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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Silver Super Bull who wrote (8454)	2/22/2004 8:21:39 PM
From: mishedlo	Read Replies (2) \| Respond to of 110194

As I have posted previously, who in the supply chain is going to "eat" the price increases in raw materials?? It can't be the distributors or retailers - they can't afford it given their margins. It can't be the commodity producers. So that basically leaves the manufacturers or the final consumer as the one who will bear the increase. I don't think the manufacturers, as a group, have the desire or financial cushion to eat the price increases, and some of the articles Russ has posted indicate they are passing on the price increases to consumers. What % of finished product prices are commodities? As long as outsourcing EXTREMELY expensive labor to China and other places continues, there was plenty of slack to avoid price increases. Commodity prices are one of the smallest components of FINAL price. Now, once outsourcing is finished or if wages start to climb we have a different situation. Where are we on that manufactoring curve? I do not know. But companies can make up for that not only in manufactoring costs but other labor costs: accountants, call centers, product design, etc etc etc. I would say we are far far less along on that curve. Finally you ignore as does Russ, the affect of price on demand. Just what do you think will happen to auto demand if they raise prices $2,000. Hint: car sales already suck this Q. My wife has a GM lease and they are begging us to trade it in 6 months early with no penalty. I asked the dealer how things were. He said EVERY car dealer in the area was struggling, not just GM. While I think there MIGHT be an ATTEMPT to raise prices, I doubt many will stick. Perhaps toilet pater tissue rises. Big deal. Someone posted a PPI of +.8%. Frankly I thought it would be worse. Gold and silver prices are falling with the rise in the US$. All it takes for Copper to plunge is for demand in China to fall off a bit, that mine strike to be settled or the US$ to keep rising. What happens if we get all three? Look at consumer confidence. Plunging like a frigging rock. Historically that has meant consumers pulling in their horns a bit. You expect price hikes to stick in the face of that? I don't. I think IF they hike and buying falls off, that buying will NOT resume at prices from which we came. Just a theory no better or worse than any others perhaps but I almost forgot...... rising inventories amist this all. This economy is on the edge right here and if the stock market starts plunging look out nellie. Mish