Click to enlarge.
All exponential trends eventually fail. This one is no exception.
Real apparel prices (inflation adjusted) have seemingly stopped their downward spiral at about the same time real potato prices have seemingly stopped their upward advance. Also note that this chart has been relatively flat over the past 5 years (we're no longer on the exponential trend line in red). Coincidence?
This is great news for those of us who have hoarded apparel in recent years. It is also great news for those who couldn't figure out a way to hoard potatoes long-term.
Lucky me! ;)
In all seriousness, I look at this chart and wonder if the Commodity ‘Super Cycle’ May Be Coming to End. It doesn't help that I'm not bullish on China, nor have I been since 2007.
This is the part that I find most interesting. Perhaps it was not a coincidence. As real apparel prices fell, something else (like potatoes) had to go up in order for our central bank to meet its 2% inflation target. So what happens to the real price of other things if real apparel prices can no longer fall? Perhaps they can't go up. It's a rather simplistic question and the answer is simplistic too. Of course, that doesn't mean it isn't right. Who can say for sure?
In any event, I am definitely not in the hyperinflation camp (at least not anytime soon).
Just something to think about. This is not investment advice.
Source Data:
BLS: CPI Database
http://www.potatodays.com/unique/fashion.html
ReplyDeleteTJandTheBear,
ReplyDeleteThere is no entry fee.
First prize is $25, second prize is $15 and third prize is $10.
More money is going to make it to Main Street than all of Bernanke's helicopter drops combined! ;)
Gallows humor!
Since a great deal of apparel is made in China and a few other developing countries, the end of the marginal supply of low cost labor seems like it would be a key factor in apparel prices ending their decline.
ReplyDeleteNo, just like with agriculture, the availability of low cost labor has simply delayed the movement to full automation. I suspect the U.S. will once again have a vibrant textile industry, only it won't employ that many people.
ReplyDeleteFor what it is worth, this is what I said in a private email yesterday.
ReplyDeleteIt is my opinion that apparel prices are probably about done falling compared to overall American inflation. It's just an opinion though. On the one hand, most apparel has been outsourced to other countries where labor is cheaper. On the other hand, there could still be downward pressure on relative prices if automated assembly lines replace human workers entirely. That's certainly probable over the long-term.
Mrs Dawg is after me to cull my polo shirt count. 64. Now I have all the data necessary to reverse her mind using logic alone. Right?
ReplyDeleteSeems to me that all the deflationary components are going to stop deflating all at once. At the same time the Fed knows full well that they won't be able to call back even a fraction of $3t they've stuffed into the banks. Even a little leaking out at 12x leverage has got to go somewhere and it won't be stocks.
Rob Dawg,
ReplyDeleteMrs Dawg is after me to cull my polo shirt count.
Oh the humanity! ;)
Seems to me that all the deflationary components are going to stop deflating all at once.
I'm still torn on this. Can we keep 7 billion people busier than a monetary printing press? It's a serious question and I don't have too much of an opinion.
Even a little leaking out at 12x leverage has got to go somewhere and it won't be stocks.
That's certainly a concern of mine long-term. I didn't exactly name myself Deflationary Mark. Sigh.