With the aim of finishing up our year-end message by the weekend, I'll simply quote from economist Peter Boockvar's morning note, on inflation, offer up a quick comment, and, as usual, report the morning numbers.
"...a good proxy for the industrial sector because of the number of SKU’s the company distributes and the breadth of customers it has in terms of markets, MSC Industrial Direct (MSM), reported earnings last week for their fiscal quarter ended the end of November. It thus is a recent snapshot of company activity until we see Q4 numbers from most everyone else in 3-4 weeks.
They said this in response to their lower gross margins seen in the quarter, “First one is that we’re planning for a sizeable price increase early in calendar 2022 to respond to the increasing pace of inflation that we continue to see from our suppliers. And second, we’ve launched an initiative to improve price realization across our sales, category and marketing teams in the coming months…As a result, we expect to achieve our goal of keeping gross margins roughly flat for the fiscal year (ending August 2022), beginning with a bounce back in Q2.
They added this on what they are seeing: “Strength was seen across most segments of the industrial economy, with automotive being the largest exception. On the other hand, supply chain and labor constraints remain tight, creating ongoing challenges with scarcity of supply, inflation and continuity of operations. We’re hearing that supply and shipping constraints may ease in the coming quarters. Although, we’ve not seen much evidence of this ourselves to date. Labor shortages remain severe. In fact, hiring and staffing, even our own operations is a challenge.”"
Note: We are seeing signs of easing supply constraints, and, as we've stated, we expect inflation pressures to moderate early next year. Long-term, however, odds clearly (in our view) favor a higher inflation rate than we've grown accustomed to these past several decades.
Asian equities were mixed overnight, with 8 of the 16 markets we track closing lower.
Europe's leaning green this morning, with 13 of the 19 bourses we follow trading up as I type.
US major averages are rising to start the day: Dow up 94 points (0.26%), SP500 up 0.28%, SP500 Equal Weight is up 0.29%, Nasdaq 100 up 0.38%, Nasdaq Comp up 0.56%, Russell 2000 up 0.90%.
The VIX sits at 16.83, down 0.71%.
Oil futures are up 0.97%, gold's up 0.05%, silver's up 0.90%, copper futures are up 0.32% and the ag complex is down 0.20%.
The 10-year treasury is down (yield up) and the dollar is up 0.07%.
Led by MP (rare earth miner), Viacom, Latin American equities, solar stocks and ALB (lithium miner) -- but dragged by uranium miners, German equities, carbon credits, AMD (chip maker) and utility stocks -- our core portfolio is up 0.27% to start the session.
So very true in investing: emphasis mine...
"To consort with the crowd is harmful; there is no person who does not make some vice attractive to us, or stamp it upon us, or taint us unconsciously therewith. Certainly, the greater the mob with which we mingle, the greater the danger."
Have a great day!
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