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 … Continue reading Inflation Is Moderating, But…
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, … Continue reading Stagflation Is Here. The Fed Will Ease in 2024.
Don't worry about the debt ceiling. More spending is coming. The risk of Treasury defaulting in June is 0.00000000000000000001% (I jest), but that is neither here nor there. Both the Dems and the GOP want to spend on pork, it is just a question of which flavor. Therefore, the debt ceiling will be lifted, another … Continue reading Don’t Worry About The Debt Ceiling
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, … Continue reading Tomorrow’s CPI Release Does Not Matter
Core CPI accelerated month-to-month to 0.5% (from 0.4% in January), as "Shelter" accelerated to 0.8%. Our view is that the Fed will continue to hike rates but may slow the pace of QT, particularly as it relates to Treasuries. The Fed says it will maintain interest rate hikes as the Banking sector stumbles. More importantly, … Continue reading Price Inflation Persists. Now What?
Fed Chair Powell has the backbone of a jellyfish. Therefore it will be interesting to see what he and his band of banking flunkies do at their FOMC meeting later this month - especially if Financials continue to trade down and should consumer prices remain elevated as we expect (CPI release is Tuesday at 8:30am … Continue reading Powell’s Puzzle. Dimon A Winner.
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 … Continue reading Labor Force Participation – Weak
WMT expenses (COGS and interest expense), grew faster than January quarter revenues. Fiscal 2024 full year outlook looks similar where expenses are growing as fast as or outpacing revenue growth. That's what an economy in the midst of stagflation looks like - muted growth with costs (including debt expense), growing as fast or faster than … Continue reading Walmart Looks Like Stagflation
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 … Continue reading Tomorrow’s CPI = Noise
PPI up 0.3% month-to-month as food inflation remains sticky. In case you missed this morning's PPI release, click HERE. Foods. With respect to "Foods", it is no surprise that poultry, eggs and dairy were up in November as this was reflected at Retail. Apparently there is a bird flu that was driving poultry/egg prices higher. … Continue reading PPI: Food Prices Remain Elevated