Happy Memorial Day

By Biiwii

Let’s remember all of those who have moved on while packing in the grilled meat products and alcoholic refreshments this weekend.  Let’s remember the heroic, the less obviously heroic and all the other loved ones who have passed on.

Grampy… WWII hero


Dad… Korean War and a lifetime of positively touching others


Jonathan, who was my financial market Godfather and became the very first NFTRH subscriber… after imploring me not to do it. :-)


Brad, who was once upon a time an important and influential business associate and friend who later followed his passion to become a premium Tequila maker before dying much too young.


And everyone else, both military and non…


War always sucks…

Happy Memorial Day



By Michael Ashton

Here is a summary of my post-CPI tweets. You can (and should!) follow me @inflation_guy or sign up for email updates to my occasional articles here. Investors with interests in this area be sure to stop by Enduring Investments.

  • CPI Day! Exciting. The y/y for core will “drop off” +0.20% m/m from last yr, so to get core to 1.9% y/y takes +0.29 m/m this yr.
  • Consensus looks for a downtick in core to 1.7% y/y (rounding down) instead of the rounded-up 1.8% (actually 1.754%) last mo.
  • oohoooooo! Core +0.3% m/m. y/y stays at 1.8%. Checking rounding.
  • +0.256% m/m on core, so the 0.3% is mostly shock value. But y/y goes to 1.81%, no round-assist needed.
  • Headline was in line with expectations, -0.2% y/y. Big sigh of relief from dealers holding TIPS inventory left from the auction.
  • Core ex-shelter was +0.24%, biggest rise since Jan 2013. That’s important.
  • This really helps my speaking engagement next mo – a debate between pro & con inflation positions at Global Fixed Income Institute. :-)
  • More analysis coming. But Excel really hates it when you focus on another program while a big sheet is calculating…
  • It’s still core services doing all the heavy lifting. Core goods was -0.2% y/y (unch) while core services rose to 2.5% y/y.
  • Core services has been 2.4%-2.5% since August.
  • Owners’ Equivalent Rent rose to 2.77% y/y, highest since…well, a long time.
  • Thanks Excel for giving me my data back. As I said, OER was 2.77%, up from 2.69%. Primary rents frll to 3.47% from 3.53%.
  • Housing as a whole went to 2.20% y/y from 1.93%, which is huge. Some of that was household energy but ex-energy shelter was 2.67 vs 2.56
  • Or housing ex-shelter, ex-energy was 1.14% from 0.67%. Seems I am drilling a bit deep but getting housing right is very important.
  • Medical Care +2.91% from 2.46%. Big jump, but mostly repaying the inexplicable dip from Q1. Lot of this is new O’care seasonality.
  • Median is a bit of a wildcard this month. Looks like median category will be OER (South Urban), so it will depend on seasonal adj.
  • But best guess for median has been 0.2% for a while. Underlying inflation is and has been 2.0%-2.4% since 2011.
  • And reminder: it’s median that matters. Core will continue to converge upwards to it, (and I think median will go higher.)
  • None of this changes the Fed. They’re not going to hike rates for a long while. Growth is too weak and that’s all they care about.
  • For all the noise about the dual mandate, the Fed acts as if it only has one mandate: employment (which they can’t do anything about).
  • The next few monthly core figures to drop off are 0.23%, 0.14%, 0.10%, and 0.05%.
  • So, if we keep printing 0.22% on core, on the day of the Sep FOMC meeting core CPI will be 2.2% y/y, putting core PCE basically at tgt.
  • I think this is why FOMC doves have been musing about “symmetrical misses” and letting infl scoot a little higher.
  • US #Inflation mkt pricing: 2015 1.1%;2016 1.8%;then 1.8%, 2.0%, 2.0%, 2.1%, 2.2%, 2.3%, 2.4%, 2.5%, & 2025:2.4%.
  • For the record, that is the highest m/m print in core CPI since January 2008. It hasn’t printed a pure 0.3% or above since 2006.

There is no doubt that this is a stronger inflation print than the market expected. Although the 0.3% print was due to rounding (the first such print, though, since January 2013), the month/month core increase hasn’t been above 0.26% since January 2008 and it has been nearly a decade since 0.3% prints weren’t an oddity (see chart, source Bloomberg).

Continue reading Post-CPI

Pivotal Events

By Bob Hoye

“A Sense of Ending”

Click for full PDF


Rates of Money Pumping

By Steve Saville

Comparing Rates of Money Pumping

This post is a modified excerpt from a recent TSI commentary.

The following table shows the amount of monetary inflation in a number of different countries/regions. Specifically, the table shows the amount by which the money supplies of Australia, China, the Euro-Zone (EZ), Hong Kong, Japan, the UK and the US have grown over the past year, the past 2 years and the past 4 years. In those cases where it was easy for me to do the calculation I’ve used TMS (True Money Supply) as the monetary aggregate, but in other cases I’ve used M1 or M2. In China’s case I show results for both M1 and M2, because due to the lack of detail provided by the People’s Bank of China I’m not sure which of these measures is closest to TMS.


Here’s some information that can be gleaned from the above table:

Continue reading Rates of Money Pumping

Transports – Big Concern?

By Chris Ciovacco

Transportation Average – A Big Concern For Stock Bulls?

Weakness In Transports In 2015

If you follow the markets, you have probably heard about the “non-confirmation” warning being flashed by the fact the Dow Transportation Average has failed to post a new high simultaneously with the Dow Jones Industrial Average.

Dow Theory Is Useful

We have written about Dow Theory many times in the past; a July 2014 article explains the economic rationale behind the theory. We believe Dow Theory is useful, but it is one of many sources of information.

Continue reading Transports – Big Concern?

Crude Leads Bond Yields

By Tom McClellan

Crude Oil Leads Bond Yields

Crude Oil Leads Bond Yields
May 22, 2015

What if I told you I could draw you a picture ahead of time for what the future of interest rate movements would look like?  That would be a cool trick, no doubt.  But that’s exactly what crude oil prices can do for us.

Continue reading Crude Leads Bond Yields

Pigs Break Out With Yields

By Biiwii

[edit] You may recall a previous note that my time and energy would be severely tested in May and posting would be lighter than usual.  Well, it has really kicked in.  We’ll be back to normal come June, I expect.

As posted at NFTRH.com

It is too early to call it a confirmed breakout, but the Bank index has popped above cyclical bull market highs. Weekly MACD and RSI both look good.


The monthly chart shows that BKX has been consolidating above a long-term support area for the better part of 2 years.

Continue reading Pigs Break Out With Yields

Asset Bubble Deleveraging

By Alhambra Investment Partners

We Are Going To Find Out If An Immense Asset Bubble Can Be Carefully And Purposefully Deleveraged

Some people are getting very nervous about China, and as usual that stems from a misreading of the Chinese intentions. This is not to say that one should not be concerned at all, but it is much better to be concerned for the right reasons in order to find a more suitable line of inquiry and analysis. The complications of interpreting the Chinese reform agenda is again the upset in the variables, as most commentary continues to assume the baseline orthodox construal.

Mainline monetarism assumes that all monetary inflows and increases are desirable, a view is amplified when faced with economic stress and the potential for outright recession and dislocation. The current situation in China certainly qualifies under those terms, which is why the monetarist view is so confounded. They simply cannot fathom why the PBOC, or the communist government in general, would not immediately and forcefully undertake any and all “stimulus” means no matter the relative circumstances financially.

Continue reading Asset Bubble Deleveraging

Around the Web

By Biiwii

Market Analysis & News From Around the Web


Cars & Financial Manias

By Bob Hoye

Great Cars, Soaring Sales and Financial Manias

Click for full PDF

Which June, Charles?

By Michael Ashton

Which June Did You Mean, Charles?

Yesterday, Chicago Fed President Charles Evans gave a speech in which he said that he probably leaned towards making the first tightening early next year, as there is “no compelling reason for us to be in a hurry to tighten financial conditions.” The Fed, he said, probably shouldn’t raise rates until there’s a “greater confidence” that inflation one-to-two years ahead will be at or above 2%. This isn’t a surprising view, as Evans is the progenitor of the “Evans Rule” that says rates should stay near zero until unemployment has fallen below 6.5% (it has) or inflation has risen above 2.5%. Yes, those bounds have been walked about; in particular the 6.5% unemployment rate is obviously no longer binding (he sees the “natural rate” as being 5% again). But the very fact that he promoted a rule that set restraints on a mere return to normal policy means that he is a dove, through and through. So, it should not be surprising that he isn’t in a hurry to tighten.

Continue reading Which June, Charles?