World Food Crisis

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Inflation Winners And Losers
BY TYLER DURDEN - THURSDAY, JAN 27, 2022 - 05:50 PM

https://www.zerohedge.com/markets/inflation-winners-and-losers

So let's highlight a few winners and losers in a self-reinforcing inflationary spiral.

Asset inflation driven by zero interest rates and a tsunami of central bank liquidity will lose steam as rates rise and the liquidity spigots are turned off. As mortgage rates rise, already overvalued homes will become even less affordable as the number of buyers who can afford much higher monthly payments recedes toward zero.

Local governments dependent on skyrocketing real estate valuations driving higher property taxes will be losers.

Bonds paying 1% interest are losers once rates click up to 2% or 3%.

Stocks are a mixed bag, as the relatively few companies with unlimited pricing power may benefit from inflation, but the majority will be pressured by higher labor, materials, shipping and energy costs, plus higher taxes and fees as the claw-back from capital gathers momentum.

Consumers are losers as costs soar, but service workers with pricing power are winners. The Federal Reserve can print $1 trillion in an instant but it can't print experienced welders, plumbers, electricians, accountants, therapists, etc., and very little of this labor can be replaced by low-level (i.e. affordable) automation / robotics.

Farmers who have been decimated by decades of low-cost imports might gain some pricing power as adverse weather, higher shipping costs and other factors increase the cost of imported agricultural commodities. Corporations with quasi-monopolies on essential industrial minerals/metals such as magnesium, nickel, etc. will have pricing power due to scarcity and the wide moat around their businesses: it isn't cheap to set up competing mines and acquire rights to the minerals.

As a general rule, keep an eye on inelastic demand and supply. Elastic demand refers to demand which can ebb and flow with costs--the classic substitution mentioned earlier in which costly beef is replaced by cheaper chicken. Elastic supply is ranchers responding to much higher beef prices by increasing their herds.

There is always some elasticity in demand and supply as conservation, new efficiencies, recessions, etc. can stretch or shrink supplies and demand. But demand for essentials such as fertilizer, energy and food can only drop so much, and supply can only increase by so much.

The clear winners in inflation are those who require little from global supply chains, the frugal, and those who own their own labor, skills and enterprises in sectors with relatively inelastic supply and demand. The losers are those who are entirely dependent on global supply chains for essentials, wastrels who squander resources, food, labor and money and those gambling on the quick return to zero-interest largesse and endless trillions in liquidity.