When I look at the opportunity, it’s all about how well corporate America has done in terms of increasing profit margins. We’re at record levels now, so the revenues have come back, but all the costs haven’t come back. And that means tremendous earnings growth. That’s the positive.
The negative is we are seeing budding cost pressures from a whole bunch of different sources, one being input costs. So, the raw materials are significantly higher. The second is transportation. We had just-in-time inventories, and when we hit the pandemic just-in-time wasn’t in time. And so, we’ve had massive delays. I bought a bike earlier this year; six months later, I’m still waiting for my bike to come from China.
The auto industry is seeing the exact same thing, the auto sales on an annual rate for the most recent month, 12 million cars, we should be selling 17 or 18 million cars annually. We just can’t get the chips. So, that’s the bad news. And you’re going to see that in the revenue line for a number of companies in the third quarter and the fourth quarter.
But today’s deferred demand means future growth in 2022 and 2023. So, we’re elongating the ride, which from an equity market perspective is a great thing.
And then finally on the labor side, it’s wonderful to see—particularly the lower end—get paid more. They certainly deserve it after all these years. But the bigger problem is you just can’t find the workers. In our country we have 11 million open jobs, and I think all companies are going to be paying more, which leads to a real issue. If you start to get a margin squeeze, how do you as a company manage that?
