Inflation Might Get Much Worse

One of my favorite people to read every week is John Mauldin and here is what he wrote based on his trusted contacts in Shanghai that has been in a 3-week complete Covid shutdown--

“This is what three weeks of downtime does. Ships arrive and can’t unload or be loaded because the workers who would do it are in lockdown, so they pile up. Remembers the stories last year about Los Angeles and Long Beach? Shanghai is that same situation on steroids.”

Next John writes about Russia and its energy industry—

“Schlumberger and Halliburton have left Russia. How do you keep your wells operating, let alone drill without them? I can guarantee you that US production would fall dramatically if those two companies decided to not operate in the US. They are vital to world oil production. Russia doesn’t have that expertise, let alone the equipment. This will be a slow-moving development, and sadly, it means energy prices will keep rising. “

What does this mean for us in America? The global supply chain crisis is about to get much worse. Second, energy prices will keep rising across the globe. Third, because of Russia’s War food prices will continue to rise. All of this will create additional inflationary pressures which could easily spark inflation into double-digit territory. The Fed is now fighting inflation head-winds that are at hurricane strength it appears.