Taps Coogan – October 13th, 2021

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David Roche, Independent Strategy President, recently spoke with CNBC to warn the supply chain problems we are witnessing are going to be long lasting and squeeze corporate profitability.

 

Some excerpts from David Roche: 

“There was a day when even things like gas markets were purely national. Now it’s a global crisis. The shipping crisis is a huge crisis. China’s power crisis is mirrored in the UK… In the background we have those nice people in Russia who are turning off the gas taps because they want to screw Ukraine probably screw the rest of Europe into the bargain so that they can get the North Sea pipeline open…”

“The thing that really amazes me is that the supply chain crises, which are really supply and demand crisis, a lack of balance, have really come to the fore after the pandemic in so many sectors in ways which I think are durable so they will cause inflation in ways which are not transient.”   

“If you look at demand after Covid, as soon as demand is freed up, as soon as your can go to restaurants… you get excess demand… and that of course fuels profits. Now you’ve gone over the top… how many restaurant meals can you eat? How many holidays… can you actually take? Now once that happens… demand starts to converge towards a trend growth rate which I suspect is much lower after the pandemic than before. As that trend growth effects the top lines of companies, the costs do not stop going up… because we have all these supply chain disruptions. So, you get an immediate profit squeeze which surprises everybody and should surprise no one…”

There is more to the interview, so enjoy it above.

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