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Inflation

For Nine Million, Unemployment Benefits Have Suddenly Ended

The Economic Implications One of the major Wall Street investment houses recently lowered their Q3 GDP growth rate from 6.5% to 2.9% (!!), apparently realizing that two-thirds of the quarter was history, that the data have all been weakening (like August auto sales), and that the fiscal stimulus (helicopter money) was now in the rear-view mirror.  Readers of this blog know that we have been discussing much slower growth than …Read More

Delta-Variant, Soft Data Bode Ill for Near-Term Growth

The markets waited all week for Fed Chair Powell to speak at the Kansas City Fed’s Annual Jackson Hole Symposium.  Due to the Delta-variant, like many other business meetings, this one was held virtually.  There was growing market concern that Powell would turn somewhat more hawkish, especially since some Regional Fed Presidents appear to have done so in recent speeches and media appearances.  As a result, interest rates, as measured …Read More

The Payroll Numbers Won’t Prevent Economic Growth From Softening

Employment was the big story of the week with headline Payroll Employment rising +943K Seasonally Adjusted (SA). The consensus estimate was +870K, so, apparently, a big beat. But, looking beneath the surface reveals that this isn’t quite what, at first blush, it appears to be. Since the pandemic began, we have held the view that the Not Seasonally Adjusted (NSA) data present a truer picture than do the SA. The pandemic’s distortions haven’t …Read More

The Rate Spike Will Damage the Recovery

Fed Intervention Needed There was quite a spike in interest rates the last week of February with the 10-Year T-Note spiking from a 1.36% level as of the close on Wednesday to as high as 1.60% intraday with a close of 1.55% on Thursday.  Friday’s close was 1.45%.  But, a lot of damage was done. It is naïve to think that this spike was caused by the inflation narrative, i.e., …Read More

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