Finding Fertile Ground in This Perfect Storm

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In today’s Money Morning…gaslighting the public is business as usual…a perfect storm…where does that leave us?…and more…

The prize for most out-of-touch take last week goes to financial news outlet Bloomberg.

Check out the offending tweet:


Fat Tail Investment Research

Source: Twitter

[Click to open in a new window]

No meat for the plebs on less than $300k a year, I’m afraid. It’s lentils for you from now on!

The article even talks about letting your pets die to save money on vet bills.

I mean, seriously?!?!

Unfortunately, as I’ll explain shortly with a very worrying chart, cost of living pressures could be about to go ballistic.

But first, let’s see why stupid media like the above is at least partially responsible for this mess…

Gaslighting the public is business as usual

What’s most galling about the Bloomberg article is the idea that it’s somehow our fault for the out-of-control price rises.

And — in their words — we need to ‘reconfigure our consumption’.

Of course, there’s no mention of the extreme actions of central bankers over the past few years. No mention of record-low interest rates and extreme monetary interventions that have pumped the world with cash.

It’s simply ‘our fault’ — those earning less than $300k that is — for wanting too many unnecessary luxuries.

Like a piece of steak.

Or a pet…

This elitist viewpoint is symptomatic of Bloomberg and other mainstream financial outlets.

The sad truth is, they’re merely mouthpieces for the corridors of power.

I actually made the mistake of watching Bloomberg’s ‘Opening Bell’ segment while at the gym last week (thinking it would help me get up to speed with markets while I worked out).

Instead, I was treated to a series of breathless reporters covering various ‘important’ political meetings.

G7 meetings, EU minister roundtables, Fed bank minutes…

They’d solemnly recant various diplomatic statements spewing out from said meetings as if they were Holy Scripture.

No questioning of the narratives being pushed, no intelligent scepticism, or holding officials to account.

Instead, they’d get their favourite analysts from Wall Street to talk about what this comment or that comment meant.

I quickly remembered why I never usually watch this garbage.

It’s basically a parlour game of people who want to seem important, alongside those that prop them up to sound intelligent.

The problem these days is a lot of these ‘important’ people think they’re gods. They think that they can solve the world’s problems with divine legislation.

And the mainstream press laps it up. It doesn’t matter that they get things wrong most of the time.

Remember when we were told inflation was ‘transitory’, for instance?

Now, it’s ‘lentils’ for thee.

Which brings me back to the most worrying chart on the hyperinflation front I’ve seen to date…

A perfect storm

Of course, inflation was never going to be transitory.

The Russia-Ukraine conflict certainly isn’t helping. But it’s a convenient excuse for what central bankers had already gotten wrong.

Don’t forget that.

Though the conflict is exacerbating things, no doubt.

Not only because of its well-documented impact on oil prices, but also on wheat.

Russia is the world’s largest exporter of wheat, accounting for 18% of global supply. And Russia and Ukraine combined is 25.4% of global supply.

That’s a lot of supply under threat in the short term that’ll ripple out into the price of staples like bread, cereal, and beer.

But that’s not the worrying chart I came across on Friday.

No, it was this:


Fat Tail Investment Research

Source: Twitter

[Click to open in a new window]

Make no mistake, this parabolic fertiliser price chart is very bad news for everyone — not least the poorest.

A blog piece from Doomberg (a much better source of financial news than Bloomberg, in my opinion!) had a particular worrying viewpoint.

They wrote:

The tempest caused by the European energy disaster has merged with the hurricane of consequences flowing from Russia’s invasion of Ukraine, forming the genesis of a generational crisis in food that will leave few unaffected.

Continuing…

The coming crash in global food supply will be driven by a similar phenomenon across virtually every input into farming — they are all spiking to historic highs simultaneously, supply availability is diminishing across the spectrum, and the time to reverse the worst of the upcoming consequences is rapidly running short.

You can read the piece in full here.

But the reasoning is pretty simple to follow.

A lot of fertiliser products are derived from natural gas. So when natural gas prices increase, they do too. Plus, a lot of these fertilisers naturally come from gas-rich Russia.

Unfortunately, it’s not the only farming cost rising fast.

Diesel is also another big input for commercial farmers, and this is going up rapidly as well.

And in this modern day of technology, even the global chip shortage is having an effect on farming operations.

As reported:

Jim Boyer, an Emmet County farmer, had a similar, personal anecdote. He’s awaiting a $40 emissions-related sensor for his tractor, and he’s not sure if it will arrive anytime soon.

“I cannot drive that tractor — a quarter-million-dollar piece of equipment — because I cannot get that sensor,” he said.

A perfect storm for a melt-up in food prices?

Maybe…

Where does that leave us?

To be honest, I’m not too sure.

The thing I’ve learned in markets is that it’s a complex game of action and reaction.

And there could even be some investment opportunities for Australian energy companies, fertiliser producers, and farmers in all this.

It’s a fertile place to be digging, in my opinion.

But what I do know is that many of these current problems have been exacerbated by bureaucratic meddling from elitist politicians, cheered on as usual by their lackeys in the media.

For example, the current energy problem in Europe was always an accident waiting to happen.

I’m all for action on climate change, but you can’t be myopic about it. You need to look at the entire spectrum of outcomes, and clearly, ideology overtook reality on this front.

I mean, what did they think leaving Putin in charge of their energy needs would lead to?

Then there’s the fact that central banks over the past decade have created debt-ridden economies and zombie industries that can’t survive on their own two feet.

It’s why the likes of Bloomberg constantly report on the political class like they’re all that matters to the economy. In a way, that’s exactly what the bureaucrats have created, but that’s never the way it should be.

Lastly, the increasingly hyper-partisan politics have created deep divisions between — and even within — countries, simply to allow elites to profit.

Are free markets perfect?

No.

But I think we’re learning in real time the cost of a bureaucratically-managed economy. And it seems clear to me we’ve leaned far too far in that direction.

Maybe it’ll take an almighty food crisis to open our collective eyes to what’s really going on?

I hope not…

Good investing,

Ryan Dinse Signature

Ryan Dinse,
Editor, Money Morning

Ryan is also editor of New Money Investor, a monthly advisory aimed at helping investors take an early-mover advantage as decentralised finance and digital money take over the world. For information on how to subscribe and see what Ryan’s telling his subscribers right now, click here.

About Ryan Dinse

Ryan Dinse is an Editor at Money Morning.

He has worked in finance and investing for the past two decades as a financial planner, senior credit analyst, equity trader and fintech entrepreneur.

With an academic background in economics, he believes that the key to making good investments is investing appropriately…

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