#CKStrong

Robinhood, the online brokerage used by many retail traders to pile in to heavily shorted stocks like GameStop Corp, has made an ambitious push into loaning out its clients’ shares to short sellers as it expands its business. – Reuters

Doesn’t the Robin Hood crowd scan the markets looking for short positions? The following chart illustrates how short auto dealers are of inventory, or how sales are depleting the current stock of new cars.

Ship in ten Mercedes, please!

Yes, the auto sector is suffering a real supply shock based on the chip shortage and is not the best example of excess demand. However, the auto supply chain and semiconductor market are.

As the world shut down because of the COVID-19 pandemic, many factories closed with it, making the supplies needed for chip manufacturing unavailable for months. Increased demand for consumer electronics caused shifts that rippled up the supply chain. Orders began to pile up as manufacturers struggled to create enough chips to meet the new levels of demand. A backlog began to grow and grow and grow. – Popular Science

Really, folks, the market for goods and services is starting to be infected by the same type of expectations that have been in the securities markets for years. Go check and see what is happening in the global supply chains if you don’t believe us.

Does the Fed have the stomach to smackdown demand to balance the economy? Do they even have their assessment of the economy right or is it too steeped in academic models? Do they realize that the global stimulus has been so excessive that it actually doing the opposite of what is intended in some sectors — i.e., shutting down production and laying off workers?

Jay Powell is not an economist and leans heavily on the Fed staff.

If they do tighten monetary policy and the asset markets sell off hard, we will soon be talking about deflation and the cycle repeats. Stagflation, cometh, or are we there yet?

Stay tuned.