The Capitalist Investor - Episode 106

The Omicron variant, supply chain issues, and inflation –– it seems like everybody is getting hurt. Mask mandates are once again being implemented in cities all over the U.S. regardless of vaccination status due to the rising fears of the new Covid-19 variant. What kind of economic turns come out of mask mandates? How can we learn to adapt with Covid without breaking down local economies, increasing inflation and deterring people from working again? We’re tired of seeing people get hurt. Mark “Johnny Lawrence –– Cobra Kai” Tepper is joined once again with Derek “Diamond Hands D” Gabrielsen and Luke “Cool Hand Luke” Lloyd as the three tackle these hot topics and more on Episode #106 of “The Capitalist Investor.”

Outline of this Episode

  • [2:10] The economic standpoint of mask mandates
  • [12:55] Boosting the American economy.. What if?
  • [20:05] Everyone is still getting hurt by inflation
  • [21:40] Politics influences money
  • [30:00] Reactions to the PPI’s new high

With mask mandates comes economic restrictions

Since the Omicron variant has overtaken the majority of Covid-19 cases, state-wide mask mandates have been reimplemented in California and New York. The vaccine is no longer enough even though we were all told it was the “cure-all, end-all.”

So people are back to wearing masks again indoors at restaurants, stores and major events –– that is if they will be going to those places anymore. Mask mandates come with economic effects. They’re not just mandates, they are restrictions for businesses. People will be less inclined to go to major sporting events if they have to mask up or show a negative Covid-19 result. People will eat out less if they have to sit at their own table with a mask on.

With mask mandates come the risks of businesses closing their doors and shutting down again, along with travel restrictions. The restaurants that were on life-support a year ago are once again at a disadvantage. Mandates and restrictions brought by Omicron fears are going to hurt local economies and deter business.

We were told that variants were going to show up. Didn’t we want a more transmissible, mild variant? We’re going to have to live with Covid-19 for a long time, we can’t restrict or close the economy every time. Local businesses are run by people and it’s going to be them –– who barely made it out of last year –– that are going to hurt the most by mandates and restrictions. We have to come up with better and more manageable ways of living with Covid-19.

What if the U.S. moved its supply chain closer by and brought more jobs into America? What if, right?

America has the biggest economy in the world but lately it isn’t looking like it –– between the labor shortage, inflation and the supply chain issues, we’re not using our size to our advantage and we’re too dependent on other countries’ production outcomes. Being the biggest economy, we’re also one of the biggest net importers. But what if we were to change that?

The majority of manufacturing and production jobs in America have been outsourced to different countries in order to drive lower prices and pay lower wages. But are the lower prices always worth it when our supply chain production is no longer in close reach and so many Americans are out of work?

It’s just an idea, but maybe someday we should consider moving those outsourced jobs back to the U.S. We have to think in the long term; this isn’t a short term approach since inflation and the cost to produce goods is so high right now. But there has to be a way to get people back to work again and to strengthen our control on global production and the supply chain.

Maybe to fix one issue we have to fix another first and we should start with the supply chain. The truth is: not enough people want to go back to work yet. Pandemic level unemployment benefits have given people a taste of a lifestyle that they don’t want to give up.

The current system of our supply chain is not working –– we are depending too heavily on countries that are not accessible or within our reach. We need to have relationships with other countries, but we need to be more independent and diversify our supply chain. The U.S. has negotiating powers, and it’s time to use them. In order to stimulate our economy and envision a supply chain that’s within our reach and control, we should utilize and create relationships with newer, closer countries.

PPI and CPI numbers are showing that inflation is not easing and can get worse

We don’t know anyone who hasn’t felt the effects of this inflation crisis. It affects us all no matter what side of the spectrum you’re on: the seller or the consumer. We need the Fed to be aggressive; it needs to tighten and taper.

At the time of recording, we saw one of the highest producer price index (PPI) numbers that we have ever seen before. The year-over-year headline PPI reached 9.6 percent –– the highest level since records date back to 2010.

PPIs are used to measure the average change over time in selling prices perceived by the producer of goods and services. Basically, PPIs are inflation measurements that come from the eyes of producers or businesses; high PPIs mean that producers are seeing consumers pay more when they buy products. Similarly, high PPIs reflect high inflation rates since consumers are paying more as prices keep rising.

PPIs eventually get passed onto CPIs, the consumer price index. CPIs are inflation measurements that consumers perceive –– it measures the average change of prices over time.

CPIs are more heavily regarded to measure inflation than PPIs since they are the most successful at determining cost of living changes. With high PPIs come high CPIs –– we just saw one of the highest CPI rates in over 30 years at 6.8 percent. With these current CPI and PPI rates –– inflation is only going to increase within the next month.

Businesses are now left to make decisions: to absorb the cost increase or to pass it onto consumers. But no matter what, the consumer and the producer will both be hurt. Everyone’s bills are going up and we have to play this long-game out.

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