Inflation or price gouging

One behavior that I have noticed over the years is that when the dost of goods goes up the retail price goes up in proportion (or moire) rather than just raising the retail price by the amount of codt of goods increase. Another is that it is very easy to increase the price on some item due to a temporary increase in cost of goods but the price seldom goes back down when the cost of goods drops again.

Somehow, we have gotten into the mindset that in order to get competent people, we have to pay outrageous salaries. Corporate boards are certainly in that mindset. They want the corporation to grow beyond their wildest dreams so only the best people will do and in order to get the best, you have to pay the highest salaries. The trouble id that they usually don't get the biggest bang for the buck. I have seen too many of those corporate wiz kids flop. It's not just the corporations. The same thing is happening on professional sports and in the entertainment industries. For that matter, look at collegiate sports.

While CEO salaries are for the most part outrageous, it isn't the whole picture A 10 million$ salary for the CEO of a company with 10 billion$ revenue won't create the kind of inflation we are seeing..
 
I can get around the high prices by using scrap metal and wood on my projects. But insulin is another matter. If it was not for the VA, I'd be paying several hundred a month. One reason that insulin is so high is that basically three companies that make it. So, it is a monopoly. My wife had a cousin that died because he was not able to afford the insulin.
 
Aaron_W said:
I think diesel demand has increased significantly since the 1980s.

Diesel didn't surpass gas engines in big rigs until the 1970s. Diesel pickups were not really a thing until the 80s, diesel cars did start to show up in the late 70s but with the exception of Mercedes Benz most diesel cars were not very popular (and I'm pretty sure sales of diesel MBs were much smaller than gas powered).
Ford and GM introduced diesel pickups in 1983, Dodge introduced a diesel pickup in 1989. These were work trucks, soccer mom's wanted nothing to do with these slow, noisy, soot blasting beasts.
VW turbo diesel cars had a brief spurt of popularity in the 2000s before emissions regulations caught up to them.

These days you never see a non-diesel big rig and diesel pickups have become trendy, with many people buying them for status, not because they actually use them for doing truck things.

Many states also have a higher tax on diesel than on gasoline, and my understanding is that heating oil production competes with diesel fuel production which can raise the price of diesel in the winter time.

Fuel refining is vary advanced these days with refineries being very capable of breaking down less desired petroleum products to their base molecular structure and reformulating them into more valuable products. A lot of historically cheap petroleum products like naphtha and kerosene have seen price increases because what were once basically waste products are now made to meet the demand for them, any excess can be used as fuel stocks for other products.
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The energy content of diesel is higher than gasoline so the oil companies can justify charging more.

Some details:

Diesel fuel produces 128,488 Btu/gal while gasoline produces 112,114 – 116,090 Btu/gal

It takes 30 percent less diesel for a compression engine to travel the same distance as a gasoline spark-fired engine because of the higher efficiency of the diesel engine.

Ariel
 
LATE POST | I wrote this around noon but it didn't get posted. Late as usual, that's me.
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It's all of the above and then some. I realize that political discussions are forbidden. But what it comes down to is political. The proverbial "helicopter money" has to come from somewhere. So we pay the price for it. I can't go any deeper without breaking the law about politics.

I follow the following web sites among others:
Steve Quayle
Mike Adams
George Ure
Don't much agree with everything, but they have good insights into what is going on. I list below a CR & LF so the list can be removed if it's too touchey politically.

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woodchucker said:
The stock market is what helped kill this country. When only the rich and corps were in it pre 1968 or so... Companies had long term goals. When 401k's and people started investing themselves in mass, the goals changed, we went from long term to short term profits... get your money and get out.... The stock market does not represent what companies are doing or should do.

Do you remember the Miliken age. If a company was doing well , profiting, their stock dropped like a brick... if a company was hurting the stock soared... They were killing companies to sell of the pieces. Again .... the stock market not being good for America.
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My portfolio is up 12% YTD as of closing 2/18, so I don’t think your comments are universal. There are plenty of great companies that make excellent returns in an unstable economy like we have at present. Consumers are still buying toilet paper, and sofas for their LR. But if you aren’t savvy enough or interested enough to be selective in equities, then an index with a 5 year horizon is likely to be rewarding. By far, the last 3 years, my best plays have been in residential real estate.
 
Some basic points:

Diesel went up, because the government asked the refineries to prioritize gasoline over diesel production a few years back. A barrel of crude oil can be fractionalized to make a variety of products. If you optimize for one, you get a reduction in other products produced from that barrel. Right now, most voters are more concerned about the price of Gasoline, the additional cost of diesel is "hidden" for your typical suburban voter. Certainly, truckers and farmers are strongly impacted (and aware) of the cost of diesel, but they are only a small portion of the voter pool. For any elected official, raw numbers of voters is the name of the game.

Inflation on goods is certainly visible. Every now and then I ask myself "how much would this cost me to make". I have a small machine shop, along with welding equipment. The answer is typically "I cannot buy the raw materials, and justify the time to make it, for the cost I could buy the part for". How much would you charge to make a new alternator for your vehicle? How about a brass fitting for high pressure pneumatics, or even a part, like a new impeller for your vacuum cleaner. I considered making a new welding cart, but after pricing all the parts (sheet metal, chain, wheels, axles, etc), I realized I could buy one cheaper than I could make one (I don't have a metal scrap yard nearby).

The economy of mass production still makes it hard for a smaller business to start up, and survive. There will always be a market for custom or bespoke items, but it will always be a small market.

We will certainly see people complain about the high prices, but we won't see the common man put in an apple orchard, even though the price of apples has gone up on the store. We won't see people in large numbers start sewing up a new pair of blue jeans.

Let's just face it, big businesses know the public is not going to start making "their own stuff" in any real numbers. The only thing that will slow them down is when the public stops buying. Once interest rates go up, we will see the tide start to shift a bit. Or, at least we will see it on higher priced items, which normally require a loan to purchase.
 
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davidpbest said:
My portfolio is up 12% YTD as of closing 2/18, so I don’t think your comments are universal. There are plenty of great companies that make excellent returns in an unstable economy like we have at present. Consumers are still buying toilet paper, and sofas for their LR. But if you aren’t savvy enough or interested enough to be selective in equities, then an index with a 5 year horizon is likely to be rewarding. By far, the last 3 years, my best plays have been in residential real estate.
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What part of my comments were about how your or anyone else's stocks did?

I had nothing to say about owning a portfolio. Only that the stock market is not good for most companies. While it is supposed to raise money for them, it affects their planning. Instead of planning long term goals, most shareholders are interested in how the price is today, not tomorrow. So the goals change from long term to short term. That may be good for the stock, but it's not good for a company.

Some companies align well with the stock price. Some companies have nothing to do with the stock price...
 
Aaron_W said:
I recently saw a discussion of this. Big companies are showing record profits since 2020. Increased prices to cover costs would not equal increased profits so clearly some are taking advantage of the current situation. There is little competition among huge corporations anymore.

This popular illustration shows how few tool companies exist today. The tool market is actually rather competitive compared to some. Only a handful of companies dominate the food and fuel markets.

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Smaller businesses are in a tight spot, they have little control over their costs and have to pass on higher costs to remain profitable.
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I think I’ll stick with Makita.
The government inflation figures for 2021 was 7% I believe.
This seems low to me.
The printing and infusion of trillions of dollars makes our cash worth significantly less. IMHO
 
woodchucker said:
What part of my comments were about how your or anyone else's stocks did?

I had nothing to say about owning a portfolio. Only that the stock market is not good for most companies. While it is supposed to raise money for them, it affects their planning. Instead of planning long term goals, most shareholders are interested in how the price is today, not tomorrow. So the goals change from long term to short term. That may be good for the stock, but it's not good for a company.

Some companies align well with the stock price. Some companies have nothing to do with the stock price...
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Where will the real estate bubble top out?
We’ve been looking for a replacement home for over a year now. The last three years has realized double digit increases year over year.
Our investments in securities did well the past three years as well. About half of our money is in less than moderate risk categories since we are retired.
 
mmcmdl said:
I just have to wonder where all these unfilled jobs are they talk about every day
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They are everywhere. And the argument that people are staying home because the government is sending out their economic recovery checks is no longer valid.
Andersen Windows is a large window manufacturer based not too far away from me. I drove by one of their smaller plants a few weeks ago and there was a huge hiring banner on the outside of the building. Starting wage was $26/hr with yearly bonuses of $56K. That is over $100k to go put windows together. Nearly every business around here has a sign out looking for employees. The current unemployment rate is 2.8% in WI. I always figured that at least 5% of the population was unemployable.
 
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