Have you ever run a “channel check?”
This is a technique used by fund managers — especially those focused on retail stocks — where they examine a company’s distribution channels as part of stock analysis.
For example, if you go to a Lululemon store and there aren’t any “sale” signs, odds are the fundamentals are looking good.
But if you run into an Under Armor and half the store is a clearance rack…
That tells you the store hasn’t been able to push inventory, which could hurt the stock. After all, they have cash tied up in inventory… and they have to cut the price to move that inventory…
Shrinking their margins.
This may be new to you, but I bet you’ve done it over the past two years when you go grocery shopping.
I’ve seen two interesting things recently.
The first is that toilet paper went on sale for the first time since the pandemic:
That’s a massive signal, potentially telling us that paper processing supply chain issues are starting to resolve.
In other areas, the global economy is still experiencing a “cascade failure,” as the supply chains show.
It’s why you can buy fresh corn, but there’s somehow a popcorn shortage at the same time:
It’s how you can buy soy products, but baby formula has to be airlifted in from Europe.
And it’s how, every time I go into Publix, you can buy sugar right off the shelves…
But Gatorade continues to be in short supply.
That’s just on the food side of things– it’s getting worse in other pockets.
Consider the crack spread.
This is the price difference between crude oil and refined products like gas and heating oil.
It’s on a tear — not because we ran out of oil, but because our refinery processing is down significantly.
And it’s about to get weirder.
Think about our electrical grid. You’ve got lines, substations, generators, transformers… a lot of parts to make the grid work.
This could get ugly:
Transformers are used to “step down” the voltage on the grid. This a downshifts power from a plant into an energy that won’t explode your house circuitry.
Big problem: There aren’t any transformers out there.
If you’re a new home builder, you’ve got to get transformers to send power into the homes. And there’s currently a THREE-YEAR BACKORDER on them.
That’s just for the “nice-to-have” transformers.
What if our power grid gets overloaded? What if there’s a hurricane or a rolling blackout in a major city?
How quickly could things get fixed?
Because we’re pivoting away from lines on a chart to people dying from heatstroke, and cities implode as emergency services aren’t available to cover all the problems.
Not to get dark on you, here, but it’s vital to at least keep these things in mind. I’d rather be safe than sorry.
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Original Post Can be Found HERE