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It’s mostly a demand shock, not a supply shock, and it’s everywhere

bridgewater.com

431–440 of 478 posts

Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere

#431

Earlier quoted context omitted.

Could it also be our understanding is gradually improving and the externalities are just lagging more than first thought?

No,it’s mainly that business won’t change until it’s forced on them. Big tragedy of the commons problem

Right. They want regulation...but NOT THAT REGULATION!! No one will be able to agree on anything as politicians bounce between big donors bitching and various voter poll data.

Somewhere out in left field are the right things that need to be done.

Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere

#432

Earlier quoted context omitted.

John Wayne toilet paper... it’s rough, tough and doesn't take shit off anybody.

Nothing captured my imagination and horror more than an advertisement I once saw for "splinter-free" toilet paper.

Back when I used to use toilet paper, I would sometimes encounter a kind which would fall apart while I was still wiping, breaking up into a bunch of tiny "rollies" which would, as you may guess, would remain stuck to my butt. It was one of the "extra soft" brands, I think.

Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere

#433
post #304

Earlier quoted context omitted.

Meat can be easily substituted, so I'd consider that discretionary spending. Furthermore, producing meat consumes many times the plants, than if humans directly consumed those plants. So in an emergency, just stop producing meat and you'll have plenty of plant-based food left.

Can you eat grass? I know I can't... Yes, producing meat requires animals eating a ton of plants and they also need a lot of water. Except that can be mostly grass (that humans don't eat), and the water is just rainwater (that the animals in question will piss later, so it will end on the ground anyway). The reason why animal-based farming exists is because it is the only way we have to get any food in certain parts…

Cows eat grass? Farmers are all panicking and buying hay (premium hay that tests properly for nutrients) at outlandish prices. You need a crap ton of the right hay to keep beef cattle alive. No to mention all the corn to fatten them so that your meat gets graded as choice+.

Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere

#434

Earlier quoted context omitted.

> Your mistake is weighing superstition vs tangible harm. Care to share which of the thousands of peer-reviewed papers on the Intergovernmental Panel on Climate Change's website, you have: a) read b) understood c) found errors in d) brought to the world's attention? 500, 10, 1, ? I thought not. And yes, of course it sucks - no one wants this. You seem to think the unpleasantness of the diagnosis and remedy gives you…

The IPCC has been making dire predictions now for 3 decades. Can you point to any that came true? Off the top of my head I know that 1. Glacier park was to vanish by 2020. Its still there, barely changed, some glaciers shrank, others grew. 2. Sea level didn't rise as expected. 3 Polar bears are strong, and are not on the endangered list. 4. Temperatures did not rise as much as expected. We are still way below the Rom…

The IPCC does not make predictions. Never has, never will. The whole point, which real climate scientists repeat as nauseum, is we can never know absolutes because of the huge number of variables and timeframes. So what they do instead is provide scenarios. And each scenario has a series of weightings or probabilities. The summaries spell these out in rough terms, the full reports go into intricate detail and sources. If you spend the time to read the summaries you will find a good number of scenarios which are currently playing out as we speak.

Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere

#435
post #65

Earlier quoted context omitted.

Bridge water is very much on the record saying what they think comes next. Inflation, low rates, poor performance for bonds, poor performance for many assets.

Where are they investing then?

If I had to channel Ray Dalio he would say:

- Keep your Beta as high as possible, you want to be as diversified as possible heading into a difficult environment

- Cash is trash

- Value will accrue to real assets and hard money. Real estate, equities with consistent cash flows and strong books, commodities, crypto, land, natural resources. These kinds of things

There are plenty of videos of him on youtube going deeper on all of these topics

Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere

#436
post #65

Earlier quoted context omitted.

Bridge water is very much on the record saying what they think comes next. Inflation, low rates, poor performance for bonds, poor performance for many assets.

That was my thesis all summer long, but bond yields have remained stubbornly low and the stock market just had a blowout October even as inflationary pressures picked up amidst the Evergrande crisis and the debt-ceiling crisis. I’ve given up thinking that there is anything that can bring down this market and will no longer fight the trend.

I think you may be slightly misunderstanding his take. I don't think he would argue this bubble is going to pop. Maybe increased volatility with a couple "events" but not a nominal pop. The bubble will pop through sustained inflation. The S&p will be up 100% while the dollar will have lost 60% of it's value over 5 years. From a metrics perspective the bubble is gone at that point.

So yeah, after 10 years of thinking bubbles were about to pop I'm finally on the "this is the exception" this market is never coming down team. It really is politically infeasible for it to move in any other direction while it's totally politically feasible to print money and maintain high nominal values.

Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere

#437
post #378

Earlier quoted context omitted.

>Some lockdown policies directly affect your 'need for stuff' I think this was the root cause of the toilet paper shortage. People who normally spend a large portion of the day at the office were now spending that time at home. There was a popular viral video at the time of a man driving around on a forklift in a warehouse full of toilet paper laughing about the shortage, but it was all commercial toilet paper not wh…

The causes of the lockdown shortages are cultural, toilet paper disappeared in Northern European and English speaking countries, while in Italy (and I think in some places in Spain) yeast could not be found.

Yeast also ran out in Northern Europe.

Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere

#438

Earlier quoted context omitted.

Solar is an excellent replacement for home heating oil during the Michigan winters. The vast majority of people in Michigan are already connected to an extremely efficient distribution network for electricity. The marginal cost of delivering additional energy through this network does not round to zero, it is zero. Meanwhile heating oil is delivered by trucks with a large cost in depreciation, labor, and fuel (furthe…

I live in Michigan. I have a 5.9kwh solar array. Spring/fall, I can produce over 40kwh/day. Summer heat lowers my production to upper 30-40kwh. January 2021, I produced 197kwh the entire month. I know this discussion is focused on heating. But from an electric vehicle perspective; 197kwh is not that much. In the winter, I don't think it would be enough electricity for a homes electric needs + EV or electric heat. I c…

So connect to some wind power which in the midwest produces 3x the capacity in the winter as it does the summer [0].

[0]: https://www.eia.gov/todayinenergy/detail.php?id=20112

Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere

#439
post #438

Earlier quoted context omitted.

I live in Michigan. I have a 5.9kwh solar array. Spring/fall, I can produce over 40kwh/day. Summer heat lowers my production to upper 30-40kwh. January 2021, I produced 197kwh the entire month. I know this discussion is focused on heating. But from an electric vehicle perspective; 197kwh is not that much. In the winter, I don't think it would be enough electricity for a homes electric needs + EV or electric heat. I c…

So connect to some wind power which in the midwest produces 3x the capacity in the winter as it does the summer [0]. [0]: https://www.eia.gov/todayinenergy/detail.php?id=20112

That's the job of utilities, not individual consumers.

Look, if the government wants to migrate utilities away from gas for heating and replace that with something else, the way you to do that is to have the government build, or contract out to build, the something else that is just as reliable and just as affordable, and then when that is in place, you work with the utility to switch over to the new thing and then retire the old thing. This is called a migration.

Shocking, I know.

The way you don't do it is to adopt some neoliberal obsession with turning everything into a market where end users trying to heat their homes are facing higher prices, and the hope is that these higher prices just cause the utility to transition to something else through the magic of markets.

That's not what markets are good at. Funding big infrastructure projects and coordinating the replacement of one infrastructure with another is the responsibility of government, not markets.

We didn't build our hydro and nuclear capacity by relying on the magic of the free market. We had a planned decision to build this infrastructure as a result of public need, and so we built it, and then the utilities hooked up to it, and the end user got power. We didn't build the interstate highway system by relying on free markets either. When people want to deploy subways, the solution is to build subways, not just tax gas and hope subways just spring up out of the market.

Telling individual homeowners "Well, there is wind power technology out there" is eco-sadism.

It is taking things offline or penalizing them instead of having replacements provided, and we just hope that the penalties will cause replacements to spring up.

This is faith-based energy policy. It is not effective governance, and it is not politically sustainable.

Re: It’s mostly a demand shock, not a supply shock, and it’s everywhere

#440

Earlier quoted context omitted.

It’s a whiptail effect. Shifts in demand and supply cascade and create unpredictable effects. For example, the rush on toilet paper triggered more production, which reduced pulp supplies, which constrained golf cart supply. Why? Seats are made from particleboard, made from pulp. Plus, golf courses bought more carts than usual due to lockdown restrictions.

Was the particleboard really the operative constraint? Or is the explanation about extra demand the correct one? It seems plausible that golf cart manufacturers aren't ready to handle extremely spiky demand. Also, that the toilet paper explanation begins as a joke or a guess, and takes hold because everyone likes it as a story.

Check out:

https://charlestonbusiness.com/news/automotive/80346/

I don’t have an academic paper, but I got the same story from several pretty big rental providers. (I needed about a dozen golf carts for a project)

It was crazy - the rental places had no inventory because gold courses weren’t offloading older gold carts due to the supply chain issues.

We ended up buying a smaller number of bigger utility vehicles from Bass Pro Shops, of all places! The techs had fun with that.

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