Hey, it’s summer 2021, is it inflation, I don’t know, or is it a temporary price disruption? What does that even mean? Right. What’s going on right now? Everything seems to be going up in price. And you’re worried, like, is my money not going to be able to buy me as much of these normal goods that I would this same basket of goods? So we’re going to talk about how a free market economy generally fixes itself, how capitalism is a real thing. Others substitute goods.

Now there’s something called equilibrium. We’re going to talk about yo yo price effects and how that goes into effect. We’re going to talk about that.

Things might actually go lower in the future. I don’t know what we’re talking about. Is it really hackers and sabotage and some other things that are playing a big role in here? Or is it just opportunistic people? There’s a bunch of different items all rolled into this ball called inflation.

And we’re going to discuss that right now. My name’s Mike Acquisto and I’m a real estate broker by day and a thinker by by evening. And let’s go ahead and talk about what we have here with inflation. So with inflation, we’re going to take a look at an article, we’re going to chat that link into Unitab, have two different links that we’re going to kind of discuss.

So, Omkar, if you would, let’s go ahead and pull that bad boy up and see what we got. So I have two links. Let’s go with the first one that’s there with the money talks News.com article. So I’ll let you grab that one real quick and perfect. So if we scroll down here, what we have scroll down just a little bit and we’ll see what we get here. Whoa. All right.

Looks like I put the wrong link in there, so that’s not going to really help us out there. What I’m going to do is just briefly discuss the items then and see what’s going on. I definitely didn’t want to discuss the three best vacuum cleaners that are going on out there.

So maybe, Omkar, if you would, just go ahead and grab me a link on items that have been hit by inflation in twenty, twenty one? I don’t know. I chatted in that wrong link. But you’ll pull that up here in just a second for me. But let’s talk about the free market and kind of how it fixes itself. So what we have right now is we just got done with this whole virus thing right here in the US and we had all types of disruptions and people had a choice on what to do.

So I’ll tell you how we reacted to this big major event. Right. So what we did is we stopped spending completely and we went into like this deep freeze. And then in doing so, we were like we were sincerely nervous and we had no idea. And we were holding on super tight to every single deal that we had and were like, I don’t know, are we ever going to close any more transactions? It’s going to take place. And then what we find, what we saw was deals kept closing in just about every single thing closed, and all of a sudden their bank account built up.

And we got to this place in this weird spot where, like new business just continue to come in. And it wasn’t a huge disruption. If you actually look at it business wise. I mean, it was a disruption for sure. And we had to do things differently. But like, business just continued on and you felt bad and you felt weird. And there were all these types of things that happened.

But from an actual business standpoint and you look at revenue and whatever, you would hardly notice what happened. And you might be like, oh, something happened, but it wasn’t it wasn’t a big deal. And now business is actually back and it’s up more than it was last year, year over year. So was there an event? I don’t know from a business perspective.

So that was how we reacted to it. But a lot of people took and did different items like they’re going to shut down their factory, they’re going to lay off people. Right. There were actions that people took and those actions when they take them, takes a long time to start those back up.

So sometimes when you put things into mothballs or you freeze it or you sell it or you don’t renew the lease or whatever, that happens to be right. You don’t buy that new piece of equipment, it becomes difficult to get started back up. So to move that ball takes a long time. And I think we’re seeing that in a lot of different places. Right.

So those are some of the items that are really affecting us now is to restart that. You know, we’ve seen different problems with whether it’s in cars and automobiles and the chips, whether it is in video processors, that there’s a problem there, whether it’s with computers, that we need a lot more of them.

All of a sudden, there’s this huge demand because everyone started to go to work from home and all these students were at home in computer sales are up like crazy. Right. It’s a weird thing to think about this before this event took place. Right. How long did you have your computer for? Right. You look at your desktop and you’re like, oh, my computer is fine.

Like, I use it. It kind of became an Internet machine. And all you did was go to the Internet on your computer. So people were extending the lifetime of their desktop. Then suddenly you get in the situation, well, you’re like, no, I’m going to work from home. My kids are home and I need multiple devices and whatever that is. So computer sales were through the roof.

So that caused the problem supply down the road. Right, because it just changed dramatically. But what happens with each one of these different items is there’s an equal and opposite reaction because we here in the US have a free market economy and things will bounce back. So what happens is we may run into one of these things called a yo yo effect.

So that’s a real thing, and it’s kind of like a rubber band when it gets stretched a little bit. So imagine, I guess, talking about computers here, right? All of a sudden we had this demand on computers and people were like, we need more of them. Right? There’s more work from home.

There’s more kids at home. So we need more computers. So there’s a rush on all the components that go into it. So everybody starts ramping up and they ramp up, ramp up, ramp up. Right. And now we have all these new parts, new suppliers, new things, new technologies, a lot of advancements that kind of went on during that time frame.

And then people buy these, but now they’re under there’s a huge demand, so the supply catches up to it. But what happens sometimes is you have a supply that continues to accelerate and people get better and better at things because like all the way off the charts, we have this rubber band effect and it’s like cold and stretched. And then all of a sudden what happens is we don’t need as much demand anymore because we’re not going to always need to buy those things at the same exact rate once they’re kind of purchased. But we built up all this extra supply.

We had people that jumped into this business. Right. Do you think that there’s as much PPE that’s being purchased right now? Is there was exactly a year ago, I don’t know, would be something you could look up and imagine all these companies that jump in to respond. Right. And they started all these new businesses and they bought all this new equipment and they ramp up. They’re like, oh, it’s going to be a thing, right? They ramp it up and ramp it up.

And now we have all this production capacity. And then all of a sudden we have this rubber band effect where we don’t need as much anymore. So now what happens? So the price is going to drop because all of a sudden this stuff is there and we have all these masks and you’re like, well, I’m not buying them at the same rate I was before.

People are hoarding them. There’s not this stuff going on. So now all of a sudden we have this like price reduction in the future. So we’re talking about is it inflation or is it more of a temporary price disruption? Right. So what I think you have here is each of these different items were hit in different ways. So whether it’s lumber that we hear, the price is going up.

Do we think in five years that we really have a lumber problem? Right, these different components, so there’s glue that goes into it, there’s shortages on all these different components, whether it’s like cars, right. Do you think that in five years from now there’s a shortage of cars? You think like we don’t have enough cars in five years? I don’t know. I don’t I don’t think so.

I think we’ll get back to it. Gasoline prices went right back up and spiked back up. Why? Because things are happening now. There’s more shipping now. There’s more stuff. So we’ll make up for these things. We’ll come back. And what I think you’ll see is that humans adapt and adapt really quickly. And what you’re going to have is that we had temporary price disruptions, we also had some extremely untimely things have also started happening as we had OP opportunistic people who did all types of different attacks.

So we had hackers and hijacks and people who are doing like ransomware. And that was going on for like the gas lines and the pipelines and for the electric grid. And there was different things there. So now we had price spikes over there because we had these problems.

But that is completely different than the virus or they’re unrelated items, and are those going to continue? I don’t know. I’m actually more worried about them long term than I am of some of the supply problems that we currently have, because for those you can’t predict. But what we’re going to see is there should be more chip plants built.

There is probably going to be way more chip plants built than they need. There’s going to be more capacity added on for each one of these different items and going to have this rubber band effect. And we will have the same basket of goods that goes up and cost short term.

But then I think we’re going to have this relaxation of what actually takes place. And all of a sudden we’ll go back the other way and maybe we’ll have deflation. So when you look over a period of time, I don’t know, is there going to be something that goes on inflationary? Well, yes, of course.

We’re reopening the economy. We went from like a gangbusters economy to, like, hitting the emergency brake as hard as you could, just grabbing it and like, hold on to anything and like Fred Flintstone style and put your feet down and try to stop it with anything you could. Right. Like, go home. Don’t leave your house like everybody. The whole world. Stop.

Yes, of course, the economy was bad, so now it’s starting back up and we ramped this back up and there’s going to be a problem. And there’s all these different items that were in short supply. And we have opportunistic people because they happen to be sitting in this seat and all of a sudden things come to them and are like, I have the item that everybody needs, like who needed a hand sanitizer before this, right? Was that really a thing?

There was like all these germophobia have like this tiny little one. But there was all these opportunistic people when all of a sudden they’re like, I have the hand sanitizer in today’s the day that everybody needs it, so I’m just going to raise my price. Right.

Do we think long term that hand sanitizer is going to be an expensive item, do we think it’s going to cost a lot more? Right, we see all these things kind of starting to come down in price, so we had the lumber that went like way up and it’s like, oh, is never going to stop and somebody’s going to come down while all of a sudden there’s substitute items for that.

So you talk about lumber and you’d use a lot of it for, you know, for for building. And then there’s substitute building materials, so for the wall, for the studs, there’s steel that you can use. So in commercial projects you have that. So it’s only going to go so high because there’s this substitute item and then that will come in and adjust for it. Right. We have other items.

So plywood went up. Now there’s recycled plastics that are composite that are similar to plywood that are stronger and cheaper and recycled and may be a better use for. And you’re not cutting down the tree and you start looking at all those things and you’re like, is that more eco friendly? To use something like this, it won’t rot. There’s no risk of destruction from something like termites. So is that a better alternative? Humans are pretty ingenious.

You’ll see a lot of adjustments whenever there’s an opportunity, the opportunity will be filled. That void will be complete. And what you’ll see is probably going to go back the other way. So that’s my prediction for you. There’s going to be a lot of yelling and prices.

Prices are going to be up short term. But if you look over the course of five years and we look back and we’re going to be like, huh? I was weird, but I don’t think we’re going to have any hyperinflation, so inflation is to do with this same basket of goods.

So now I do have this link over here. We’re going to show the second link on the consumer price index and show you what this basket of goods is. So there’s this arbitrary basket of goods that has to deal with inflation. And it’s how much money does it cost me to buy this basket of goods? And it’s all these different consumer goods. And if we take a look over here, what we’re going to see is there’s been a huge change in one of the big categories.

So this categories went up like crazy. And what it is, over the last 12 months, we’ve had a huge change in energy cost. Well, yeah, no one drove a year ago, everyone was locked up and staying at home and no one was doing anything. So we didn’t drive in.

Remember when oil actually went negative, when you had to pay people to take it for like this? You know, I don’t know, several hour time frame oil had a negative value for some of these future contracts. Well, that’s gone. Oil seems to be right back up for it was we have all these things going on, right? Like we have EVs and everything else.

And then somehow you look like, huh, there’s still a lot of oil being used. So as we look at this, this is one of the biggest changes for us. And that that that’s the biggest kind of jump that sticks out to me. And as I look at that kind of thinking, it’s kind of logical. So what we had over the last quarter was a five percent inflation rate. And then we look at that.

And is that kind of logical? When you restart an economy, when you go from, like being on life support to being let’s go do everything with all this pent up demand kind of only makes sense. So what do I lead to at the end? You’re probably sitting there and you’re thinking like, what is Mike really think? Maybe not.

Maybe you’re not thinking that. But if I look at it, I see temporary temporary disruptions. I see bigger threats, actually, with things being shut down due to hackers and sabotage and international type events there. I see weird things that we had happened recently, like fires taking this out, wildfire doing this. All those things cause huge disruptions as well.

All right, I think we’re gonna have enough chlorine over a period of time, I think we’ll adjust from this. We went to this global economy of things being super cheap relative because they were all produced at the lowest, lowest price place and they were centralized in one location across the world.

So when something happens there, we have this just this disruption. I don’t think that’s going to continue, I think we’ll maybe get a little bit smarter and we may have a couple of smaller ones across the globe to make up if these things take place. And there’s going to be opportunistic people who want to make money, because after all, we do live in a free market economy and these things will all repair themselves and we will be just fine. Inflation, my friends, uh. That’s my thought.

Episode Links

Mike Acquisto , consumer price index , real estate broker,

Episode Recorded Live on YouTube 6.17.21

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