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I don't understand why this isn't a bigger story. Why isn't the stock market reacting at all? GM, Ford, Toyota are shutting down car plants because they can't g

I don't understand why this isn't a bigger story. Why isn't the stock market reacting at all? GM, Ford, Toyota are shutting down car plants because they can't get parts, and the financial system shrugs! At work, we sell robot kits and parts to schools. Schools are coming back from summer break. We are completely out of stock of every complete kit and many important parts. We're missing out on maybe 50% of our sales for the year because we can't get inventory. What the hell am I supposed to do for the next six or twelve months, sit at my desk and whistle? We have literally nothing to sell! I look at a car mechanics subreddit, and the exact same story: no parts, customer vehicles sitting in the yard for a year waiting for replacements: https://www.reddit.com/r/Justrolledintotheshop/comments/podimy/parts_availability_bitch_sessionjoin_me/ https://www.reddit.com/r/Justrolledintotheshop/comments/podi... The situation reminds me of February 2020, after the first COVID deaths in the US, with comments on HN by managers talking about complete carnage in the sales forecasts, but the markets floated along, ignorant of reality. For a while.

Gys 5y ago
I think for the economy in general the effect might be small as long as the final consumer spends the money on alternatives. For example I buy a Ford instead of a Chrysler (which is unavailable due to missing chips).
- tonyedgecombe 5y ago
  I’d imagine manufacturers are shifting what capacity they have to higher margin products and pushing up the prices on those products. It’s probably a good time to slaughter a few sacred cows as well. In some ways it could be good for them.
  - Gys 5y ago
    'Rather than relying on the traditional volume-based sales target, the two [Mercedes and BMW] aim to sell fewer cars and make more money.' https://www.motor1.com/news/532591/mercedes-bmw-keep-prices-high/ https://www.motor1.com/news/532591/mercedes-bmw-keep-prices-... If this happens in a large scale, inflation will rise.
    - delecti 5y ago
      I work at Mercedes and can confirm that my (company performance based) bonus was great this year for exactly that reason. It's been weird doing so well personally while everything is going crazy.
- jcims 5y ago
  That's probably true if it were the case, but it seems that entire industries are impacted.
mschuster91 5y ago
> Why isn't the stock market reacting at all? Multiple reasons IMO: - the stock markets have long ago diverged from reality towards "financial engineering" - tech and service companies which form an ever larger share of the economy aren't hit by supply chain issues at all, the only thing that hit a bit was big advertisers cutting the ad budgets early in the corona crisis - lots of stocks are held by pension funds and other slow-as-molasses, long term holding entities - for those parts of the markets that still are based on the real world, it's betting on the future - and the corona disruptions are going away rather sooner than later, at least for the Western world plus China where by the end of the year even children should be able to get vaccinated (and governments seem to shift towards "if the unvaccinated want to die by corona, let them die", which is crass given that at the moment children can't be vaccinated at all, but understandable from a politics point of view). South America and Africa aren't important markets or labor source for companies on the Western stock markets which means the stock markets don't (have to) care about the low vaccination rates there. - in contrast, companies that are hit hard by supply chain issues (like your company, farms and other small businesses) aren't listed on the stock exchanges meaning their issues don't get passed through on the stock market - for some of the companies (esp. the car industry), the stocks have taken a bit of a downturn (e.g. Ford -10% over 6M), but again - most people are believing that once the supply chain issues resolve themselves, customers will come and make all the purchases they couldn't over the last two years thanks to corona
- dustintrex 5y ago
  > tech and service companies which form an ever larger share of the economy aren't hit by supply chain issues at all They actually are: try buying eg. recent AMD chips in bulk, some models of laptops, GPUs... even home office gear like webcams and printers were in short supply last year, although this seems to have largely sorted itself out. But agreed, these are rarely showstoppers and you can usually work around them.
  - Gravityloss 5y ago
    Maybe that's actually resulting more work for the software sector, as problems can't be solved by just throwing more hardware at them!
AdrianB1 5y ago
>> What the hell am I supposed to do for the next six or twelve months, sit at my desk and whistle? Think about how you can produce the stuff you sell, not just pass it from hand to hand. Being an intermediary is the first job to disappear, the schools can order directly from China and maybe they should. That will take out some inefficiencies from the chain.
- luckylion 5y ago
  Will it? Hundreds of schools individually negotiating with Chinese companies to buy small amounts, dealing with logistics, handling customs etc should be more efficient than one company importing stuff and doing domestic distribution?
  - subpixel 5y ago
    Disintermediation defies all odds. Who would have thought Chinese entrepreneurs would be able to successfully market and sell to fickle individual US consumers through Etsy, Amazon, and eBay. Surely someone needed to curate the offerings and account for cultural gaps? Turns out that’s what platforms do.
    - OJFord 5y ago
      What? They desperately need somebody to do that. The seller that figures out that the hundred 'different' products from brands called things like 'MIOUYIKI' with a 'product name' like '100% sharpest knife best for you [five star icons]' are absolutely not appealing to me, will do a lot of business indeed. (Or perhaps it's happened (to other listings), and they do a good enough job I haven't realised. But there's just so much tat to wade through on Amazon these days, that would all sell better if it were just listed/branded/marketed etc. by an English person. I'm not saying I'd do a better job of selling in China - just that as local and culturally familiar people as possible should do that. Spend a fiver on Upwork or whatever and a have a native look it over.)
    - lotsofpulp 5y ago
      >Who would have thought Chinese entrepreneurs would be able to successfully market and sell to fickle individual US consumers through Etsy, Amazon, and eBay. Surely someone needed to curate the offerings and account for cultural gaps? Turns out that’s what platforms do. For cheap trinkets that I do not care about, maybe. For anything else, I am going to Costco/Nordstroms/Apple/Target/Home Depot etc for reputable brands and reliable supply chains. And that is just for small value home goods. For even higher value goods like construction materials, business equipment, labor, and other capex, no platform today is good enough to offset personal relationships and trust built over many years.
jcims 5y ago
I just spoke with someone last night that works in industrial robotics. Lead time for a new FANUC was ~50 weeks for one of his customers. This impacts my buddy b/c his company helps manufacturers build out and QC their robot lines.
- nebula8804 5y ago
  Is there any basis in reality for that number(50 weeks) or is it more of a 'dynamic' number that changes as supply might happen to increase/decrease? If it is a hard deadline that does not change, well I guess we can just write off 2022 for a lot of industries right now.
  - jcims 5y ago
    It's all based on projections from upstream supplier commitments as well as prior customer commitments so very much subject to change in either direction. I looked and couldn't find a name for it but there's an accordion effect that flows through supply chains after a big disruption. This is just part of it. The problem is that it's not an acyclic graph, e.g. chip suppliers need robots too, so it can take a long time to shake out of the system.
    - cosmie 5y ago
      > I looked and couldn't find a name for it The bullwhip effect[1]. Although in this instance, it's inverted from its traditional direction. Generally the closer you are to the consumer/end product in the supply chain, the less impacted you are by the bullwhip effect. Tiny deviances between your actual and forecasted/expected demand can result in reactionary changes to materials orders, which grow in magnitude and volatility as you follow the downstream supplier chain. So the whip goes from those closest to the consumer upstream to those further away. Car companies canceling chip orders at the beginning of the pandemic are an example of what's generally considered the bullwhip effect. Suppliers generally have little choice but to put up with the volatility, because if they don't they risk their customer sourcing a different supplier that _will_ and losing the account entirely. That said, the power dynamics now are different. Many suppliers have more demand than their ability to service it right now, either because of constrained materials supplies themselves, lack of manpower, or lack of additional capacity. And those capacity constraints are hitting suppliers industry wide, so the "upstream" consumers of those materials have no alternatives to source. Hence why the bullwhip is going in reverse from how it typically does, where the ones closest to the end product are the ones at the mercy of the suppliers they source materials from. [1] https://en.wikipedia.org/wiki/Bullwhip_effect https://en.wikipedia.org/wiki/Bullwhip_effect
storkmarket 5y ago
> Why isn't the stock market reacting at all? Historically, the majority of actors in the stock market had a pessimistic response to negative events. A few outliers discovered that optimism in the face of pessimism has big rewards... word spread, and now everyone is optimistic, all of the time. There is no risk, only rewards of varying sizes. The markets were never based on reality, there was just a period of convergence between the attitudes of people living in reality and the attitudes of market actors. As Warren Buffet didn't once say, "be greedy when others are fearful, and remain greedy when others are greedy. be greedy."
- onlyrealcuzzo 5y ago
  > A few outliers discovered that optimism in the face of pessimism has big rewards It didn't pay off to be optimistic in 1930. The government got into the business of subsidizing asset prices at all costs after The Great Depression, and especially after The Subprime Crisis in 2008. I don't see this ever changing. But if it does, ignorant optimism probably won't be a good strategy anymore.
  - MR4D 5y ago
    > It didn't pay off to be optimistic in 1930. It depends on the timeframe. First, you got a lot in dividends (which were much higher rates than today’s dividends on average). Secondly, by the end of the war, you were at least break even, and by the early 1950’s you probably more than doubled your money. Now, if you had been patient and been optimistic in 1932/3 at the very bottom of the market, you would have made a killing, nearly 10x your investment by the early 1950’s, plus all the dividends! But, I get your point and agree with the rest of your comment.
    - onlyrealcuzzo 5y ago
      If you doubled your money by the 1950s, but inflation more than halved your money, then you didn't even break even, and you definitely did not make a "good" investment. Especially if you have to pay tax on the "profit". Okay - sure - maybe given the environment, "good" investments were few and hard to come by.
raxxorrax 5y ago
> and the financial system shrug Doesn't affect the casino so why would we see a reaction? The financial system is mostly fictional by now. Companies switched from having warehouses as building to having warehouses on the road, mainly in ships and trucks. We had some problems too getting parts for our products, mainly chips of course. Until some weeks ago we still felt the Ever Given in the Suez Canal because our suppliers were out of stock as well. Many businesses were relaxed on contractual penalties because it affected everyone. Of course Covid is still a factor, although it really didn't hit many industries too much.
lotsofpulp 5y ago
> The situation reminds me of February 2020, after the first COVID deaths in the US, with comments on HN by managers talking about complete carnage in the sales forecasts, but the markets floated along, ignorant of reality. When I buy VTI, I am not concerned about sales today, tomorrow, or even 2 years from now. I have cash and bonds for that. For my equities, I only care that their underlying companies are going to exist in 10, 20, 30 years and are going to be relatively successful in the marketplace. Of course, it is possible things are going to hell in a hand basket and none of these companies will be around in 10, 20, 30 years, but I am betting I will have bigger problems than the resell value of my equities if that is the case.
- mcguire 5y ago
  Everybody's time horizons expand when the market is going up.
  - deleted 5y ago
    [deleted]
throwaway59553 5y ago
>I don't understand why this isn't a bigger story. Why isn't the stock market reacting at all? GM, Ford, Toyota are shutting down car plants because they can't get parts, and the financial system shrugs! Because the stock market doesn't care about any of that. If reason commanded the financial system, pretty much the entirety of manufactories would never had moved to South Asia. They moved not because it was in the interest of the people or the several countries, but because it was more favourable to the shareholders, and all these "businessmen" who have no loyalty to any country.
- gruez 5y ago
  >If reason commanded the financial system, pretty much the entirety of manufactories would never had moved to South Asia. They moved not because it was in the interest of the people or the several countries, but because it was more favourable to the shareholders, and all these "businessmen" who have no loyalty to any country. That seems... totally consistent with reason? Companies cutting costs to increase shareholder profits is totally consistent with reason. It might not be consistent with reason for the welfare for the entire country, or for the poorest, but that doesn't mean it's not reasonable.
  - throwaway59553 5y ago
    Please continue to ignore that the whole economy is a house of cards, with the recurrent crisis every few years where taxpayers have to bailout the same people. It seems very sustainable. Companies have to stop working because the supply chain is a mess? Very reasonable. Your post doesn't sound like mental gymnastics at all.
    - gruez 5y ago
      > Please continue to ignore that the whole economy is a house of cards, with the recurrent crisis every few years where taxpayers have to bailout the same people. It seems very sustainable. What bailouts are you talking about? The only ones that come to mind are the 2008 financial crisis and covid. The latter seems less "the whole economy is a house of cards" and more "we had to shut down the economy for several months". Also, how is this related to the original comment about offshoring being unreasonable? It looks like you saw a "the economy is bad" post and wanted to chime in with your own "the economy is bad" thoughts. >Companies have to stop working because the supply chain is a mess? or you know, covid.
snarf21 5y ago
The stock market isn't reacting because of the Fed. As long as their programs remain and interest rates say 0, the asset inflation bubble will continue. Also, the stock market today is so heavily dominated by tech that don't have these supply chain issues.
drumhead 5y ago
They're not reacting because they're forward looking. They know that these supply chain problems are only temporary, and that they'll disappear in relatively short space of time. Production capacity, distribution capability or market size haven't been destroyed.Its all still there it just takes time to get it up to speed again. But it will get back to pre-pandemic level again, so there's no point in panicking about it. The exchanges know this and are looking beyond it to the recovery.
nimbius 5y ago
because markets have been effectively decoupled and insulated from reality for a while now. We never left quantitative easing from 2008 (the only attempt to do so tanked the market 800 points) and the fed's buyback --despite being signaled to stop soon-- doesnt seem to be stopping anytime soon on fear of the exact same type of flash-crash. car companies can and do issue buybacks to bolster stock prices, and since interest on their debt is practically zero (or actually zero in many cases) theres no pressure from shareholders to do anything. the fed seems content to ride out what they believe is short-term inflation as a tax on wealth, in lieu of blowing up the credit market with interest rate hikes. the real problems will begin if inflation begins to rise uncontrollably due to covid this winter and further employment stagnation. I believe this inflation will continue to rise. the US is ill equipped for covid even in 2021, and no matter the wage hikes, employees seem to be firmly against going back to whatever it was that constituted "work" for them in the past without more meaningful reforms (healthcare, pto, etc...)
SpicyLemonZest 5y ago
It was a big story in March 2020, when people worried that a global pandemic might cripple the supply chain. But goods and services kept flowing, strongly suggesting that modern supply chains are robust despite concerns about JIT and such. It's difficult to believe that any issues we're facing today could be worse for supply chains than 90% of the world being subject to shutdown orders. In particular, it's worth noting the lumber market, where supply chain issues are starting to resolve themselves despite predictions that something was fundamentally broken.
handrous 5y ago
Our local well-regarded (by our city's standards, anyway) public school district can't find a food supplier that can meet lunch demand. Their usual two dropped them before school started, saying they simply couldn't meet demand, and a third just broke contract for the same reason. They've notified parents not to be alarmed if, sometimes, the "main" dish at lunch is an individual pack of trail mix from a big-box retailer. Local restaurants and fast food places have been marking a lot of items as unavailable. A lot of packaging (drink containers, take-out containers) have been unavailable, then replaced by a similar but not-identical model, recently. I'm surprised the panic buying hasn't started yet, frankly. Supply of lots of important stuff (though I don't think toilet paper, yet? Hahaha) looks a lot worse than it did during the panic buying last year, and that's without a run on goods, so must be a sign of actual problems.
- vondur 5y ago
  I wonder if this is partly from lack of workers too.
- nradov 5y ago
  Schools used to contain actual kitchens with employees who cooked and served hot food on site. Now school districts have largely outsourced that work. That saved money and is more "efficient" but made the system less resilient.
  - scohesc 5y ago
    Who would have thought that relying on another entity for literally every single thing you do has consequences when the sole entity you rely on decides to dip out or has issues! It's crazy silly how short-sighted people are.
    - eatYourFood 5y ago
      Was there any real reason to assume progressional caterers would not be able to professionally cater? My school had a kitchen in the 90's but they closed it in 2001 when my other started (and started to outsource). For 20 years, outsourcing worked just fine and saved them a ton of money.
hristov 5y ago
Markets are a machine for predicting the future not the present. The supply chain chaos is something that can be fixed and probably will be fixed at some time in the near future. Capitalism view is that if there is demand and it is possible to fulfil that demand at good profit margins, that demand will be fulfilled. Yes there is a shortage of containers. But a container is nothing but a metal box with a wooden floor. More containers can be made and are being made. Yes there is a shortage of container ships. But that is because there is 50 container ships waiting in a huge line in front of long beach to be unloaded. Once they get unloaded they will start sailing back and forth and there will no longer be a shortage. Yes there is a shortage of workers and truck drivers. So the companies will raise wages and hire more. In general stock market investors do not worry too much about excessive demand. What keeps them up at night is lack of demand. What happened in march 2020 is that the stock market was spooked about lack of demand. People feared that the virus will wipe out large part of the population and the rest will be hunkered down trembling in fear and saving every penny. There was a lot of government mismanagement in handling the virus (especially in some countries) and it killed and is killing way more people than it should have, but it is not affecting demand. Furthermore, governments and central banks correctly put in welfare and support programs in order to prevent a wave of poverty and collapse of demand. So currently the problem is not lack of demand but lack of supply. Which is very much fixable.
jsight 5y ago
> Why isn't the stock market reacting at all? I always respond to this the same way. What reaction _should_ the market have? And is that reaction 100% (or even say... 75%) predictable based upon the available information today? And then if it is, what consequence would that have on your ability to invest immediately afterward? So, my answers are... the market should largely ignore short term (<5 year) factors and the response should largely be unpredictable based upon the behavior of the masses. Most investments should have time horizons that make these movements irrelevant to 10+ year profit estimates. But I feel like a lot of people want responses that are more like this: The market should drop precipitously based upon the information that short term profits (and thus P/E ratios) will fall. Based upon this, I should be able to immediately invest all available cash and reap a windfall when mean reversion occurs within 1-3 years. I think one of these is a more realistic scenario than the other, regardless of which world we'd like to live in.
- Qub3d 5y ago
  Excellent advice! This is a similar response to what I tell new investors who think they're smart buying high-dividend stocks right before the payout, then sell after. The market prices in expected movements! (P.S. on HN, you can use asterisks around words instead of underscores for italics)
scohesc 5y ago
The reaction of the stock market for the past year and a bit has been "quick, pump more printed money into it to keep stock prices up and pretend everything's okay when it's really really not - it'll be the next guy's problem right?" It happen one already in a similar manner in 2008 and it'll happen again because we didn't learn our lessons the first time.
deleted 5y ago
[deleted]
mcguire 5y ago
"Why isn't the stock market reacting at all?" Inflation. In the stock market, yes. There's a lot of money with nothing else to do. Somebody puts some in the market, stock prices go up, and everyone says, "hey, stocks are going up!" Lather, rinse, repeat. Remember, the market can remain irrational longer than you can remain solvent.

Gys 5y ago

I think for the economy in general the effect might be small as long as the final consumer spends the money on alternatives. For example I buy a Ford instead of a Chrysler (which is unavailable due to missing chips).

tonyedgecombe 5y ago
I’d imagine manufacturers are shifting what capacity they have to higher margin products and pushing up the prices on those products. It’s probably a good time to slaughter a few sacred cows as well. In some ways it could be good for them.
- Gys 5y ago
  'Rather than relying on the traditional volume-based sales target, the two [Mercedes and BMW] aim to sell fewer cars and make more money.' https://www.motor1.com/news/532591/mercedes-bmw-keep-prices-high/ https://www.motor1.com/news/532591/mercedes-bmw-keep-prices-... If this happens in a large scale, inflation will rise.
  - delecti 5y ago
    I work at Mercedes and can confirm that my (company performance based) bonus was great this year for exactly that reason. It's been weird doing so well personally while everything is going crazy.
jcims 5y ago
That's probably true if it were the case, but it seems that entire industries are impacted.

mschuster91 5y ago

> Why isn't the stock market reacting at all? Multiple reasons IMO: - the stock markets have long ago diverged from reality towards "financial engineering" - tech and service companies which form an ever larger share of the economy aren't hit by supply chain issues at all, the only thing that hit a bit was big advertisers cutting the ad budgets early in the corona crisis - lots of stocks are held by pension funds and other slow-as-molasses, long term holding entities - for those parts of the markets that still are based on the real world, it's betting on the future - and the corona disruptions are going away rather sooner than later, at least for the Western world plus China where by the end of the year even children should be able to get vaccinated (and governments seem to shift towards "if the unvaccinated want to die by corona, let them die", which is crass given that at the moment children can't be vaccinated at all, but understandable from a politics point of view). South America and Africa aren't important markets or labor source for companies on the Western stock markets which means the stock markets don't (have to) care about the low vaccination rates there. - in contrast, companies that are hit hard by supply chain issues (like your company, farms and other small businesses) aren't listed on the stock exchanges meaning their issues don't get passed through on the stock market - for some of the companies (esp. the car industry), the stocks have taken a bit of a downturn (e.g. Ford -10% over 6M), but again - most people are believing that once the supply chain issues resolve themselves, customers will come and make all the purchases they couldn't over the last two years thanks to corona

dustintrex 5y ago
> tech and service companies which form an ever larger share of the economy aren't hit by supply chain issues at all They actually are: try buying eg. recent AMD chips in bulk, some models of laptops, GPUs... even home office gear like webcams and printers were in short supply last year, although this seems to have largely sorted itself out. But agreed, these are rarely showstoppers and you can usually work around them.
- Gravityloss 5y ago
  Maybe that's actually resulting more work for the software sector, as problems can't be solved by just throwing more hardware at them!

AdrianB1 5y ago

>> What the hell am I supposed to do for the next six or twelve months, sit at my desk and whistle? Think about how you can produce the stuff you sell, not just pass it from hand to hand. Being an intermediary is the first job to disappear, the schools can order directly from China and maybe they should. That will take out some inefficiencies from the chain.

luckylion 5y ago
Will it? Hundreds of schools individually negotiating with Chinese companies to buy small amounts, dealing with logistics, handling customs etc should be more efficient than one company importing stuff and doing domestic distribution?
- subpixel 5y ago
  Disintermediation defies all odds. Who would have thought Chinese entrepreneurs would be able to successfully market and sell to fickle individual US consumers through Etsy, Amazon, and eBay. Surely someone needed to curate the offerings and account for cultural gaps? Turns out that’s what platforms do.
  - OJFord 5y ago
    What? They desperately need somebody to do that. The seller that figures out that the hundred 'different' products from brands called things like 'MIOUYIKI' with a 'product name' like '100% sharpest knife best for you [five star icons]' are absolutely not appealing to me, will do a lot of business indeed. (Or perhaps it's happened (to other listings), and they do a good enough job I haven't realised. But there's just so much tat to wade through on Amazon these days, that would all sell better if it were just listed/branded/marketed etc. by an English person. I'm not saying I'd do a better job of selling in China - just that as local and culturally familiar people as possible should do that. Spend a fiver on Upwork or whatever and a have a native look it over.)
  - lotsofpulp 5y ago
    >Who would have thought Chinese entrepreneurs would be able to successfully market and sell to fickle individual US consumers through Etsy, Amazon, and eBay. Surely someone needed to curate the offerings and account for cultural gaps? Turns out that’s what platforms do. For cheap trinkets that I do not care about, maybe. For anything else, I am going to Costco/Nordstroms/Apple/Target/Home Depot etc for reputable brands and reliable supply chains. And that is just for small value home goods. For even higher value goods like construction materials, business equipment, labor, and other capex, no platform today is good enough to offset personal relationships and trust built over many years.

jcims 5y ago

I just spoke with someone last night that works in industrial robotics. Lead time for a new FANUC was ~50 weeks for one of his customers. This impacts my buddy b/c his company helps manufacturers build out and QC their robot lines.

nebula8804 5y ago
Is there any basis in reality for that number(50 weeks) or is it more of a 'dynamic' number that changes as supply might happen to increase/decrease? If it is a hard deadline that does not change, well I guess we can just write off 2022 for a lot of industries right now.
- jcims 5y ago
  It's all based on projections from upstream supplier commitments as well as prior customer commitments so very much subject to change in either direction. I looked and couldn't find a name for it but there's an accordion effect that flows through supply chains after a big disruption. This is just part of it. The problem is that it's not an acyclic graph, e.g. chip suppliers need robots too, so it can take a long time to shake out of the system.
  - cosmie 5y ago
    > I looked and couldn't find a name for it The bullwhip effect[1]. Although in this instance, it's inverted from its traditional direction. Generally the closer you are to the consumer/end product in the supply chain, the less impacted you are by the bullwhip effect. Tiny deviances between your actual and forecasted/expected demand can result in reactionary changes to materials orders, which grow in magnitude and volatility as you follow the downstream supplier chain. So the whip goes from those closest to the consumer upstream to those further away. Car companies canceling chip orders at the beginning of the pandemic are an example of what's generally considered the bullwhip effect. Suppliers generally have little choice but to put up with the volatility, because if they don't they risk their customer sourcing a different supplier that _will_ and losing the account entirely. That said, the power dynamics now are different. Many suppliers have more demand than their ability to service it right now, either because of constrained materials supplies themselves, lack of manpower, or lack of additional capacity. And those capacity constraints are hitting suppliers industry wide, so the "upstream" consumers of those materials have no alternatives to source. Hence why the bullwhip is going in reverse from how it typically does, where the ones closest to the end product are the ones at the mercy of the suppliers they source materials from. [1] https://en.wikipedia.org/wiki/Bullwhip_effect https://en.wikipedia.org/wiki/Bullwhip_effect

storkmarket 5y ago

> Why isn't the stock market reacting at all? Historically, the majority of actors in the stock market had a pessimistic response to negative events. A few outliers discovered that optimism in the face of pessimism has big rewards... word spread, and now everyone is optimistic, all of the time. There is no risk, only rewards of varying sizes. The markets were never based on reality, there was just a period of convergence between the attitudes of people living in reality and the attitudes of market actors. As Warren Buffet didn't once say, "be greedy when others are fearful, and remain greedy when others are greedy. be greedy."

onlyrealcuzzo 5y ago
> A few outliers discovered that optimism in the face of pessimism has big rewards It didn't pay off to be optimistic in 1930. The government got into the business of subsidizing asset prices at all costs after The Great Depression, and especially after The Subprime Crisis in 2008. I don't see this ever changing. But if it does, ignorant optimism probably won't be a good strategy anymore.
- MR4D 5y ago
  > It didn't pay off to be optimistic in 1930. It depends on the timeframe. First, you got a lot in dividends (which were much higher rates than today’s dividends on average). Secondly, by the end of the war, you were at least break even, and by the early 1950’s you probably more than doubled your money. Now, if you had been patient and been optimistic in 1932/3 at the very bottom of the market, you would have made a killing, nearly 10x your investment by the early 1950’s, plus all the dividends! But, I get your point and agree with the rest of your comment.
  - onlyrealcuzzo 5y ago
    If you doubled your money by the 1950s, but inflation more than halved your money, then you didn't even break even, and you definitely did not make a "good" investment. Especially if you have to pay tax on the "profit". Okay - sure - maybe given the environment, "good" investments were few and hard to come by.

raxxorrax 5y ago

> and the financial system shrug Doesn't affect the casino so why would we see a reaction? The financial system is mostly fictional by now. Companies switched from having warehouses as building to having warehouses on the road, mainly in ships and trucks. We had some problems too getting parts for our products, mainly chips of course. Until some weeks ago we still felt the Ever Given in the Suez Canal because our suppliers were out of stock as well. Many businesses were relaxed on contractual penalties because it affected everyone. Of course Covid is still a factor, although it really didn't hit many industries too much.

lotsofpulp 5y ago

> The situation reminds me of February 2020, after the first COVID deaths in the US, with comments on HN by managers talking about complete carnage in the sales forecasts, but the markets floated along, ignorant of reality. When I buy VTI, I am not concerned about sales today, tomorrow, or even 2 years from now. I have cash and bonds for that. For my equities, I only care that their underlying companies are going to exist in 10, 20, 30 years and are going to be relatively successful in the marketplace. Of course, it is possible things are going to hell in a hand basket and none of these companies will be around in 10, 20, 30 years, but I am betting I will have bigger problems than the resell value of my equities if that is the case.

mcguire 5y ago
Everybody's time horizons expand when the market is going up.
- deleted 5y ago
  [deleted]

throwaway59553 5y ago

>I don't understand why this isn't a bigger story. Why isn't the stock market reacting at all? GM, Ford, Toyota are shutting down car plants because they can't get parts, and the financial system shrugs! Because the stock market doesn't care about any of that. If reason commanded the financial system, pretty much the entirety of manufactories would never had moved to South Asia. They moved not because it was in the interest of the people or the several countries, but because it was more favourable to the shareholders, and all these "businessmen" who have no loyalty to any country.

gruez 5y ago
>If reason commanded the financial system, pretty much the entirety of manufactories would never had moved to South Asia. They moved not because it was in the interest of the people or the several countries, but because it was more favourable to the shareholders, and all these "businessmen" who have no loyalty to any country. That seems... totally consistent with reason? Companies cutting costs to increase shareholder profits is totally consistent with reason. It might not be consistent with reason for the welfare for the entire country, or for the poorest, but that doesn't mean it's not reasonable.
- throwaway59553 5y ago
  Please continue to ignore that the whole economy is a house of cards, with the recurrent crisis every few years where taxpayers have to bailout the same people. It seems very sustainable. Companies have to stop working because the supply chain is a mess? Very reasonable. Your post doesn't sound like mental gymnastics at all.
  - gruez 5y ago
    > Please continue to ignore that the whole economy is a house of cards, with the recurrent crisis every few years where taxpayers have to bailout the same people. It seems very sustainable. What bailouts are you talking about? The only ones that come to mind are the 2008 financial crisis and covid. The latter seems less "the whole economy is a house of cards" and more "we had to shut down the economy for several months". Also, how is this related to the original comment about offshoring being unreasonable? It looks like you saw a "the economy is bad" post and wanted to chime in with your own "the economy is bad" thoughts. >Companies have to stop working because the supply chain is a mess? or you know, covid.

snarf21 5y ago

The stock market isn't reacting because of the Fed. As long as their programs remain and interest rates say 0, the asset inflation bubble will continue. Also, the stock market today is so heavily dominated by tech that don't have these supply chain issues.

drumhead 5y ago

They're not reacting because they're forward looking. They know that these supply chain problems are only temporary, and that they'll disappear in relatively short space of time. Production capacity, distribution capability or market size haven't been destroyed.Its all still there it just takes time to get it up to speed again. But it will get back to pre-pandemic level again, so there's no point in panicking about it. The exchanges know this and are looking beyond it to the recovery.

nimbius 5y ago

because markets have been effectively decoupled and insulated from reality for a while now. We never left quantitative easing from 2008 (the only attempt to do so tanked the market 800 points) and the fed's buyback --despite being signaled to stop soon-- doesnt seem to be stopping anytime soon on fear of the exact same type of flash-crash. car companies can and do issue buybacks to bolster stock prices, and since interest on their debt is practically zero (or actually zero in many cases) theres no pressure from shareholders to do anything. the fed seems content to ride out what they believe is short-term inflation as a tax on wealth, in lieu of blowing up the credit market with interest rate hikes. the real problems will begin if inflation begins to rise uncontrollably due to covid this winter and further employment stagnation. I believe this inflation will continue to rise. the US is ill equipped for covid even in 2021, and no matter the wage hikes, employees seem to be firmly against going back to whatever it was that constituted "work" for them in the past without more meaningful reforms (healthcare, pto, etc...)

SpicyLemonZest 5y ago

It was a big story in March 2020, when people worried that a global pandemic might cripple the supply chain. But goods and services kept flowing, strongly suggesting that modern supply chains are robust despite concerns about JIT and such. It's difficult to believe that any issues we're facing today could be worse for supply chains than 90% of the world being subject to shutdown orders. In particular, it's worth noting the lumber market, where supply chain issues are starting to resolve themselves despite predictions that something was fundamentally broken.

handrous 5y ago

Our local well-regarded (by our city's standards, anyway) public school district can't find a food supplier that can meet lunch demand. Their usual two dropped them before school started, saying they simply couldn't meet demand, and a third just broke contract for the same reason. They've notified parents not to be alarmed if, sometimes, the "main" dish at lunch is an individual pack of trail mix from a big-box retailer. Local restaurants and fast food places have been marking a lot of items as unavailable. A lot of packaging (drink containers, take-out containers) have been unavailable, then replaced by a similar but not-identical model, recently. I'm surprised the panic buying hasn't started yet, frankly. Supply of lots of important stuff (though I don't think toilet paper, yet? Hahaha) looks a lot worse than it did during the panic buying last year, and that's without a run on goods, so must be a sign of actual problems.

vondur 5y ago
I wonder if this is partly from lack of workers too.
nradov 5y ago
Schools used to contain actual kitchens with employees who cooked and served hot food on site. Now school districts have largely outsourced that work. That saved money and is more "efficient" but made the system less resilient.
- scohesc 5y ago
  Who would have thought that relying on another entity for literally every single thing you do has consequences when the sole entity you rely on decides to dip out or has issues! It's crazy silly how short-sighted people are.
  - eatYourFood 5y ago
    Was there any real reason to assume progressional caterers would not be able to professionally cater? My school had a kitchen in the 90's but they closed it in 2001 when my other started (and started to outsource). For 20 years, outsourcing worked just fine and saved them a ton of money.

hristov 5y ago

Markets are a machine for predicting the future not the present. The supply chain chaos is something that can be fixed and probably will be fixed at some time in the near future. Capitalism view is that if there is demand and it is possible to fulfil that demand at good profit margins, that demand will be fulfilled. Yes there is a shortage of containers. But a container is nothing but a metal box with a wooden floor. More containers can be made and are being made. Yes there is a shortage of container ships. But that is because there is 50 container ships waiting in a huge line in front of long beach to be unloaded. Once they get unloaded they will start sailing back and forth and there will no longer be a shortage. Yes there is a shortage of workers and truck drivers. So the companies will raise wages and hire more. In general stock market investors do not worry too much about excessive demand. What keeps them up at night is lack of demand. What happened in march 2020 is that the stock market was spooked about lack of demand. People feared that the virus will wipe out large part of the population and the rest will be hunkered down trembling in fear and saving every penny. There was a lot of government mismanagement in handling the virus (especially in some countries) and it killed and is killing way more people than it should have, but it is not affecting demand. Furthermore, governments and central banks correctly put in welfare and support programs in order to prevent a wave of poverty and collapse of demand. So currently the problem is not lack of demand but lack of supply. Which is very much fixable.

jsight 5y ago

> Why isn't the stock market reacting at all? I always respond to this the same way. What reaction _should_ the market have? And is that reaction 100% (or even say... 75%) predictable based upon the available information today? And then if it is, what consequence would that have on your ability to invest immediately afterward? So, my answers are... the market should largely ignore short term (<5 year) factors and the response should largely be unpredictable based upon the behavior of the masses. Most investments should have time horizons that make these movements irrelevant to 10+ year profit estimates. But I feel like a lot of people want responses that are more like this: The market should drop precipitously based upon the information that short term profits (and thus P/E ratios) will fall. Based upon this, I should be able to immediately invest all available cash and reap a windfall when mean reversion occurs within 1-3 years. I think one of these is a more realistic scenario than the other, regardless of which world we'd like to live in.

Qub3d 5y ago
Excellent advice! This is a similar response to what I tell new investors who think they're smart buying high-dividend stocks right before the payout, then sell after. The market prices in expected movements! (P.S. on HN, you can use asterisks around words instead of underscores for italics)

scohesc 5y ago

The reaction of the stock market for the past year and a bit has been "quick, pump more printed money into it to keep stock prices up and pretend everything's okay when it's really really not - it'll be the next guy's problem right?" It happen one already in a similar manner in 2008 and it'll happen again because we didn't learn our lessons the first time.

deleted 5y ago

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mcguire 5y ago

"Why isn't the stock market reacting at all?" Inflation. In the stock market, yes. There's a lot of money with nothing else to do. Somebody puts some in the market, stock prices go up, and everyone says, "hey, stocks are going up!" Lather, rinse, repeat. Remember, the market can remain irrational longer than you can remain solvent.