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Despite Wall Street Hype, Inflation is Not Imminent

Retail sales rose a record 5.3% M/M in January after three months in a row of decline.  No doubt the $600 checks from the late December “helicopter” money drop played a large role.  The Atlanta Fed now says that their GDP model pegs the current quarter’s growth at +9.5% (Annual Rate (AR)).  In addition, Industrial Production was up nearly 1% (0.9%) in January.  So, why worry?  Infections and hospitalizations are …Read More

Markets Are Bubbly – The Economy, Not So Much

Not a Bubble?  The equity markets have been driven by momentum and speculation these past few weeks, not by underlying business fundamentals.  We had GameStop, followed by Silver, then Pot stocks, and now SPACs, all driven by retail.  PE ratios are in the top 1% of their historical range.  Junk bond yields are at all-time-record low levels (sub 4%).  In January, the worst stocks based on business fundamentals, significantly outperformed …Read More

We Don’t Live in “Normal” Times

The equity markets are in one of those rare moods where they continue to rise no matter the news, even when there are riots in the nation’s capitol complex, and when non-farm payrolls fall -140K.  Would you say this is “normal?” Regarding inflation expectations, interest rates rose rapidly along the Treasury yield curve with the 10-year T-Note yield rising from 0.93% (93basis points) from its close on January 4th to …Read More

The Wile E. Coyote Market/Economy

The Wile E. Coyote stock market has now looked down. Nothing but air! The “good news” data from the U.S. economy is all stimulus related. Without stimulus, Q3 GDP would have fallen double digits. The economy has yet to face the oncoming eviction crisis in the rental markets and foreclosure tsunami in the commercial real estate market. No matter how the economic numbers are presented, 22+ million unemployed tells you all you …Read More

The Real Recession Is Just Starting

At month’s end, we are going to see the BLS announce a 30%+ bounce in real GDP (the Atlanta Fed’s forecast is now above 35%). Much of this is already priced into the equity market, so a positive or negative reaction will only occur if the reported number is significantly above or below the consensus view. In addition, this is old news, as Q3 will have been in the rear-view mirror for …Read More

The New (Scary) Fed Steps Into New Territory

The pandemic’s second wave has appeared in Europe and now in the U.S. The Fed is more concerned about the economy and has taken the unprecedented step of telling Congress it will monetize whatever spending Congress desires. (Not your Father’s Fed!) The latest weekly unemployment data confirm the Fed’s worst fears: The Recovery has stalled! Overview No matter who wins the election, the following issues must be faced: Deflationary forces are at …Read More