Happy Friday!

After your morning cup o joe and reading this piece, itll be a coast into the weekend.

I imagine youre looking forward to that glass of wine with great anticipation.

Enjoy it. You deserve it.

What Ill be talking about in this piece is something youve already felt. But its time to bring it into the collective consciousness.

Let me explain.

New Friends

Last night I had the pleasure of meeting one of the worlds best commodities analysts. Hes one of the brightest macro minds on the interwebs nowadays.

Unfortunately, Im under the Chatham House Rule, so I cant name him.

In case youve never heard of that: The Royal Institute of International Affairs, better known as Chatham House, is a world-leading policy institute with a mission to help governments and societies build a sustainably secure, prosperous, and just world.

The Chatham House Rule is as follows:

The Chatham House Rule helps create a trusted environment to understand and resolve complex problems. Its guiding spirit is: share the information you receive, but do not reveal the identity of who said it.

The Rule reads as follows:

When a meeting, or part thereof, is held under the Chatham House Rule, participants are free to use the information received, but neither the identity nor the affiliation of the speaker(s), nor that of any other participant, may be revealed.

This analyst was crystal clear in his analysis and, even more importantly, his presentation.

I had an absolute blast.

I want to share some of the ideas that were explained, pictured, and clarified last night.

Here at the Rude, I've already been talking about what a problem China is and how bad our supply chains are, and how big a problem energy is going to be because of inflation.

That's what we fleshed out last night. It was a great chinwag.

So, let me take you through those three ideas with this analysts excellent analysis sprinkled on top.

The Supply Chain

First, supply chain issues. I don't know if you've had a look outside of Long Beach, California, but there are a bunch of ships waiting to get into the Harbor.

The Ports of San Pedro, Los Angeles, and Long Beach form a bustling port. The combined Ports of Los Angeles and Long Beach handle over 25% of all container ships coming to the United States.

Credit: CBS Los Angeles

According to this analyst, it takes nine days to unload their stuff. That is a record.

I knew it was a big issue before I got on the phone with this guy last night because my wife had asked me, "What's going on in Long Beach, California?"

As you know, Pam used to be a pharmacist, and now she's a housewife.

So if she is asking me these questions, it's important.

Its the equivalent of when a taxi driver tells you to buy a stock because you know the news filtered down to the mainstream.

Supply chain issues will continue, and that leads straight into our next topic, which is China.

China Syndrome

China is a big problem and will continue to be one for the next decade.

Last night, this analyst put up a map showing the exercises of the big ships in the Asia Pacific region. The United States, the Philippines, Japan, and the rest of the gang are all doing Naval exercises.

Theyre not messing around either, sending in the carriers.

Credit: NavalNews

There's only one reason why they're doing those Naval exercises, and that's because of China.

And its not just the military.

Interestingly, I was one of the first newsletter writers to say that Evergreen wasn't a Lehman moment.

This analyst had a great retort to that. He said, "Fine, it's not Lehman. This is their Countrywide moment."

He implied this is the canary in the coal mine, and there's more trouble to come. I tend to agree with that now.

Of course, the PBOC, the People's Bank of China - Chinas central bank, is trying to quell the problem and create as soft a landing as possible with the scaling back of money printing.

That all makes total sense.

But as we know from Mises and Hayek, every time a central bank tries to slow things down, they accidentally prick a bubble.

Ludwig von Mises described a crack-up boom in Human Action:

If once public opinion is convinced that the increase in the quantity of money will continue and never come to an end, and that consequently the prices of all commodities and services will not cease to rise, everybody becomes eager to buy as much as possible and to restrict his cash holding to a minimum size. For under these circumstances the regular costs incurred by holding cash are increased by the losses caused by the progressive fall in purchasing power. The advantages of holding cash must be paid for by sacrifices which are deemed unreasonably burdensome. This phenomenon was, in the great European inflations of the 'twenties, called flight into real goods (Flucht in die Sachwerte) or crack-up boom (Katastrophenhausse).

Economist Friedrich Hayek famously described this situation as like grabbing a "tiger by the tail."

Once the central bank decides to accelerate the process of credit expansion and inflation in order to head off any recession risk, then it continually faces the same choice of either accelerating the process further or facing an even greater risk of recession as distortions build in the real economy.

A financial crash emanating from this crack-up boom is a massive possibility in The Middle Kingdom. And in the United States, as well, for that matter.

Expensive Energy

The next thing is energy.

Ive been writing for ages that the Feds money printing leads to commodity prices roofing it.

The issue is quite obvious. Everything's getting more expensive.

It was odd to hear this analyst talk about the big discount stores like BJ's and Costco, which I had written about a few weeks ago.

But the interesting thing to me was I didn't realize that BJ's and Costco were also not stocked to the gills and having supply issues.

I still remember the land of milk and honey. Its hard for me to imagine a lack of abundance in America.

Usually, those big guys are the last ones to have supply issues.

Of course, here at Landers, my equivalent of BJ's, we don't have pallets stacked to the sky anymore, which I'd expect in the Philippines.

But it seems that's also a massive issue in the United States.

And that leads me to my bonus issue and what ties all this together.

Scarcity: Unknown to Modern Americans

Americans have never had to deal with real scarcity before.

I think it's going to be a shock to the American system, to the thoughts of amber waves of grain and limitless supply, near-limitless demand, and unlimited potential.

Americans are going to have to learn to economize now.

Americans are going to have to learn to (GASP!) lower their time preference.

Time preference is the assumption that, all else being equal, people prefer a given end to be achieved sooner rather than later. In the Misesian school it is derived from the assumption about human action. If people did not prefer to attain their ends sooner rather than later they would never act. The further in the future the attainment of the end appears to be, the less preferable it is. The less waiting time, the more preferable is the end.

Quite frankly, I think Americans have the highest time preference in world history.

I want it all, and I want it now, as Freddie Mercury once sang.

Getting everything now is no longer how it works.

Americans are going to have to wait. They're going to have to economize.

Americans will have to decide the most essential product they could acquire now to ease their burden rather than buy everything at once.

Being outside the United States for 22 years, I haven't had to deal with scarcity all that much, to be fair.

London's got pretty much everything, and Singapore has pretty much everything. Hong Kong has pretty much everything.

But the Philippines doesn't have everything. And there's a world of difference between the first-world and the third-world.

But third-world problems have now become first-world problems thanks to inept government management. Our governments cannot organize themselves at all.

As a result of their lack of organization, entrepreneurs cannot organize themselves. Consumers now have to make more challenging choices than they've ever had to make in America before.

Scarcity may ease up at some point, and supply chain issues may get fixed. But I don't think this problem goes away entirely for a long time.

So I thank this masked analyst for his fantastic insights.

The last takeaway from the conversation is that though things may look bleak from a consumer standpoint, there are loads of ways to profit from an investor standpoint.

So were going to be discussing this going forward.

Have a great weekend!

All the best,

Sean