Holiday costs are soaring … how it’s accelerating a key business shift … why the holiday season 2022 could look very different

 

Before we jump into today’s Digest a quick note…

Our InvestorPlace offices are closed tomorrow and Friday for Thanksgiving.

If you need help from our Customer Service team, they will be glad to assist you on Monday when our offices reopen.

Given the market holiday, we’ll also be taking off tomorrow here in the Digest. But we’ll pick back up with you on Friday.

From all of us here at InvestorPlace, have a wonderful Thanksgiving!

Moving on to today’s Digest…

***Hopefully tomorrow’s Thanksgiving feast won’t break your budget

The Farm Bureau reports that the cost of a Thanksgiving dinner for a group of 10 is up 14% from last year.

From NPR:

The Farm Bureau’s calculations include turkey, stuffing mix, sweet potatoes, rolls with butter, peas, cranberries, a veggie tray, pumpkin pie with whipped cream, coffee and milk, with enough for leftovers.

The turkey itself costs 24% more than last year, the group says; it’s $23.99 for a 16-pound turkey.

The financial pain won’t stop with your Thanksgiving meal.

When you’re out-and-about on Black Friday, expect to pay more when you stop at McDonald’s for a quick refresher.

The fast-food giant has gotten nailed from several angles. Its wage costs have risen 15% so far this year. Meanwhile, its production costs (think paper, food, various other supplies) are expected to be up about 4%.

Of course, management is passing along these increases to you and me. McDonald’s has raised its prices roughly 6% from last year.

And the hits keep coming!

If we look ahead to December, all you Christmas Tree enthusiasts can expect to pay between 10% to 30% more for both live trees and artificial trees.

And as for holiday shopping in general, CNN Business just reported “2021 will be among the most expensive holiday shopping seasons ever.”

***But if Luke Lango is right, things will be very different come next Christmas

For newer Digest readers, Luke is our hypergrowth expert, and the analyst behind Hypergrowth Investing. His specialty is finding market-leading tech innovators that are pioneering explosive trends, capable of generating outsized investor wealth.

But such tech-innovators are often highly-sensitive to inflation and interest rates. Given this, Luke has been monitoring these variables for months, and more importantly, their likely path going forward.

As noted a moment ago, Luke believes we’ll be in a very different situation 12 months from now.

From Luke’s issue of Hypergrowth Investing earlier this week:

What if I told you that next year could actually be the cheapest holiday season ever? Doesn’t that sound like a paradise after paying $5 a gallon for gas to just get to the store?

Well, guess what? It can. 2022 can turn into the cheapest holiday season on record.

In explaining why, Luke starts by pinpointing the primary drives of today’s inflation: shortages in both supply and labor.

As to our supply shortages, for decades, U.S. companies have outsourced manufacturing to China, India, and other parts of Asia. But Luke notes that these emerging economies do not have the same resources as the U.S. to handle the Covid-19 pandemic.

In many cases, this means U.S. companies are trying to get their goods from factories that are running at just 50% capacity.

Back to Luke:

U.S. companies are getting fed up with these shortages.

This is now the second time in three years that outsourced supply chains have proven unreliable (remember the Trade War?), so they are increasingly looking to localize their supply chains – or bring them stateside.

***Meanwhile, workers are proving hard to find today, despite significant unemployment numbers

As it stands today, businesses are already having a hard enough time luring workers back to the labor force. But if U.S. companies decide to say “no more” to unreliable manufacturing outsourcing and instead localize their supply chains, that’s even more open jobs.

Back to Luke:

So, these companies will either fail to find enough U.S. workers to localize their supply chains, or they’ll find enough workers but will be paying them insanely high wages which erode said company’s profit margins.

It’s a lose-lose situation.

And that’s why inflation is still red-hot.

U.S. companies aren’t localizing their supply chains because doing so is economically and logistically unfeasible, and therefore, we’re stuck with big supply shortages and huge price surges.

So, how is this going to resolve itself?

By something we’ve covered here in the Digest…

Robots.

***Today’s shortages are planting the seeds of tomorrow’s localized, robotic supply chain

Back to Luke’s update:

If I’m a company that is supplying product from Asia, what I’m going to do in 2022 is bring my supply chain stateside, invest in automated technologies, and set-up an entirely automated supply chain run by robots that don’t require a salary.

That way, I bypass both the current supply and labor shortages, produce enough goods to meet demand, see a boost in sales and decrease costs, and ultimately make more profits.

I turn my lose-lose situation, into a win-win.

Trust me, folks, this is exactly how most companies in America are thinking right now – and that’s why supply chain automation and robotics will be one of corporate America’s biggest investment focuses of 2022.

We don’t have to wait until 2022. It’s already started.

From The Wall Street Journal:

Robotics orders by North American companies are on track for their biggest year, according to an industry group.

Total robotics sales for the first nine months of the year were $1.48 billion, topping a previous record of $1.47 billion set over the same period in 2017, according to the Association for Advancing Automation, or A3. Sales rose from $1.09 billion in the first nine months of last year.

A3’s data look at industrial robots, which often are used for assembling parts or transporting heavy materials in production settings, according to the association.

“With labor shortages throughout manufacturing, logistics and virtually every industry, companies of all sizes are increasingly turning to robotics and automation to stay productive and competitive,” A3 President Jeff Burnstein said.

And this is from The Hill:

A recent survey from Verizon of more than 600 U.S. small businesses found that 30 percent have already adopted digital tools to help compensate for a shortage of workers during the COVID-19 pandemic.

Think this is short term? It’s not.

As the cost of these technologies rapidly decline, both big and small companies are making significant investments in software and hardware that is helping to eliminate what is for many their biggest headache: people.

For obvious reasons, businesses don’t like to talk about how they’re eliminating employees with automation. But it’s happening.

Yes, it’s happening.

This is not a trend or a fad. It’s a fundamental shift in modern business.

The companies that adapt will see it reflected positively in their bottom lines. The companies that don’t (or can’t due to business models) will face serious headwinds.

We’ll keep you up to speed on developments here. But it’s not too early to look at the specific companies in your portfolio to evaluate how they’re responding to this shift.

Have a good evening,

Jeff Remsburg