goes down for any reason, everything that depends upon that solvent close down. As for including capacity to produce more solvent, forget it: the equipment is specialized and needs to be purchased with preparations measured in months, the ways to carry more petrochemical feedstocks to the plant do not exist and can not be conjured out of thin air, employees who know how to operate the plant are limited, and so on.
These wide ranges of intermediaries create long dependency chains which break if even one link goes down. Every intermediary is a prospective disruptor, and the more intermediaries there are, the more opportunities for one link in the chain to snap. With excess capacity kept near-zero to make the most of revenues, there’s no slack, no pool of expertise to tap, no production capacity that can be switched on with a flick of a switch.
3. The instinctive human action to shortage is to stock what’s limited or perhaps threatening to end up being limited. For wholesalers and enterprises, this suggests over-ordering to guarantee sufficient inventory to keep production/ sales. This quickly intensifies lacks as the lucky few grab far more of the decreasing supply than they need, starving everybody else down the chain.
Customers also buy more and things it safely in closets, pantries, garages, and so on. Stockpiling is not just reasonable when faced with shortages, it’s likewise rational when price boosts are ensured: better to purchase more now before the cost increases.
But given that the worldwide system is enhanced for narrow series of supply and demand, this panic-buying strips the system of what little wiggle-room it had. Consider fuel and diesel supply systems. They’re optimized for average chauffeurs to maintain less than half a tank of fuel. So when everyone begins complementing their tank whenever they see an open gasoline station, the modest excess supply is quickly drained pipes and lacks start cascading through a system with near-zero excess capability, storage, personnel, tanker-trucks, etc.
Count the intermediaries in between the source of the stuff you need and your home and you’ll have a good grasp of your vulnerability to international supply chain breakdowns. Very few people know enough to count the intermediaries, and we might reckon there’s a couple of dozen at many. In a lot of cases, the true number remains in the hundreds once we count the components, specialized products, glues, solvents, product packaging, shipment, and so on in every part of the production and shipping chain.
If you make your own Christmas presents with materials you have on hand, there are no intermediaries between the provider and the recipient. That’s a safe and secure system. Depending upon numerous intermediaries to all function completely as the whole chain disintegrates, that’s substantially less protected.
Santa is generally a jolly fellow, but that doesn’t indicate he doesn’t take pleasure in meting our well-deserved punishment to the greedy. All gains are guaranteed by the Federal Reserve up until the magical belief in the Fed’s hocus-pocus comes across the disintegration beam. Oops, sorry about your Santa rally. You got greedy with the wrong person.
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