TEK2day

Operating at the Intersection of Technology and the Capital Markets

    Tag: Stagflation Is Imminent

    • Inflation Is Moderating, But…

      Sure, year-over-year Headline CPI is moderating (although I expect the year-over-year percentage increase to accelerate next month). Core CPI also moderated month-to-month. That was also a good piece of news last week. However, that’s not the point. Prices remain elevated (see CPI chart below). The Dollar has been devalued. The price of like-for-like goods and…

    • Stagflation Is Here. The Fed Will Ease in 2024.

      With today’s CPI release (focus on the Core CPI number of 5.3%, not the headline number which benefits from the drop in oil prices), I figured it’s a good time to promote my book: Stagflation Is Imminent. We are living in a negative Real GDP, negative real interest rate (yes, rates remain negative), high debt,…

    • Tomorrow’s CPI Release Does Not Matter

      Tomorrow’s CPI release is inconsequential at this point. Prices for finished Goods & Services likely modestly abated and will remain elevated in our view such that 2% CPI is not going to happen this year. More pressing for the Fed is the ongoing banking crisis. The fixed income market ought to be setting interest rates,…

    • Labor Force Participation – Weak

      Blame the various COVID relief packages for the weak labor force participation rate – 62.5% in February, up from 62.4% in January but down from 63.3% in February 2020 pre-pandemic. This at a time when the Biden Administration is proposing a $7 trillion budget. I’m not sure where demand for U.S. Treasuries to fund this…

    • Tomorrow’s CPI = Noise

      Regardless of where CPI lands tomorrow, my view is that the Fed will hold rates higher for longer than the market believes. Higher interest rates combined with a shrinking money supply (QT), translates to: tighter monetary conditions, a higher cost of capital, less revenue visibility for companies, more employee layoffs and a deeper recession. The…

    • More QE Is Coming. Stagflation Is Staying.

      Governments gorged on historically low interest rates since 2009 and issued record amounts of debt to fund all sorts of silly spending programs from economic “stimulus” checks to QE. Debt securities are subject to the laws of supply and demand as is any commodity. We have too much paper outstanding – especially as it relates…

    • Prices Need To Decline To Kickstart Real GDP Growth. Don’t Hold Your Breath.

      Prices need to fall across the economy to really kickstart economic growth to the point where Americans can feel it. Unfortunately this is not going to happen. Prices and interest rates will plateau, yet they will remain elevated as the economy stalls. We have a word for this economic condition – Stagflation. If you regularly…

    • It Always Makes Sense To Invest In Quality Names

      Many Technology investors got religion on August 26th as it relates to interest rate increases (more to come) and a Fed pivot (not any time soon). The message of “higher for longer” was reiterated yesterday by Fed Chair Powell. The Fed tends to undershoot when it comes to inflation and its Fed Funds target. We…

    • The Fed Remains Accommodative. Inflation Remains Persistent.

      Despite hawkish rhetoric the Federal Reserve’s monetary policy remains accommodative. Real interest rates remain negative by a wide margin (8.50% CPI compared to a 2.25-2.50% Fed Funds Rate range) and we are nowhere near a “neutral” rate. Our outlook calls for muted Real GDP growth and high prices (i.e. Stagflation) for years to come. Commodities…

    • August CPI To Remain Robust

      The Cleveland Fed’s current August year-over-year CPI estimate is 8.3%, down 0.2% from July’s 8.5% level. The bank estimates August Core CPI at 6.3%, up from July’s 5.9% level (while oil prices have fallen, food prices continue to rise). We quote the Cleveland Fed as the bank’s view on CPI and Core CPI is in-line…