Just in case you forgot to pay attention to actual facts, inflation is a fiction, something made up by Central Bankers to validate their rate hikes, which in turn have helped blow out yield spreads for the direct benefit of your local billionaire bankers.
Back in the real world, there’s no basis for a super tight Fed policy. Based off today’s CPI readings, inflation grew by just 0.2% for the month, 1.7% for all of 2016.
Over in Exodus, we have a raw commodity index. I view it as a real time gauge on inflation. We definitely saw a bounce this year, higher by 8.5% — but still well off 2014 levels.
Again, the assumption for higher growth is predicated off the thesis that Trump will deliver on tax cuts, huge fiscal stimulus program, and domestic productivity gains. By factoring in earnings and discounting valuations at much lower tax rates, there’s certainly a bull case to be made, even at 18x earnings. However, the Fed’s mandate of keeping the inflation genie in the box is going to begin looking ridiculous if we don’t start to see some actual inflation. Otherwise, they’ll be hard pressed to hike in 2017.
The 10yr bond yields have risen from a low of 1.55% to 2.6% since late September, nearly a 100bps move while inflation was running cold at just 1.7%.
Boolish.
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I wonder if they hike in 17 just cause they said they were
going to hike.My feeling is short a 30% stock market fall
they hike.
They definitely do not hike three times. Maybe once. Probably not twice. Three times is a bag of laughs inside a clown car at the worst circus in outer space.
Lol.I’II try and remember that one .
Board the ark if you care about the fate of humanity.
Longest bull run since inception. Another 4 for sure.. probably another 4. 16 years. Just wow! Boomers look like newbies when Gen X retires. We’ll have more money and need less on medical because we actually cared about our health. Millennials will be our servants loving at home. Doing our bidding or end up homeless.
I, for one, hope the Fed raises rates 10 times next year. I could care less how the stock market reacts. Savers around the world have been fucked over by ZIRP for far too long.
There’s plenty of inflation in prices of living expenses such as food and most services. Furthermore middle and lower income people spend a much larger percentage of their income on necessary living expenses, compared to the upper income class.
Someone making $250 K doesn’t feel another $15 on a bag of groceries. At the $35 K level it means being hungry, or never having a bit of a treat in your life.
USD strength is producing stagflation
There is still a mix between inflation in some areas and deflation in others, so the numbers don’t tell the full story. The Fed is in an impossible situation. If they raise rates too much, then we’ll see a whole new cycle of debt destruction and deflation. That can’t happen, but my guess is they need to sound hawkish as long as the market keeps going up. The second the market begins to worry, all the rate hike bets will be off that table.
This is the same game we’ve been playing the past 20 years…
by in pm stks, tlt, utes, sel in EE (knowing)