Could The Coronavirus Lead To Inflation? (Radio Interview)

February 25, 2020

On the Trey Ware Show, Karl explained to Trey that while the market is pricing in deflation because of the Coronavirus, perhaps the bigger concern for consumers should be inflation as the supply chain is disrupted.

Trey Ware:                         Well the President answered some questions in India this morning about the coronavirus, so I’m going to go back to Karl Eggerss from and we’ll talk about what happened with the stock market yesterday.

Trey Ware:                         You know, one of the things that I started to say months ago when this first appeared on the scene, Karl, is that economically the impact won’t be felt for months down the road, and certainly that’s exactly what’s happening here, is that with all of the manufacturing that is not going on in China today.

Trey Ware:                         I was reading earlier a report about all these tanker containers, these shipping containers that are full and sitting at the ports in China that they can’t get shipped out. Food is rotting in these containers and all these goods that they have manufactured to send around the world, but they’re just sitting there. That with that going on, this is something that you don’t feel today right now in the economy, but something that’s weeks or months down the road.

Karl Eggerss:                      Yeah. You know, our listeners need to really watch out for prices going up. The market is acting as if this is deflationary. This actually could be inflationary, because if you can’t get products here the products that exist sitting on the shelves become worth more. So we need to watch for inflation, which is really interesting because the market’s not really pricing that in, not a lot of people are talking about it. But let’s look over the next few months to see if prices start to go up on some of our goods, and that could be another kind of… You know, a gut punch to the economy, is everybody looking around and their prices are higher.

Karl Eggerss:                      Again, as we talked about yesterday, if you start to see some layoffs, if you start to see some furloughs and people temporarily not working, temporarily even that puts a dent in the economy, and at the same time if prices are going up that could really hurt for the consumer.

Trey Ware:                         Well, and politically too. It could really hurt politically because we’re dealing with a political year and to have this hit now… You know the President has asked for another $2.5 billion to fight this. They started out with 130 million. They realized that that price tag is going to be way too low. They’re going to need 2.5 billion or more to be able to fight the coronavirus, and now it’s having a huge effect in Europe. We just saw again overnight they’re now up to seven dead in Italy. Many parts of Italy have been shut down now.

Trey Ware:                         In Iran, the official count out of Iran is 12 dead, but there are those in Iran right now who are saying no, it’s more like 55 or 60 dead in Iran right now.

Trey Ware:                         So we’re dealing with a global pandemic, something that has stretched beyond the borders of China right now, which is one of the reasons I believe the President is in India today, because India is another manufacturing hub, and being in India today to make sure that we have a manufacturing partner and to shore that up, as well as a partner to help us deal with Afghanistan, is a really smart move for the President to be making right now.

Karl Eggerss:                      Yeah. Let’s also watch… If the Federal Reserve really wants to retaliate against President Trump, which we know Jay Powell’s not a big fan, they’re not big fans of each other, they will not lower interest rates, and even though the market is begging for it.

Karl Eggerss:                      If you look at the bond market, it’s pulling down what the Feds should do. So the Fed behind the… They actually should be lowering rates right now, but they don’t want to look political one way or the other this year. They really should be lowering rates. If they don’t do it, that would be a political statement in and of itself. So watch for the Fed to not only lower rates, but do something else creative to try to give confidence globally.

Trey Ware:                         Only a couple seconds left. What are the futures looking like today?

Karl Eggerss:                      Probably down to about 100 right now. Keep in mind we’ve got about 50… Since 1950 we’ve had over 50 days where the market has fallen about 3.5%. I did some research. On average the market has bounced the next day and a year out 100% of the time on average.

Trey Ware:                         Sounds good. Thank you Karl Eggerss.