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An Upcoming 30% Price Increase For Cotton Products And Defaulting Chinese Clothing Manufacturers May Soon Test The "Deflation" Thesis
The question of the night is whether Wal-Mart can absorb a 30% price increase in cotton products, because as Bloomberg reports, it will very soon have to. Gap Inc., J.C. Penney Co. and other U.S. retailers may have to pay Chinese suppliers as much as 30 percent more for clothes as surging cotton prices boost costs. Reports Bloomberg: "It’s a little terrifying to deal with cotton suppliers now," said Vicky Wu, a sales manager at Suzhou Unitedtex Enterprise Ltd., a closely held, Jiangsu province-based clothes maker that counts Gap and J.C. Penney among its clients. This is not an exaggeration - in last week's What I Learned This Week, 13D.com's Kiril Sokoloff, a China expert, noted: "We bought cotton back at around $0.99 because we thought the fundamentals were still very powerful. We liquidated the entire position on October 26 at around $1.29 because many Chinese clothing manufacturers were nearing bankruptcy and the Chinese government was cracking down on hoarders, speculators and investigating position sizes." Note the completely unwanton use of the word "bankruptcy" by the otherwise mellow Bulgarian - what has happened in cotton prices is setting off a seismic shift for low-margin retailers, and many traditionally safe and stable companies will soon be forced to attempt to pass on surging costs, or go out of business, especially as the ranks of low-cost vendors goes up in smoke. Bernanke's inflation exporting model is about to backfire with a vengeance. In this most direct consequences of excess liquidity-driven near-hyperinflation, the best possible outcome would merely a total collapse in margins. If you think a very irrelevant Dick Bove hates Bernanke now, wait until you listen to the Walton family's thanksgiving dinner...
There are those who see absolutely no inflation in the future. Then, there is Ben Bernanke's "but he is really not printing money" reality:
“American consumers better get used to rising prices on the shelves of Wal-Mart and other retailers,” said Jessica Lo, Shanghai-based managing director at China Market Research Group. “China’s manufacturers are getting squeezed not only by rising cotton costs but also soaring real estate and labor costs.”
John Ermatinger, Gap’s Asia president, declined to say whether it would raise prices. “We are going to be mindful of our competition,” he said in a Nov. 10 interview in Shanghai. “We are going to be mindful of our consumer. That’s how we’ll ultimately establish our prices.”
Shandong Zaozhuang Tianlong Knitting Co., which makes Polo Ralph Lauren Corp. T-shirts and track suits for Le Coq Sportif Holding SA, has raised prices as much as 70 percent from a year earlier, said sales manager Fred Hu. “If cotton keeps rising like this, we will need to lift prices by 30 percent by the Spring Festival next year or we lose money.”
Unitedtex, which sells $24 million worth of shirts and jackets annually to Gap, plans to raise prices by 5 percent to 30 percent for products that will be available in April, Wu said in an interview. The supplier plans to increase capacity to meet the retailer’s demand, she said.
“It’s very hard to budget for input cost, if prices are as volatile as they are,” said Peter Rizzo, Sydney-based managing director at FCStone Australia Pty. "It heightens the awareness of Chinese textile manufacturers to look at risk-management tools.’’
Never mind collapse, corporate margins are about to prolapse, possibly turning negative. Guess what that means for record S&P EPS estimates for 2011...
Clothes makers are beginning to lose money on some orders, Unitedtex’s Wu said. “Even if we know we’ll lose money with this order, we’ll still do it, hoping to make up the loss in the next deal,” she said.
Gross margins for clothing retailers’ suppliers are between 10 and 20 percent, and net margin is usually between 3 percent and 5 percent, according to Wu and Hu.
Zhejiang province-based Ningbo Seduno Group, which sells about $30 million worth of men’s and women’s clothes to Hennes & Mauritz AB annually, increased prices by almost 20 percent since July, said sales manager Fiona Xu. Seduno also supplies Adidas AG, Inditex SA’s Zara and Nike Inc.’s Umbro Plc, and will keep raising prices as cotton costs increase, Xu said.
"Losing money on some orders" means that not even Level 10 dark FASB magic can make net income positive. Sorry.
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Ben S. Bernanke is stoked! He loves higher prices!
Unitedtex’s Wu represents the sellside crew! The hardened Keynsians of the retail industry.
"You gotta do what you gotta do to earn yer keep. Sell side!" [said like "West side"] - Unitedtex’s Wu as she flashed an "S" sign with her hands.
Higher prices are only sustainable if people can afford them.
Without that, you get decreased demand and margin-compression.
Which in turn leads to business collapse.
Welcome to the Greater Depression.
Don't forget that there are people other than Americans with plenty of dollars to spend, and they will do so as soon as they see that continuing to hold those dollars is a liability.
Dollars and all FIAT are worthless and should not be even used when doing trade.
Worthless? I'll take 'em off your hands then.
For PM and you have a deal!
That appears to be a common trade this week.
Tmosley: So your position is that the global marketplace will absorb a 30% rise in prices without an aggregate decrease in demand?
No way. Not a chance.
@Popo
There is only so much of a hit demand can take when it comes to the necessities of existence, no?
Regards
Well. I live in a poor, although rapidly "emerging" country.
So for me, the notion that Americans can't reduce consumption of the "necessities of existence" is a bit laughable.
How many shirts, pairs of shoes and pairs of pants does the average American actually "need"?
We'll soon find out.
I promise you that "demand" as a factor of necessity is lower than "demand" as is currently understood.
American consumer operates on 'want' not so much 'need'.
not for long
Thank you for the sanity
So why the hesitation in telling us what "emerging" country you are from? Stereotyping a whole nation is just as wrong as stereotyping a group of people. Most Americans where I live are starting to understand that we are in for hard financial times and have pulled back from excesses and have taken a look at their needs vs. wants. You can't expect a nation where cheap credit was/is abundant to change over night, but it is changing. Sustained change only comes from sustained pain. No one is immune to cheap credit. Take Brasil for example, they are in for a cheap credit awakening much the same as American if they do not change their current practices. I see people who barely have a job walking into stores and buying a big screen TV on payment plans that extend their whole life. The average uneducated Brazilian is in love with the fact they can purchase anything they want with cheap credit. You are fooling yourself if you believe developing countries are immune to this syndrome. Much the contrary.
Ahhh, the ol' "American as the only consumer in town" chestnut.
That's been changing, rapidly, did you blink and miss it?
US population is 4.5% of the world's, and no matter how bad the world economy is, every last human on earth still needs to eat and wear clothes at pretty much the same rate they are now, indeed some nations' populations a lot more than others. And with more and more that aren't 'Americans' having the means to do so...well, you figure it out; or are you still blinking?
Ahhh, but sellers' costs are still going up thanks to Bernanke's cheap money policy. So, sellers can decide between raising their selling prices and losing (some, hopefully not all) business or not raising their selling prices and going out of business. It seems there may be no escaping from this vicious cycle we're in that was brought about by an expansion in credit by the worlds' central banks.
It is a fine line between inflation and deflation, and Ben Bernanke is taking a massive dump right on that line. So is peak oil. Increasing oil prices are going to raise costs of doing all business. The problem taht is inflation is more than if some rich trophy wife spends $5k or $10k at the red tag sale.
MLH;
How are businesses going to afford higher input costs?
At this point I'm squeezed so tight that if I raise prices nobody will buy and if I lower prices I'll be giving stuff away for free.
Practically everyone I talk to is in the same boat. Commerce which can not support oil above a certain price don't chase that price, they simply close the doors. That locks oil in the ground; rendered too valuable to use (for the most part). Now you're left with only the oil which is profitable to extract below the going market rate. If the avg replacement cost is now $70/bbl, that leaves a pretty thin margin of available oil to drill for.
Lot of businesses already closed the doors and plenty more swirl the drain.
High oil prices will never happen in nominal terms, not unless the parabolic growth in credit demand can resume after its recent hiatus.
$50/bbl will be more expensive than current price
Global demand for oil is increasing at the same level as American/European/Japanese purchasing power is decreasing. It is a game of chicken, and the money masters are going full bore because if they do not then this current economy will be known for what it is, a shame. If that happened the dollar would collapse. If that happened oil prices would sky rocket. But everyone wants to keep the bed ridden ponzi alive, so the monie masters print. But once oil production turns the gig is up. This is the fine line the monie masters walk, and they do not control oil production. All the while main street suffers unjustly. Monie masters wish for this suffering because they think it creates obedience. They have been right so far, unfortunately, but there is one thing that has not been tested. An American uprising could do this.
So what exactly are these developing nations going to be doing to support higher oil prices? Most of these nations can't even afford to consume the very things they produce..
You're an advocate of decoupling? I can not possibly imagine that China could maintain 10% growth with oil approaching $120/bbl now and likely outright contraction in that case. Once America and Europe can no longer afford to buy the junk most developing nations produce it's game over.
Peak oil is so much more than high prices...it's oil being locked in the ground. The waste based economies are going the way of the gold standard.
China can produce and maintain any kind of growth they need because:
China remains a centrally-planned, communist dictatorship; part of what is centrally-planned and dictated are, Lo & Behold, Growth Figures! In China you produce the numbers or you get a trip on the execution bus to the organ-bank!!
-- of course we can trust that the Chinese would *never, ever* cheat on those numbers to dodge that white bus .... perish the thought!
yay we get 30% of the purchasing power of our currency back per 50,000 pounds of fiat! good job banana ben!
I am wondering how long this hyperinflation madness will continue to affect people.
Cotton price increases suck. My sensitive skin only tolerates 100% cotton clothing. Darned that Bernanke! Altho, many times 100% cotton clothes end up on sale because most people prefer the synthetic blends because they wrinkle far less.
Anything with an Agricultural commodity is going to go through the roof, not just cotton. Food. Especially food.
With clothes, it'll just be another excuse to introduce the latest, petroleum derived, cheap, crappy fabric as the cheap option.
Hexa-Cottonesque. The new cotton.
ORI
http://aadivaahan.wordpress.com
Cost-push inflation, bitchez!!!
Cost push margin compression, bitchez
Old man and his young son sip tea in China:
Dad whats that sound ?
Son thats the sound of inflation marching toward us.
What can we do about this ?
Nothing.
Buy gold, buy silver.
Simple.
Dad can we buy silver ?
Son, I'm not worried about my small funds I'm worried about the smoke pour'n out of the manufacturing complex.
Daddy they are not going to keep raising rates that will end in tears.
Son they will make the same mistakes as greenspan the bubble is here it to late ... we are fuckd.
~ Me no junk u.
No worries. Several people are quite angry with me today.
I learn a little something from everyone. You give your thoughts right or wrong thats the important thing because thats the only way you learn sometimes...
I enjoy the show. I love the fact ZH is global I learn a ton from many posters from across the globe ...
who is this Hypertiger with his gigantic pestilential brain who says things like...
"Bankers do zero except live off the yield from the bottom…there is no pause button.
When there’s a pause it’s because the bottom they are sucking power from has been either sucked dry or is refusing to supply the top with the power they are seeking.
Period end of story.
And if the top raises yields it will just inflate less than previous inflation faster.(deflation)
Or you think that increasing mortgage or long term exponential growth rates will cause real estate to recover?
Whipping an exhausted horse to gallop twice as fast as it just did the past 65 years is not going to work.
It’s over.
Fortunately since the bottom is oblivious of this…The collapse is very slow because the bottom is basically killing their selves fighting it like it’s a recession.
Day in and day out you all just keep marching to doom with glee.
And as long as it remains this slow…You all will liquidate each other for quite some time before becoming aware.(?!?)
Until then you all will claim irresponsibility for the actions of humanity but with no supporting evidence…well real evidence…not fabricated and planted for you supreme morons stumble upon.(sic!?!)
I hear them blasting you all 24/7 with lie after lie…then you idiots try to rebroadcast (sic-er)your interpretations of the lie to me…
Really…You all actually continue to attempt to convince me to accept the recovery lie you have embraced like good little drones.(psych)"
My guess is a Lebanese male, between 25-35, fairly-well educated; may have gone to an English-speaking school in France, graduating with a degree in business and a minor in economics; average student, nothing to write home about; his girlfriend is very beautiful but she wants to leave him because he would rather hang out with his friends than do his homework.
He blames his failings on the United States and the Zionist clutches of the bankers, as it is convenient for him to do that. He receives American radio and possibly some television, though he may only watch it at work, which would leave one to believe that he works in an open office and not a seperate cubicle, probably answering telephones or making cold call sales-pitches.
He really resents his failings and wishes his mother would talk to him more, give him advice, but she really doesn't see much in the game for him and he is too afraid to ask.
He resents Jews but refuses to specifically mention them by creed, so it may be assumed that he is not a very religious person. My guess is a former Christian who hates what the Muslims have done to his country but is sympathetic to their rantings against the usurious Zionists. He believes that the United States is itself a giant Zionist enterprise intent on destroying the world and rebuilding it in their own image and he thinks that that is the worst crime of all.
Other than that, I have no clue.
?"
so vote republican.
so vote Democrat then?
Vote for Ralph Nader then?
Zappa
son, confucius say
better for girl to meet boy in park but better for boy to park meat in girl.....
I'll tell you what we can do about it. Stop using fucking cotton. It's a shitty material to make clothes out of. It doesn't last, and it's not strong.
Hemp is superior in almost every way, and your clothes will last 10x as long.
(Which is why the manufacturers and retailers hate it).
I like linen as well. Hard to find either.
linen's cool yo, but hemp undies will make yo ass high
there is precious little out there that isn't technically superior to cotton. The reason cotton is so ubiquitous is because it is permanent press, machine washable.
Wool and linen beat the shit out of cotton, but they have to be line dried and taken care of. Cotton is a disposable fabric for a disposable world.
"Cotton is a disposable fabric for a disposable world."
well said trav...and so true.
Gives new meaning to that old slogan - "cotton, the fabric of our lives..."
"Cotton is a disposable fabric for a disposable world."
Just like USD's bitchez! Made from cotton.
If you think inflations is on the horizon? Wait till oil ratchet up the pressures next years.
[page 29, Sec1:29]
http://www.jfcom.mil/newslink/storyarchive/2010/JOE_2010_o.pdf
Wool undies ? No thanks :)
bamboo, bub.
(it's antibacterial)
I saw this coming and stocked up on underwear at dirt cheap prices.
Yeah I've been running my own Operation Stock (the Fuck) Up lately as well.
I really went hard for this call as well. Now I can sit on my giant pile of socks and gold and scoff at calamity.
"Gold and underwear, bitches" just doesn't have the same ring to it though...
I'll call that hand.
http://www.youtube.com/watch?v=WeKE0DR4e5k
Very interesting numbers. Everybody trying to hold the line on product price while factor prices continue to increase and then, finally, prices jump 30%, 50%, or more...I'm seeing same at the grocery store, where the 99 (looking for the cents sign on my keyboard...it's not there anymore) cent loaf of white bread I buy each week just jumped to $1.29, and etc. Looks like chopper Ben is getting his wish.
I notice this too. But if I'm paying more for bread I'm buying less of something else. Why? Because there are two ways I'm going to be able to pay higher prices - get a raise, or borrow more. Bernanke desperately wants us to do the latter, but it's not going to happen. Lasting inflation is created by increased credit as it means people actually have money in their hands to support higher prices. What Bernanke is doing is causing spikes in commodity prices where prices rocket up from liquidity only to rocket down when the liquidity realizes nobody can afford to pay.
The housing boom bust is proof of the danger of mispriced liquidity.
30% price inflation is in-line with the Feds mandate for price stability (after massive deflation following the largest credit bubble known to man kind)
17.1% (u-6) is in-line with the Feds mandate for maximum employment.
FUCKIN' FAIL. F+
The Fed = Failure
F+? +, really? Why so generous?
Indeud, I think the FED deserves a "Forced to Withdraw" on their transcript, rather than a grade point.
Why? Then it doesn't affect their GPA. I think their "core" numbers are too low as well, they need a 2.0 to graduate.
Maybe Bubblegummer Ben will have to give the Federal Employees a raise so they can afford some new threads!
meanwhile most of it is Genetically Modified and killing soil organisms plus allergies etc in those touching it..be much more expensive if environmental cost of the US not controlling its rogue companies was factered in.
Hey, don't let tomorrows little externalities stand in the way of todays profit... Just make sure your childrens futures are secure and let the poor kids pay for the mess. Its called democracy buddy ;-)...
LOL. Prolapse > collapse. The Ben Bernank is helping the Goldman Sachs.
Tomorrow we have PPI and on Wednesday we have CPI. Any hint of inflation will kill the treasuries.
Thank God the numbers are rigged :)
All I want it to know where those guys do their shopping, or they are the Kings and Queens of the double coupon!
Any uh-hint of inflation and the dollar moves down big.
The number will, miraculously, come in as expected at PPI +0.7% and the CPI +0.1%.
Now we know why polyester leisure suits were popular in the 70s.
Peak oil implies peak polyester ... thank gaud!
Well isn't that Divine?
I was thinking the same thing YHWH. But can we skip the bellbottoms this time and leave disco dead?
Just because Bernanke prints money does not mean that Goldman Sachs must drive up commodity and food prices.The two are NOT necessarily connected. They may just be coincidentally connected or one can be used as an excuse for another because gosh darn it, banks just can't help but take their new found liquidity and slam it into commodities because they are helpless victims.
The ignorant may also argue that Goldman's manipulation of commodities simple greed and not some coordinated plan to force China to use its collected dollars for commodity and food purchases.
I think this is long term trend, no bubble.
What's the problem here? This is exactly what the Fed wants--it's a win-win; the Bernanke saves us from the death spiral of deflation and he's making Chinese exports less competitive. Blackhawk Ben greets this news with a big Cheshire Cat smile.
Death spiral of deflation?? Yeah, it sure would suck if things cost less and our money went further. Instead we will have the fluffy bunny world of stagnant wages (if we have jobs at all) and rising prices. You're right. Ben is a genius.
Looks like the cme just raised margin requirements AGAIN on silver.
http://www.cmegroup.com/tools-information/lookups/advisories/clearing/fi...
TPTB are starting to panic
leveraged speculation can't be allowed to distort price signals.
I've got no problem with this...put the same requirement on any shorts including JPM or the large commercials, and let's get real price discovery
Timmah says "forget about cotton".
Global warming = less clothes needed.
Global famine = fewer fat chicks.
Combied result = naked, hot chicks.
Yet another problem solved in Timmah's "Book of Genius Solutions".
It's simple. People don't have the money to afford higher prices so demand collapses. Duh.
Is there anyone here who actually owns a business that sells goods to people? My problem is finding people with money to spend and everyone is screaming here about inflation. Lol
Take a walk down Main St and it even a person with a PhD would recognize that everyone is broke, how is all this newly created money going to be getting into everyone's pockets?
Can I get some velocity please?
Prepare to be schooled, then.
Happens all the time. A to Z, then A again.
Oh of course. But can you explain to me how this money is going to get to everyone so they can spend it?
I eagerly await your response...
degubmint better start mailing checks.
Bc that whole "let's dole it out to the bankers" trickle down shit went fuckin NOWHERE.
I mean, the rage that's going to be brewing. The 300 that were opposed to the whole TARP fiasco are not going to forget the 1 in favor.
Bankers got theirs...billion dollar bonuses.
Yep. People say Americans are generally worthless no-good bums but I think it's like the quiet kid you poked and prodded in prison to no avail and then tried to take his lunch tray and he sent you to the infirmary for a month.
Well I'll be honest...I think I've had the wrong mentality toward a lot of my fellow citizens. People are finally starting to stir a little bit. It starts as a trickle..
Americans are not the only ones with dollars. Deflationists always seem to forget this.
Further, money is being printed like mad. It can and will leak into the general economy as Federal workers, bankers spending bonuses, etc.
And continuing beyond that, how are we any different from Zimbabwe at this point? Why do YOU think it will be different this time?
Look I'll admit something to you right now.
I don't know a whole lot about economics, okay?
All I can tell you is that I wired 150 residential units in 2007, 6 in 2008 and 0 in 2009. Tools that used to cost a certain price I can find them for half that price today and far less than that in many cases. Making sense? The cost of a home is roughly 40% less than a few years ago. You go to a farmers market and prices are the same as a few years ago. I know guys out here who spend sleepless nights wondering where they're going to find dollars to pay their bills. Many are hopeless. And this whole time I've been hearing about how these helicopters are going to be here any minute now, they're right around the corner.
Well it's getting worse out here, you understand me? It gets worse every goddamned day for somebody trying to make ends meet. We'd love some inflation out here because that would mean people have jobs and income. Do you think that's what the bankers want? You think they want people to be comfortable? You think they want to give everyone dollars to wipe the slate clean? You're fucking crazy. You're fucking insane to believe anything that comes out of the Bernank's mouth.
Rant off
Amen...
The problem with all deflationists Jdrose is they only look at money supply or credit growth for signs of inflation. If you look at all governments that caused hyperinflation it happened through capital controls. An expansion of the money supply is only half the equation. The other half is cost push inflation which is caused by raising the cost of creating captial.
The other thing that deflationists get wrong time and time again is the fact that rising unemployment doesn't mean deflation, it is actually net neutral. When someone losses a job they also are no longer productive. The net effect is a loss of wages and a loss of goods/services. They both cancel each other out! Now it doesn't mean every job lost is net neutral because their are plenty of people out their that don't create as much capital as is lost from them losing their job, but on average you could say it is.
The reason why you are confused about this issue is rather simple, money supply has increased but DISTRIBUTION OF WEALTH has become highly skewed. The Supply/Demand curve makes the assumption that distribution of wealth is relatively even, but because of central planning (i.e. wealth confiscation through the fed) very few people control a lot of capital. This causes massive volatility in markets because each individual no longer priced out of the market can move a larger portion of wealth into what ever they want.
Now that is a well written and reasoned argument you have there in your third paragraph.
It is just of base. Your tools are going down in price for now because they are existing inventory. Same with houses. The market was flooded with more than was ever needed. I never pointed to the rising prices of power tools for evidence of inflation, in fact, I pointed to those as examples of things that have received their funding from credit, and has been subject to contraction because of it. Those things which are bought with cash ARE going up in price, no matter what you say.
If the prices at your local farmer's market aren't going up, then their portions are going down, or they started with margins so huge they haven't had to raise prices. Go to a low margin retailer like Walmart, and you are guaranteed to find smaller portions and higher prices than you would have found even six months ago. The problem is that most people don't need power tools, but they do need food.
Of note is that physical precious metals are also bought predominantly with cash, and are destined to keep up with rising food prices, and possibly even beat them. The paper price, on the other hand, is composed of both physical metal and paper metal, so its increase or decrease doesn't necessarily reflect the true market value (especially as fraud starts to be revealed to the public).
Further, you must understand that no-one thinks that Ben is coming to save them. NO ONE THINKS THAT. That is just a strawman erected by Mako. The helicopters are coming to DESTROY us. His implicit implication is that you can protect yourself by holding dollars, though he claims that that is not his advice, which leads me to understand that he thinks there is NOTHING you can do, and that he is instead a death worshipper. He never offers anything that can help anyone under any circumstance, which is why I hate him. He has no purpose, save to run around calling people lemmings and telling them the end is nigh like some damned street preacher.
Well guess what? We AREN'T all going to die next Thursday, and there IS a way forward. Inflationists think is it gold, deflationists think it is dollars, and the insane think it is stocks, bonds, and/or real estate. As a student of history, and the dozen plus hyperinflations of the last hundred years, as well as the deflations experienced by various nations under the gold standard, I am fairly sure that a, hyperinflation in dollar terms is coming, and soon, and b. deflation is happening in ALL sectors, but ONLY in terms of GOLD. In terms of debased dollars, you see deflation in some sectors (power tools and housing), but severe inflation in others (metals, food commodities, etc). Those sectors probably have further to fall.
If you really want a solution for what you should do, my advise is this: get out of the business of making new installations. Instead, get good at repairing things. People don't want to by new things any more, and they will want to keep what they have in working condition as long as possible. There aren't a lot of small appliance repairmen out there (I mention that because it seems to be up your alley). Nor are there a lot of tailors, shoe repair shops, etc.
Labor bills, printed by the treasury, legal tender, marked at exact value at the federal reserve note and traded in return for WORK.
That's the only way to get in there. If not, it's all delevering, even if the Yuan appreciates or demand increases for commodities worldwide...doesn't matter.
Bring back HEMP!!!!
Actually, it might be time to start investing in or producing hemp cloth....
Yes, produces 4x more fuel per acre than Brazilian sugar cane
I had a shirt and a pair of shorts in college that were made of hemp. They were the most comfortable clothes I have ever had for the price (ie short of silk or various nice wool blends).
Sure, plus the clothing is much more absorbent and practically indestructible. That and the fact that you can make more products from hemp and it's derivatives than petroleum and it's totally RENEWABLE.
Too bad it's illegal; the epitome of government corruption, crony capitalism and stupidity.
There are many types of hemp that are not illegal besides cannabis. The Chinese have several varieties of hemp, including ma huang, which produces ephedra. As long as you're not taking ephedra, you can use it to make all sorts of things, including paper.
fun facts on hemp:
*Hemp can displace cotton which is usually grown with massive amounts of chemicals harmful to people and the environment. 50% of all the world's pesticides are sprayed on cotton.
*Hemp can yield 3-8 dry tons of fiber per acre. This is four times what an average forest can yield.
more here -- http://naihc.org/hemp_information/hemp_facts.html
Yeah, we have a temporary price increase in clothes. You really think that cash strapped Americans or Europeans are going to buy all of that? No. Someone is going to eat those high prices. Whether it is Chinese producers or Crap-mart, someone is going to have their bottom line smashed and go bankrupt starting the cycle of debt deflation.
I'm not sure that you or many other Americans will forego new underware. I don't see people cutting back on spending on clothing before anything else.
You've got to have clothes.
You've got to have clothes.
Yes, but take a look at the size of the closets in pre-WWII houses.
+ 5 bedrooms.
How many middle class folks have closets full of stuff they don't wear? Or can't fit into because they gained weight?
Personally, I wear work clothes all the time. If I'm not working at work, I'm usually working around the place or hunting, backpacking etc. The end result is that my clothes tend to be very durable. Filson, Carhart, Red Wing etc. I could probably go five years without buying a stitch.
The move to look for is to quality. I remember when a pair of Levi's was a pair of pants. Now they're thin and cheap as shit. People NEED clothes, but not the cheap crap they buy every day and sell at garage sales. I spent $500 on my work coat, but I've worn it for seven years and will probably get twenty more out of it.
Several posters above were correct. Need and want are two very different things.
you'll never know freedom 'til you go...commando!
Food, Clothing, Shelter.
The Essentials.
Those will be (have been) the next quasi-"investment" bubble.
There is zero technological or environmental reason for cotton prices to soar 30%. Yet they do and its panic in the sheets. Same with food. If you saw that amount of food left in a field after harvest, well you would demand that food be socialized and delivered to market at "cost" - 20% of everything never makes it to the truck - sans corn for syrup. Shelter - well as time always shows, when times get bad the low end keeps and strengthens its value while the middle market gets its salad tossed.
Fear sells and nothing else can be trusted.
Stop passive investing and start a local business. Then you can enjoy 20% returns and actually make something with your time.
Hmm... Nail/tanning/beauty salon? Boutique deli/coffee shop? Passport photo & expediting kiosk?
Fuck gold...COTTON BALLS BITCHEZ
Hey, I've got cotton fields all around my house. I can walk out aver harvest and pick a fortune up off of the ground. Hell, some will blow across my yard in a strong wind.
Now that I think about it, it's too bad they can't just do that "value deflation" trick to mask inflation by shrinking product sizes for cloth goods as well. It might add some humor into the mix we're all about to deal with.
If they could at least do it to C-cup and up bras, I'd be a happy man.
You wear those sizes too? Any favourite colours?
OMG...you mean that chinese pair of jeans that cost $5 to make will now cost $7??? HOLY SHIT HOW WILL GAP SURVIVE?!?!?!?!!?!
Well if the markup is 10x, those $50 jeans are going to cost $70 now
They already do, for women.
Does anyone remember Gerald Ford's "WIN" button? Whip Inflation Now? I give 10 to 1 odds that Larry Kudlow has several of these. I dare him to wear it tomorrow. Maybe he can slip one to the Real Housewife of Wasila and she can wear it on Fox and Friends or some other network dive.
I remember WIN buttons. It's one of those "if I knew then what I know now" kind of things. Back then folks didn't seem to have a clue about the origins of inflation. It was like some sort of mysterious disease.
Cotton prices will crash, just like:
Oil
Natural Gas
Spring Wheat, etc. in 2008...
The recent price spike will be long forgotton in 6 months....
Oil demand is currently equal to oil production and when production turns to the downside what happens to price robo? What happens to the supply/demand curve when supply decreases but demand stays the same (demand for oil may continue to increase as well) robo?
Wheat crops in western Canada were awful this year - mostly feed grade. Combined with fires in Russia and drought in areas in the US will likely sustain high grain prices
Gemini, yo are right on the money. It's the food inflation that will finally provide the spark.
People can go naked and cold a lot longer than they can go hungry.
Gubmint sponsored soup kitchens? What a terrible thought. Worse yet, by the time that does come to pass (next month maybe???), people will stand, bowl in hand, grateful.
This really is a bizarre world, no moral hazard, no truth, no consequences.
ORI
http://aadivaahan.wordpress.com
That spark is (mostly) geoengineered.
Time to wake up and look at the skies.
Chemtrails, bitchez!
I hear you Green Leader. Lived for years in the Bay Area, prime spray territory.
From the air and from the water.
But they are spark inhibitors, making people less able to respond, no?
ORI
http://aadivaahan.wordpress.com
sneak preview: http://www.youtube.com/view_play_list?p=598FDBCC54AD4860 njoy :)
Nice succinct commentary Popo.
Blah. Here in California the restaurants are full, the concerts are packed and there are brand new luxury cars all over the road. Yes, vacant commercial properties are EVERYWHERE but that's just led to the ones still standing having their parking lots jammed.
There in California unemployment is 30%. Your state is tens of billions of dollars in the hole. There is a huge gap in wealth, so when that 30% unemployment turns into 30% homeless, I do not think the rich people will be partying in the streets.
@Azwethinkweiz
I live in the Bay Area in Northern California and am amazed also. Houses are selling,
restaurants are full, and it is impossible to find parking at stores. I feel that I'm living in the
twilight zone. Close friends of mine just purchased a new home and are very confident
their current home will sell at top dollar. Having 2 major homes in this economy doesn't faze
them in the slightest. Yikes !
+1, I feel like everyone around me is a complete and total moron... definitely twilight zone here in NorCal.
I live in humboldt county, and even in Arcata, a small town, it is obvious people have no freaking clue as to wtf is going on.
My brother tried that with two upper-end homes in Seattle. Three years later isn't he sorry.
It's amazing what trillions in government spending can accomplish, until the next meltdown turns up.
I've needed to buy new clothes for years. This warning might be the catalyst that finally gets me off my lazy butt to the mall. They're expensive enough as-is...
I think the Fed would be generally pleased with this. Perhaps they might even pat themselves on the back and say recent inventory building activity was due to their multi-month advertisement of QE2. Economic activity, hurray!
Bigger picture: the US is trying to get an elephant sized tick off its back (the CNY-USD peg), and the Achilles heal is that China needs to import commodities to mix with its efficient labor to export widgets to the US. As USD plunges, this gets harder. China should counterattack by announcing subsidies for commodity purchases powered by its massive current account surplus (held in FRN). Then it would be on like Donkey Kong!
People that pay full-retail for clothing are either irrational economic actors, misinformed, stupid, insecure, or have money to burn.
My wife has a closet full of "luxury-brand", in perfect condition, clothing that would retail for about $30K. We, no kidding, probably paid around $300 or $400 for it. Oh, that doesn't include the $100 we pay a fashion savvy college girl to scour goodwill and other resale joints every other month or so.
Apparently the mega-wealthy buy luxury brand clothing and wear them once or never, and then donate the clothing. The beauty is the poor people, literally and figuratively, charged with pricing the clothing for resale have no idea about luxury brands. It's insane - an Old Navy shirt will sell at a premium to a luxury brand because the people pricing the clothes do not recognize the latter brand but are familiar with the former.
The "rag trade".
I know just what you are talking about, my wife does the same thing. You see the outlet brands going for more than top end $100+ articles of clothing.
Fuck! I thought cost-push inflation was supposed to rekindle aggregate demand, not force companies to operate at a loss! Shit!
...ooooh, I'm looking for demand-pull inflation. Geez, I haven't made that mistake since Econ 101.
-Ben S. Bernanke
So... commodity prices are being pushed up while American workers are out of work or experiencing cuts in hourly wages and salaries. How does this translate into price inflation again? No, what happens is they try to pass this on and they go bankrupt, meaning more unemployed who also can't afford such items.
You can't have meaningful price inflation so long as wages are held down via global wage arbitrage against a slave labor camp masquerading as a "capitalist" society.
EXACTLY!
call JP Morgan and Cargill to find out how high do they want Cotton price to go
If you have to ask the price you can't afford it.
-J.P Morgan
"...you'll wear leather clothes that will last you the rest of your life, and you'll climb the wrist-thick kudzu vines that wrap the Sears Tower. "
You mean I can finally wear my leather pants in public?
Fetish bitches!
And you will lose your shirt too.
Hah. Maybe if we planted cotton here in Arkansas and built a Loom, we might get something started again.
China china china. Phooey.
Time to adjust the language and say the words:
USA, USA, USA. We did it before and can do it again. We dont need the Chinese and thier problems.
"Never mind collapse, corporate margins are about to prolapse, possibly turning negative. Guess what that means for record S&P EPS estimates for 2011."
At least we can seek solace and consolation that EPS is no longer a criterion that is in anyway correlated to where POMOBucks end up. [sarcasmspasm end]
Pure speculation is all it is. In all markets prices are pure perceptions beholden to each holder. In this case speculation passed onto consumers by smart retailers early in the speculative curve. A giant waste of time and at best provides evidence of significant market distortions/manipulations. I'd bet on manipulations from the money czar.
My pillow s from the motherland are stuffed with pure unprocessed cotton, once broken in, the most comfortable pillows you'll ever sleep on!
the music's playin bitchez
shut up and dance
we'll have plenty of time to comiserate afterward
New margin requirement increase for gold:
http://www.cmegroup.com/tools-information/lookups/advisories/clearing/fi...
"Bernanke's inflation exporting model is about to backfire with a vengeance. In this most direct consequences of excess liquidity-driven near-hyperinflation, the best possible outcome would merely a total collapse in margins."
Margin collapse is what Karl has been talking about at market-ticker for quite sometime now.
Bernanke needs to be clobbered for all the mistakes he has made in the past and is making now..
Time to dump this cretin!!
KD is spot on with his call about margin collapse. Let's see how Ron Paul dices up Ben... time for another circumcision!
Sure the impact of Timmay and Bernanke are not doing anything to help the outlook for inflation however this article would be more beneficial if it actually showed the realistic flow-through effects that will be felt by customers at these large retailers. The margins on their clothing products are extremely wide and the more expensive the garment the wider it gets.
I've been manufacturing and sourcing textile, light industrial and healthcare/medical devices from the Far East for a decade and price rises come and go. Sure as a short term blip the raw commodity price instability is and will effect factory solvency but longer term it will be dealt with and the world will learn and adjust. Consumers will simply shift to products they perceive hold better "value" rather than shitty throw away rags. We normally see increases in menswear/womenswear sales for slightly better quality garments in leaner economic times as people wear the same thing for longer.
In Australia/Canada/US/Europe - our customer's suits, shirts, socks, you name it normally cost between 10-14% of RRP label MAXIMUM. Using back of a napkin sums this makes a $5 t-shirt from Walmart that cost 50-75c more like 75c-1.00 - and that is f&$%ing generous given they are probably buying at half that again with the volume and factory @$$ raping policies they use.
This will not translate into markedly higher prices because the large retailers have already wrung the life out of the chinese factories when the GFC hit and have been happily banking the extra margin they didn't have before. Netto the impact on the retail consumer will be mid single digit increases at best. COGS is far less important than rent, salaries, freight and logistics costs as a component of end unit price paid by the retail customer.
That's just my opinion and feel free to slate me, but at times we ring the alarm bells so often there is a risk of crying wolf.
That aside though there is still no excuse for the printing press mentality, I am surprised people in the US haven't enacted their own "lobbyists will be shot on site" policy in the vicinity of Washington.
Thx for reading and am extremely grateful to all of you for contributing this amazing resource here at ZH.
Fantastic post. Thanks for posting.