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Blackvegetable » 28 Jun 2022, 9:54 am » wrote: ↑

28 Jun 2022, 9:54 am

https://finance.yahoo.com/news/inflatio ... 22403.html



It “increasingly looks like markets mistook [the] 'bullwhip' effect of supply chain (including food) for secular inflation,” Tom Lee, Fundstrat’s head of research, wrote in a note Sunday.

 The “bullwhip effect” describes, roughly, the tendency of businesses to over- or under-estimate the amount of inventory they will need relative to consumer demand, resulting in volatility in orders across the supply chain.

 In the case of the past year, retailers over-estimated, leading them to broadly over-order from wholesalers, who then in turn over-ordered from their own suppliers – leading, in aggregate, to a major mismatch between consumers’ actual demand and inventories on hand. The bloated inventory levels at Walmart (WMT), Target (TGT), Gaps (GPS) and other retailers this past earnings season served as recent examples of how this effect played out in real-time.

 “I do not believe companies want to permanently carry higher inventory. It is expensive … and introduces huge balance sheet risk,” Lee said. “Thus, companies will want to trim inventories when supply visibility improves. The logical implication, for me, is prices will come down.”

Blessed are we, Master Vegetable, to live in your era....Huzzah!