Demand-pull inflation occurs when excessive money supply chases limited goods and services, causing prices to rise; during such economic conditions, investors should focus on companies with pricing power that can pass increased costs to consumers rather than those without such power.
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The "Surge Pricing" Economy (Demand-Pull Inflation) 🚨Hinzugefügt:
Have you ever tried booking an Uber to go to a football match when a 10 minutes ride cost you 150 bucks? Are they riding me in helicopter?
>> No, you just experienced the demand pull inflation. Here is the simple math behind this madness. 10,000 people decide to go to a football match all together, all holding up their phones while there are only 50 Uber drivers in the area. The algorithm doesn't panic.
It just inflates the price by 400%.
Only people willing to pay that price will get the ride. Here the cars didn't get better. The demand just overwhelmed the supply. Now zoom out and apply that Uber algorithm to entire North American economy. Over the last few years, the government handed over millions of people a massive pile of dirt cheap interest rate and stimulus. But the actual supply of houses, microchips, cars didn't increase at all. We have millions of extra dollars bidding for exact same goods. So what did the economy do? It hit us with the permanent price search. So this is the definition of demand pull inflation. Too much money chasing the same number of goods. But unlike an Uber, the economy search multiplier doesn't turn off the next morning. Prices stay high. So when the whole economy is surging, you don't want to be the guy actually paying the premium. You have to invest in the companies that have pricing power. That's how you will benefit from the high demand. So are you paying the search or are you profiting from it? Let me know in the comments.
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