Shipping container Inflation! (700%)

[DDTSGM]

Nothing new or earthshaking, but an interesting article:

https://www.nytimes.com/2021/10/11/b...nnah-port.html

On this afternoon, under a merciless sun, the port is on track to break its record for activity in a single day — more than 15,000 trucks coming and going. Still, the pressure builds. A tugboat escorts another ship to the dock — the MSC AGADIR, fresh from the Panama Canal — bearing more cargo that must be parked somewhere.

In recent weeks, the shutdown of a giant container terminal off the Chinese city of Ningbo has added to delays. Vietnam, a hub for the apparel industry, was locked down for several months in the face of a harrowing outbreak of Covid. Diminished cargo leaving Asia should provide respite to clogged ports in the United States, but Mr. Lynch dismisses that line. “Six or seven weeks later, the ships come in all at once,” Mr. Lynch said. “That doesn’t help.”

Early this year, as shipping prices spiked and containers became scarce, the trouble was widely viewed as the momentary result of pandemic lockdowns.......Once life reopened, global shipping was supposed to return to normal.

But half a year later, the congestion is worse, with nearly 13 percent of the world’s cargo shipping capacity tied up by delays, according to data compiled by Sea-Intelligence, an industry research firm in Denmark.

[Paul D]

I wonder if they have cardiac techs and nurses on those cargo ships.

We cannot find enough people to staff our hospital. A lot of these folks become travelling nurses/techs who join companies who use them as hired guns in other states. One guy I know now makes $6500/week as traveler. No staff + No hospital beds = no revenue generating elective surgeries for the hospital.

I'm also starting to worry about medical supplies and drugs. When that hurricane hit Puerto Rico a couple of years ago, we couldn't get a certain device because it was all made in PR. That was a nuisance but a majority of generic drug makers are overseas. That kinda is concerning for me.

[Caballoflaco]

Then there’s this.

Alabama school district warns of food shortages, asks for parent help after deliveries fail


https://www.al.com/news/2021/10/alab...ries-fail.html

Alexander City Schools has asked parents to start feeding their children breakfast at home or to send them to school with a snack because the district has not received food deliveries from their vendors.

“We have taken action to open accounts with other vendors in an attempt to diversify our supply options,” officials said in a Facebook post on Saturday. “This is a situation that is frustrating for you as a parent, and for us as well as our ability to feed our students is being greatly impacted.”

Alexander City had 2,870 students last school year, with 65% enrolled in free- and reduced-price meals, according to data from the Alabama State Department of Education.

Read more Ed Lab: How Alabama schools are battling food shortages with warehouses, long hours.

Alabama schools continue to face food shortages as the pandemic impacts the workforce needed to serve and deliver meals, as well as supplies of food and packaging materials. Every school district in the state is currently facing these shortages to varying degrees, according to the department of education.

[GJM]

There is a lot of noise out there, and while it is easy to be distracted by loud noises, the question is what will ultimately happen. Here is my problem with equity and real estate asset values. First, start with equity and real estate valuations pre Covid. Now consider how many people died, how much money we spent on direct Covid care, how much money in stimulus, how tangled supply chains have become, and what we have learned about China. All of that should, by my way of thinking, make valuations lower not higher.

[farscott]

My view on real estate prices is essentially simplistic; the price is driven by the monthly mortgage payment, not the sticker price. The budget is monthly payment; not transaction price. With 30-year interest rates low at around 3%, the $1000 P&I mortgage principal is approximately $237,000. That same $1000 P&I mortgage payment on a 30-year mortgage at 6% is approximately $167,000. And 6% is historically a low rate. If the Fed gets serious about inflation, we might see rates closer to 8% than 6%.

When long-term interest rates increase, real estate prices will crater. When that happens, we will see people trapped in homes because the mortgage principal is greater than the value of the house as most any new buyer will only be able to borrow at the higher rates.

[TGS]

My view on real estate prices is essentially simplistic; the price is driven by the monthly mortgage payment, not the sticker price. The budget is monthly payment; not transaction price. With 30-year interest rates low at around 3%, the $1000 P&I mortgage principal is approximately $237,000. That same $1000 P&I mortgage payment on a 30-year mortgage at 6% is approximately $167,000. And 6% is historically a low rate. If the Fed gets serious about inflation, we might see rates closer to 8% than 6%.

When long-term interest rates increase, real estate prices will crater. When that happens, we will see people trapped in homes because the mortgage principal is greater than the value of the house as most any new buyer will only be able to borrow at the higher rates.

Wow, 6% is considered a historically low interest rate? Sheesh. I should really count my blessings; I just bought a place and my interest rate is 2.25%.

Or, rather than a blessing is this a curse? It's not like the mortgage has a provision for balloon payments, but am I as a low-information consumer with this low interest rate now causal to some macroeconomic problem that isn't readily apparent to me?

I recognize that I'm buying at what is likely the height of a bubble and if I try to sell in the next few years there's a good chance I will owe more on the mortgage than the house is worth, but I was okay with that since the alternative is renting where I'm just throwing the money away to begin with. Just a single year of renting would be equal to being underwater in the mortgage by $30k, the way I look at it, and thus better to buy now and at least get a low interest rate than only be able to afford "half the house" if I were to wait to buy until after interest rates spike.

[peterb]

Wow, 6% is considered a historically low interest rate? Sheesh. I should really count my blessings; I just bought a place and my interest rate is 2.25%.
.

http://www.freddiemac.com/pmms/pmms30.html

[farscott]

Wow, 6% is considered a historically low interest rate? Sheesh. I should really count my blessings; I just bought a place and my interest rate is 2.25%.

Or, rather than a blessing is this a curse? It's not like the mortgage has a provision for balloon payments, but am I as a low-information consumer with this low interest rate now causal to some macroeconomic problem that isn't readily apparent to me?

I recognize that I'm buying at what is likely the height of a bubble and if I try to sell in the next few years there's a good chance I will owe more on the mortgage than the house is worth, but I was okay with that since the alternative is renting where I'm just throwing the money away to begin with. Just a single year of renting would be equal to being underwater in the mortgage by $30k, the way I look at it, and thus better to buy now and at least get a low interest rate than only be able to afford "half the house" if I were to wait to buy until after interest rates spike.

Some of us have had mortgages with rates exceeding 15%. And not on subprime mortgages. 6% was a good rate until the early 2000s.

Being underwater on the mortgage is not necessarily bad -- until it is. That usually happens when one wants to or must move and cannot sell the house without making up the difference. If you plan on staying long enough for prices to recover or the mortgage to mature, there is no downside. And since housing prices are really tied to the monthly payment, one does not lose any money by buying when prices are high other than increased property taxes on the higher assessed value. I would say insurance as well except my experience is even when valuations drop, insurers do not lower rates whereas my property taxes actually decreased after the 2008 crash.

[GJM]

http://www.freddiemac.com/pmms/pmms30.html

Look at 1982!

[Oldherkpilot]

Wow, 6% is considered a historically low interest rate? Sheesh. I should really count my blessings; I just bought a place and my interest rate is 2.25%.

Or, rather than a blessing is this a curse? It's not like the mortgage has a provision for balloon payments, but am I as a low-information consumer with this low interest rate now causal to some macroeconomic problem that isn't readily apparent to me?

I recognize that I'm buying at what is likely the height of a bubble and if I try to sell in the next few years there's a good chance I will owe more on the mortgage than the house is worth, but I was okay with that since the alternative is renting where I'm just throwing the money away to begin with. Just a single year of renting would be equal to being underwater in the mortgage by $30k, the way I look at it, and thus better to buy now and at least get a low interest rate than only be able to afford "half the house" if I were to wait to buy until after interest rates spike.

I haven't rented in 30 years, but I always try to remember that renting isn't always the waste of money some proclaim it to be. What sort of rents are you looking at to be the equivalent of $30 grand underwater? Its easy to forget the TI part of PITI. The real estate taxes, homeowner's insurance, repairs and upkeep can make the outlay on rent seem less wasteful in some circumstances.
My youngest son's girlfriend had her heart set on buying in Columbus, OH a few months back. The market there requires a large cash down payment as the houses were going for $20-30,000 over appraisal, so she couldn't get bank financing and had to postpone buying. I was pretty relieved, as i was worried about the bubble.
I'm not trying to change your mind, just pointing out another perspective. Good luck however you decide.