Rates are starting to go up

"Something's happening here, what it is ain't exactly clear" - Buffalo Springfield, "for what it's worth"

Everyone I talk to gets the feeling something's happening beyond what we're all witnessing or hearing about on the news. Most can't put their finger on it but it's there like a bad smell. There's no shortage of good reasons to have a sense of impending calamity but yet everyone is just trying to carry on as best they can. Forget about planning anything farther out than 90 days though.

This week I'm seeing the first signs of rates on money creeping higher. I don't believe this is related to the 0.5% increase the Fed did but more a culmination of pressures related to budgets blowing up on projects due to fluctuating prices and the risk that follows.

What is a little concerning is that a large number of merchants haven't yet paid April rent (over 32%!) despite demand being robust at the retail level. Demand is falling off however on shipping rates while the cost of Diesel Fuel has made trucking prohibitively expensive; so much so that real, lasting damage to our already stretched supply lines and the thousands of companies that rely on it is unavoidable at this point.

Bill Driegert, co-founder and head of operations at Uber Freight, said spot shipping rates have plunged 30% since January and this is putting pressure on contract rates as overall demand remains flat.

This weakness upstream combined with the seemingly purposeful destruction of our basic needs supply-lines like parts, PVC, Fertilizer and baby formula are about to crush the "recovery" unless they fire up the printing presses again and send us all another boatload of dollar bills. They've been pretty busy printing up a bunch of new dollars for Ukraine ($40 Billion lol) so they're bound to give small business some more right?....Right??

Some business owners are taking matters into their own hands by creating alternatives to the government gatekeepers and allowing the free market to do what it does best - create opportunity:

Crews will start work this fall building the Sustainable Beef plant on nearly 400 acres near North Platte, Nebraska, and other groups are making similar surprising moves in Iowa, Idaho and Wisconsin. The enterprises will test whether it’s really possible to compete financially against an industry trend that has swept through American agriculture and that played a role in meat shortages during the coronavirus pandemic.

Rates are a reflection of risk which is increasing across the board. Lenders meanwhile need to stay competitive to keep their funds at work. This tug-of-war will probably keep sudden increases away for now but the window is closing as I have said many times before.

The best way to prepare is to lock in fixed rates now and use the proceeds to purchase needed materials which might become more expensive, unavailable or both.

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