Inflation Games

Inflation drives interest rates. Though the Fed probably wishes they didn’t, it’s an inconvenient truth.  There are much tighter correlations, but consider the strong positive correlation between CPI and 10Y notes. This matters, of course, because with $22 trillion in debt, the US faces the same problem as the ECB and Japan: High interest rates … continue reading →

CPI: Nov 13, 2019

Today is off to an interesting start.  Following Trump’s call for negative interest rates and more grandstanding on China in New York yesterday, headline CPI came in hotter than expected but right in line with our forecast. As we’ve discussed, this is the result of oil and gas trending sideways in support of the upcoming … continue reading →

Why Interest Rates Must Not Rise

In May 2014 many of us were shocked by a report that Ben Bernanke, who had recently departed the Fed, told a group of wealthy investors that he did “not expect the federal funds rate…to rise back to its long-term average of around 4%” in his lifetime. I remember feeling Bernanke’s statement represented both extraordinary … continue reading →

PPI Confirms Inflation Troubles

PPI just confirmed what CPI declared yesterday: Despite official White House discourse, there is inflation.Of course, it’s very clear that food, energy and trade services are the primary drivers.  Without them, PPI is as low as it was in Aug 2017.As a reminder, when Aug 2017 PPI was announced, the 10Y was about 2.1% versus … continue reading →

Macro Factor Cycles and Regime Shifts

Some time ago, I noticed that CL’s (WTI light sweet crude oil futures) three important tops since 2008 were almost the same number of days apart. This cycle certainly caught my eye.After tugging on that thread, I found a similar situation regarding CL’s lows. The 2001-2009 cycle was only 31 days longer than the 2009-2016 … continue reading →

Update on Gold: Dec 26, 2018

Back on August 15, we noted that gold was nearing an important downside target.  From Charts I’m Watching: Aug 15, 2018: [Gold] has reached triple support –the .618, yellow TL off the 2011 highs, and the red TL from 2010.  We’ve targeted 1173.60 since the yellow TL broke down in May and gray channel broke … continue reading →

The True Price of Oil

As enjoyable as it is filling up the Family Truckster for only $2.36/gallon, what if it meant the the death of thousands of Kurds?  Here’s what we know. For months, OPEC ignored Trump’s demands to bring down the price of oil.  Trump was correctly concerned that spiking oil prices would push inflation to new highs … continue reading →

Mixed Messages

The headlines have been coming fast and furious over the last 24 hours.  First, Trump’s tweet yesterday morning regarding trade negotiations with China touched off a rumor, declared false this morning, that a trade deal was imminent. But, SPX soared yesterday anyway. Then AAPL’s earnings came out.  The numbers were underwhelming; and, the company’s announcement … continue reading →

FOMC: What Elephant?

Over the last 20 years, we’ve seen two yield curve (2s10s) inversions: essentially all of 2000 and Dec 2005-May 2007.  The inversions themselves posed no issues for equity markets.  It was the dramatic unwinding of those inversions that produced crashes.Eight months ago, we almost had another.  2s10s had fallen to a trend line connecting those … continue reading →