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Forget about bit big.
Prices surging over 11%.
Just this year alone.
Sales soaring 5% from this same time last year.
Now some corporate profits are taking a beating amid signs consumers are feeling the pinch.
We'll be -- taking a beating that's hi everyone I'm Brenda -- this is bulls bears let's get right to it.
We we got -- -- Smith Tobin Smith Jonas Max Ferris along with Todd John -- and Mike Norman welcome everybody.
So toggle soaring prices -- -- soaring layoffs.
They will Brando look at the simple lesson economics 101 when you're spending more money for life's necessities such as food which he said were up 5% -- here.
You're gonna have less money for other items in -- for corporate profits we'll take a hit.
That leads corporation these corporations with two options wind you can pass a rising costs onto consumers which -- we're already seeing.
Or you simply start laying off people so we had to be prepared.
Well -- out safely -- -- with Safeway but a lot of times.
-- -- -- in a recession.
Companies will just you know their margins will shrink and they won't pass them along what do you thing.
Yeah exactly I and I think they'll be the case this time look I respect.
-- odds macro view oath and you just that kind of confirm or deny that I went back up a through the history history tracking unemployment rate verses.
The CPI index basically measuring inflation and I can -- no correlation fact that a couple of instances.
In the early fifties in the mid seventies we had very high inflation.
And the unemployment rate was very low now I'm not saying.
That's always gonna happen -- -- you know as inflation perks up now if it perked up we'll see.
You know I dip in unemployment but I don't think there are correlated so I don't think you can just make a blanket statement that's what we'll see this time.
-- -- -- Pressure on and on companies pressure on retailers up pressure on and on suppliers what does that do for jobs.
It it it cuts jobs but at the part of the cycle we're in right now we've had all the investment we see we've seen a trillion dollars -- investment in improving productivity that's been done.
Now we haven't an opportunity arrives -- -- the problem.
That a company cancer and five more productivity here so that this and 70% of normal costs are labor that is where you now -- -- -- -- can't -- machine now I have to lay -- labor so there's no question.
Bad that it it is mostly Corley particularly -- about the -- -- those -- -- economics today all the dollars in the buying a selling as all about the theorize that's.
Us and labor costs if we're talking specifically about labor costs they still remains a lot right that that -- -- your cost that you did tell me just that's a major caught if the until labor costs start to rise you're not gonna see a major problem firing people and by labor costs are rising lower rates inflation not as much energy not much -- food.
There's more inflation than labor cost inflation and that's ultimately what drug labor cost in addition that a lot of companies -- -- a -- -- high unemployment rate.
They just don't do it over time so there's not -- at all these people with a 5% of uttering today and now they gotta let him go cause the economy gets a little pick out.
There's a lot of over there's a lot of people working overtime who think he's back on without firing them or not it is the unemployment rise just because consumer prices may rise a little bit.
Watch labor cost that's what you want to say what do you think my -- -- you do you think -- -- pinks slips out of office.
All of their respective -- it's not old time economics at the same economic that I have to agree with Gary -- Smith because -- while consumers are paying higher prices.
Somebody's earning that additional income -- it all stays within the economy so it doesn't.
Automatically equate to lay -- I mean if you look back as he did as he mentioned.
And over periods of time -- we had rising prices what's the most recent one was the 2007.
To 2008 period.
We had an increase in payrolls we had decline in unemployment so until the point -- may be if it results in a recession and you know it's.
Hard to call -- sad that it's not exactly without a little bit problematic but right now well all you that was it I like to show earnings growth that might and you are not going to see that in Europe -- -- well in my -- because our earnings are at a all time record high and it has not really -- -- -- -- -- -- -- -- -- -- you know -- like they -- senators did -- article you got it back I'm not that okay go -- -- Make double.
The update here when you start looking earnings you have to suspect that corporations have only two options right now remember they have a fiduciary responsibility to their shareholders.
That's who they're looking out for at the expense to -- -- capital which is sad to say.
They will be cutting off people look but you saw that was Cisco Cisco actually southern numbers -- They always experienced double digit digit earnings growth and I had to lay off thirty -- thousand besides.
Companies -- are urging that in com as a result of higher prices it's stays within.
-- you know in the aggregate it doesn't change this wealth from one sector of the economy to another that's -- -- -- -- -- all due respect to Mike.
The that's not.
So I can't believe the.
-- sentiment out there there's a bigger issue here which is that.
Obviously jobs in the private sector of the -- -- public sector already got you know being cut right now because of lowering expenses.
And those people are not finding new jobs a reason why they're not -- they're not trained to do the stuff we're -- a private sector part of the private sector job is there's some areas of this world particularly energy.
-- debate can't find enough people but for the vast majority -- dismiss allocation of of people -- people again fired are not responsibly -- going into somebody else -- job good and what's out there that no weak demand in general I mean well.
That you can't go both ways -- you -- have -- -- we have other economies growing well I don't get that all supercenters not a -- wrote what I did all 3% remember that the Brady and remember the fifteen more percent of the actual earnings from these large corporations.
Are from overseas.
That's where they're actually having people here's where the cutting back.
-- -- -- amazed that Kerry beat up on -- -- I know I I I'm not amazed might made the key point let's just huge and you saw in the opening graphics say quite.
Safeway is facing higher cost not all of which are able to pass on the consumer to say they face higher cost for.
Canned goods or all of a -- who gets those.
That higher prices the avocado.
Producers and the canned goods should they get more revenue.
To them and they are able to hire more workers that's Mike's point that's why the inflation is not necessarily.
Correlated -- yeah.
Well aren't using that logic if you know Gary -- vendors say they eliminate that product then it's that farmer Herbert ever there who's producing -- candidates.
Then they have to start laying off people that's the ripple effect in -- He said but that's -- -- spends money in another area.
They don't just.
Go from 20000 SK use the 101000 euros zoom into let's say it looks jurists on five boys and girls were were -- little -- the winds here.
The average American is a good result or no matter who -- got pregnant at the Pentagon as America to say look at -- prices are -- they know that the corporations don't feel it because the -- because as much because we've had no gains in and but it costs to their employees well -- -- -- that point that if -- -- can't get passed through that could only do one thing and that's.
Over the overhead and if you look -- -- -- customer doesn't know their prices go that's the point I think -- making is that they're they're eating some of these cost there is a healthy margin -- -- smiling at -- at the profit level for corporate as they have a little bit of margin to eat some of these rising cost.
I will say there isn't one -- -- right because doesn't lead to profits -- just -- -- inflation with a federal service trying to keep unemployment low and generating really high inflation much trying to receive now.
At that point -- -- it would prop -- everybody becomes a real problem for the economy and the stock market we're just not very companies that got over their fear of firing guys -- -- -- I don't know I candidate -- -- people they never thought they could do it people are a lot harder to fire than they were before now but just saying we're getting to that point -- not like -- yeah it's the -- presumably the children who would stop the Jews excuse again out of control but they are trying to engineer low unemployment hasn't worked -- well yet.
At the cost of a little inflation that's kind of -- -- of what -- balance is that the Federal Reserve always has been sometimes they screw it up and it doesn't work and you get inflation.
And I and employment out haven't had that yet task at last word and act as.
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