The Fed’s Standup Philosophers

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Watching the parade of Fed presidents deliver their rimshot-worthy proclamations that there is no inflation problem reminds me of a scene in Mel Brooks’ History of the World.

Brooks’ character, applying for unemployment in ancient Rome, describes himself as a “standup philosopher” who “coalesces the vapors of human experience into a viable and meaningful comprehension,” to which Bea Arthur responds, “Oh, a bullshit artist!”

In this morning’s housing data we see more evidence that even though prices are rising at a problematic rate – courtesy of the Fed, which insists there is no inflation problem – at least some areas of the economy are stagnating. Single-family housing starts plunged 9.5% (versus -2.0% expected) and permits increased only 0.3%. It seems builders know something the rest of us don’t.

According to the NAHB, “75.1 million households, or roughly 60% of all U.S households, are currently unable to afford a new median priced home.” This is a situation unlikely to resolve itself any time soon given the soaring price of lumber – again, courtesy of the Fed, which insists there is no inflation problem.

It’s no better in the rental market. The average price of a 2-bedroom apartment is up 5.3% YoY (over 30% in cities such as Las Vegas or Detroit.) Though multifamily starts are struggling to keep pace (up 4.0% YoY in April) the supply-demand picture is under mounting pressure from increasingly unaffordable single-family housing.

The futures, fresh off another overnight ramp job, haven’t yet reacted to the latest indication of stagflation. I supposed you can’t have stagflation without inflation – which the Fed’s philosophers will go on insisting doesn’t exist, like a Kanizsa triangle that isn’t really there.

To everyone else – especially those the Fed claims to be trying to help – it’s easily visible. It’s the Fed’s economic projections that seem to be without form or substance.

continued for members…

The overnight “breakout,” of course, was more of the usual nonsense designed to bust a perfectly formed falling channel – whose future is now more questionable. In the politics of the Watergate era, they called this sort of thing “ratfuckery.” Seems appropriate here too.

VIX’s channel bottom held last night, so SPX/ES’ falling channels still have a decent chance of playing out.

CL and RB are still propping up… …as is USDJPY. Note that the dollar is really taking it on the chin lately. As we’ve pointed out many times before, a falling dollar makes the inflation problem worse for a net importer such as the US.DXY in particular is in a precarious place – retracing 88.6% of its rise from its January lows. If it doesn’t bounce soon, we could see an onslaught of selling. Having punched through resistance, GC and SI are now struggling to hold their gains.