There were some very smart people a year ago saying that you couldn't kill inflation without a big rise in unemployment. Last October, Larry Summers - former Treasury Secretary and President of Harvard - said we'd need a recession and an unemployment rate of 6% to kill inflation. In the summer of last year, he said we'd need 5 years [...]
The 10 year Treasury yield has been in an uptrend since the summer of 2021 which is obvious to anyone who can see. It has stalled a couple of times and moved sideways - consolidated in Wall Street technical speak - but the trend is obvious (see below). It seems only a matter of time before we break above the [...]
I spend a lot of time asking questions. I don't always have answers to these questions but I think it is critical to ask them. Think about how the consensus might be wrong or, more importantly, how you might be. Question the narrative and try to determine what's important and what's not, who you can ignore, and who merits your [...]
It appears we have started the third correction in stocks since the bottom in October of last year. The first one was in December and saw the S&P 500 fall about 8% from peak to trough. The second one was from February into mid-March and totaled about 9%. I don't know how far this one might carry but a pullback [...]
I spend a lot of time thinking about what "everyone" else believes about the economy and markets. If you've been reading my weekly scribblings for any time, you know I have little faith in the soothsayers of this industry. No one knows what the future holds, least of all that group of crystal ball gazers known as economic forecasters. Most [...]
Housing starts rebounded nicely in May to 1631 units from a revised lower 1340 units in April. Permits went up sequentially as well, just not as much. Both series are above the historic mean and median levels. Housing starts actually showed 5.7% growth YOY. Permits declined 12.7% from a year ago, this was a slower decline and the smallest decline [...]
Everyone knows that growth stocks have been on a tear this year but what is more interesting is the divergence in performance between indexes with similar names. The Russell 1000 and the S&P 500, the two main broad US large-cap indexes, are both up about 15% this year. But the growth and value versions of these two indexes have produced [...]
No one could have possibly been surprised by the Fed's lack of action on Wednesday. They had signaled to anyone who would listen that they would pause (skip, take a hiatus, halt, or whatever you want to call it) at this meeting. And no one should have been surprised that Jerome Powell offered some tough talk about the future of [...]
In order to get inflation to 2%, how much demand do you have to kill or how much does credit have to tighten to offset the new interest income in the economy and a 6.1% fiscal deficit per year for the next decade? Inflation will be higher for longer. The Fed by necessity will have a higher implicit if not [...]
Inflation continues to fall. On a YOY basis CPI dropped from 4.96% to 4.13%. With this print, the probability of a Fed Pause went from 77% to 94%. Falling inflation rates are a result of A. more restrictive money or B. falling demand. This is not a binary question and there is a causal relationship. 11 months ago, we hit [...]
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