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Things are getting expensive

Things are getting expensive.

I was thinking, I just paid $9,000 for 1 set of kitchen cabinets/counters and one bathroom set of cabinets and counters. This would have cost me closer to $6,000 just 4 years ago, less than $4,000 10 years ago.

There are three possible reasons for this:
1. US Dollar is worth less
2. Trade War/Tariffs are making manufactured imports more expensive
3. Labor is more expensive

I wonder how this will extrapolate out. In theory, when times are tough the US dollar goes up, it and gold are the "last man standing" in a downturn, anything denominated in dollars will do better.

Source: Bullionstar.com

Essentially, non-US friendly countries have been moving their reserves of gold up recently.

Personally, I believe it is possible that we are seeing a country such as China making a move against the US dollar for world reserve currency status.

This is based on the fact that the 1944 Bretton Woods Agreement which established the dollar as the world reserve currency gave the US that immense power because the dollar was tied to gold; and that all of Europe's gold had essentially moved to the United States during WWII. Given that underlying assumption, and the fact that we are currently a Fiat only currency (not based on anything), if gold were to physically move elsewhere (such as China) and there was a big geopolitical shake-up, it is possible to dethrone King Dollar.

On a separate note, I wonder if the trade war with China will move more manufacturing back to the United States, meaning that our products will be 4x - 10x as expensive as it is now. Not only cabinets and counters, but motors, replacements parts (plastic or metal), appliances, gloves, paintbrushes. Since there are many parts that go into a construction job, an increase in prices of a few dollars among a few items makes it so that a bag at Home Depot that cost $80 just 4 years ago, now is $140. I have seen this personally.

I also wonder about our labor markets, we are still below the 2007 peak in construction industry labor, and the processes have not been that much more efficient (automated), it is still very labor intensive. Remember, nearly all homes are "hand crafted" in California, piece by piece, by a person and not a machine.

Source: Bureau of Labor Statistics

It is getting difficult to train new people to be "artisans", and many construction people are "helpers" rather than true tradesmen. I think we will get squeezed in labor costs in the future as we expect the labor pool to decrease with our Coronapocalypse.

Conclusions:
- Things are expensive
- Things can get more expensive
- Not just construction, but everything is more expensive, meaning it likely has to do with the USD ($)
- Trump stimulus devalued the dollar over the last few years, but it should strengthen in the next few
- This is hidden inflation
- Do your projects now, they will be more later
- Some rentals who have deferred maintenance, may never be maintained, it may just be redtagged or forced liquidated because the below-market rents they collect will never equal to the maintenance cost increases
- Add more buffer to your flips or your rehab projects
- Assets denominated in USD ($) such as houses, should fair well nominally
- Gold should be going up
- If you can buy real estate with minimal work, all the better

#Coronapocalypse
#Inflation
#Stagflation
#IsCashKing
#TheEverythingIsTooDamnHigh
Orange, CA-TRREG DRE#01843673-RP100 DRE#02059058-P:714-831-1800-E:info@theresultsrealestategroup.com-W:www.theresultsrealestategroup.com-Facebook - Twitter - Instagram - LinkedIn

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Location: Orange, CA, USA

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