Dude, Where’s My Stuff

Link: https://am.jpmorgan.com/us/en/asset-management/institutional/insights/market-insights/eye-on-the-market/dude-where-is-my-stuff/

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Excerpt:

COVID has disrupted supply chains in two major ways: surging demand for imported consumer goods in the West due to pandemic work from home trends and other home improvement spending, and a decline in workers required to maintain and operate these supply chains. The surge in US import demand has led to a sharp rise in eastbound freight rates (see charts for Shanghai->LA and Shanghai->Rotterdam). However, westbound freight rates have not risen nearly as much, leading to an odd and problematic phenomenon: incentives for container owners to move them back to China empty to accelerate receipt of eastbound freight rates, instead of waiting for containers to be refilled to earn westbound freight rates as well. This is illustrated in the fourth chart which shows departing containers from LA/LB: a lot of them started leaving empty once eastbound freight rates surged. This further exacerbates supply chain issues, since US goods (i.e., grains) that were supposed to depart US railcars and warehouses for export remain in place, occupying space that US imported goods were destined for. 

Author(s): Michael Cembalest, Chairman of Market and Investment Strategy

Publication Date: 27 Sept 2021

Publication Site: JP Morgan

The Supply Chain Crisis: How We Got Here

Link:https://www.nakedcapitalism.com/2021/10/the-supply-chain-crisis-how-we-got-here.html

Excerpt:

Nevertheless, the motivations for outsourcing IMHO are not properly understood. In the auto business, which is typical of a lot of US industry, direct factory labor cost is 11% to 13% of product cost. The offsets against that are greater supervisory and coordination costs (longer shipping times and financing costs, and with that, greater risk of being stuck with inventories related to products that aren’t selling well) and just plain old screw ups due to having more moving parts.

In other words, outsourcing is better understood as a transfer from factory labor to managers and executives, at the cost of greater operational risk.

Author(s): Yves Smith

Publication Date: 11 Oct 2021

Publication Site: naked capitalism

Bond Yields Have Been On a Tear Since August 4. What’s Going On?

Link: https://mishtalk.com/economics/bond-yields-have-been-on-a-tear-since-august-4-whats-going-on

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Excerpt:

Five Factors Spooking the Bond Market and Impact

Debt Ceiling Battle: Short Term, Low Impact

Supply Chain Disruptions: Medium Term, Medium Impact

Trade Deficit: Long Term, Low-to-Medium Impact

Biden’s Build Back Better Spending Plans: Long Term, High Impact

Wage Spiral: Long Term, High Impact

Author(s): Mike Shedlock

Publication Date: 8 Oct 2021

Publication Site: Mish Talk