Category Archives: Inflation

One of These Things is Not Like the Others…

By Biiwii

I just got done with an extensive multi-market subscriber update over at, concluding with this…

“Very generally, for a real (as opposed to a day trader’s) positive view we’d look forward to the prospect of gold topping out vs. silver and the gold-silver ratio’s fellow Horseman, the USD capping its mega rally for a correction.  I think these things are coming but too many people have been calling for a commodity rally and inflation.  The deflation story is very long in the tooth, but it could end in some fireworks as opposed to just gently expiring in favor of a new inflationary backdrop.”

So being on watch for the end of the deflation backdrop that has held sway since 2011’s ingenious inflation sanitizer, Operation Twist, this article at Bloomberg caught my eye.

Everything Except Headline Inflation Is Saying the Same Thing About Inflation

As a point of reference, they provided this chart.

bloomberg graph, inflation

I noted this effect some time ago after having my garbage hauler increase prices despite utterly bombed out oil prices.  He cited rising administrative costs, fees, etc. in the chain.  We note each month the firm upward trend in healthcare services and increasingly now, other services, like the oh so vital hospitality and leisure.  From Bloomberg…

“The carnage in the commodities complex is putting a large amount of downward pressure on the headline inflation rate. Other measures of inflation that remove outliers or food and energy prices are considerably higher, thanks to the pace of price increases in medical care services and shelter.”

They include a graphic of some rising prices to make the point.  With each employment report, we review and break down the Payrolls data to see an economy servicing itself now.  Strong dollars buy a hell of a lot of energy and food right now.  But there is an elephant in the room and his name is Services.  Here again is the most recent payrolls (by industry) breakdown from the wonderful

payrolls by industry

As much as I poke fun at them, the Fed is not stupid.  Its various members know full well that there is a price to pay for the 24/7, 365 inflationary fire hose routine.  Sophisticated market players see this as well, but sometimes their brains work more efficiently than the markets, which are chugging along at their own pace.

Watch the Gold-Silver ratio folks.  It still has upside likely, which means it does not yet look like time to go into an inflation trade.  But when the GSR blows out, put your thinking caps on.

Inflation Rises!!!

By Biiwii

I am being a bit of a wise guy with the title above.  A couple effects of non-stop inflation have popped up in the economy in the form of healthcare and rents.  This bolsters the case for the dreaded Fed rate hike in December.

Looking into Treasury yields, which are central to the inflationary economic growth theme, we find…

The Continuum (monthly chart of the 30 year yield) still with plenty of upside before long-term yields are capped at the limiter (AKA the 100 EMA).

tyx monthly chart

And 10 year yields still in a downtrend while 2 year yields march upward.

10 year and 2 year yields

This configuration is gold-adversarial no matter how much those pumping easy analysis, conspiracy or any other rationalizations deny it.

The bottom line is that the Fed is perceived to be in control and market participants are still orderly and subservient.  Right at the moment, anyway.

One of These PMI’s…

By Alhambra Investment Partners

One Of These PMI’s Is Not Like The Others

The ISM Manufacturing PMI for June was up to 53.5 which was the best monthly showing this year. That has been taken as inarguable insistence that the US factory sector is doing what economists expect, even though 53.5 is significantly below both June 2014 and the 12-month average (which includes four months beginning February below 53) of 54.7. As usual, the PMI is abused as to what it may actually mean:

U.S. manufacturers ended the second quarter on stable footing, reporting a strong flow of orders that could help support the overall economy in coming months.

The Institute for Supply Management on Wednesday said its purchasing managers’ index edged up to 53.5 in June from 52.8 in May. The index, based on a survey of supply-chain executives, is back up to its January reading after stalling in the early spring. A reading above 50 denotes expansion in the sector.

“Manufacturing is over its winter hump,” said Ward McCarthy, chief financial economist at Jefferies, pointing to first-quarter drags from the bad weather and shipping delays caused by the West Coast port slowdown.

That proclamation from the credentialed economist looks strikingly overwrought in light of highly contradictory and contractionary information about factory orders, which sank 8% in May. Even if the ISM PMI is correct about June being better it isn’t appearing so significant in its inflection as to erase all 8% to just get back to zero.

ABOOK July 2015 Factory Orders NSA Continue reading One of These PMI’s…

CPI Ticks Up

By Biiwii

Up by .2% the BLS reports this morning…

Consumer Price Index Summary

Here is the graphical view of recent CPI history…


The US dollar has been correcting and over at we showed some support parameters for Uncle Buck.

Also, as noted in the precious metals update for subscribers this morning, silver is making a move vs. gold and this will be a key indicator on whether or not a good old fashioned ‘inflation trade’ can get going.  It has not triggered a signal yet, but it is flirting.

The thing is, there has been a nice deflationary pull coming out of Europe and Asia that has played into the US Goldilocks scenario (strong US currency, strong stock markets and tamped down prices within the economy).  Europe is inflating its asset markets (i.e. trying like hell to boost prices)… Europe Fights Lower Prices.

[edit] Also see Euro Area PMI’s Continue Upward just posted at

Now, prices may be becoming an issue within the US economy as the global situation eases (literally).

Europe Fights Lower Prices

By Biiwii

The European inflation rate is “calculated using the weighted average of the Harmonised Index of Consumer Price [HICP] aggregates” according to  That is a fancy way of saying the things people pay for, including the things they need on a daily basis.

Here is the dreaded deflation (of consumer prices) that Europe is fighting.  Like the US before it, Europe is operating on a plan that would boost prices (i.e. the effects of inflation) higher so that people participating in the financialized economy can benefit from rising equities (as we first projected in Q4 2014) and the regular people can, well… get screwed (USA style).


Welcome to the European ‘me too’ QE play!

Yesterday the Euro boinked our target of 105 [1.04935] and all seems to be going according to plan.


But the play (dollar bull, euro bear) is getting extreme now.  Extremes can persist but they are what they are, defined as “reaching a high or the highest degree; very great”.

Let’s just assume the extremes have not yet reached the highest degree.  That does not mean the risk vs. reward to a stance in line with current trends is not extreme.  It is.  Time is the thing.  Trend followers who momo mature trends and go on autopilot always get burned sooner or later.

Economic Cost Pressure From an Unlikely Source

One little anecdote from within the vast US economy…

I received this note from my trash and recyclables collector this morning:

“The reason for this raise being larger than normal for us is primarily due to unforeseen increases in our costs, including this past September receiving the largest increase in over 5 years to both our single stream processing fees and trash disposal fees.”

So despite the gas price cost savings in this fuel intensive business, other costs have have come out of left field from elsewhere in the economic food chain.

I wonder how my old industry (manufacturing) is faring in this regard.  Even as I left the industry the definitions of what was considered toxic waste had been historically strict, regulations were as tight as a drum and the related costs were significant.  I wonder if this is a progressive situation.

I have been out for 2.5 years now.  Maybe it is time to check in and start asking questions.

While inflation has been going on non-stop for years, situations like the above, where wage and cost pressures start to bubble up are what most people (including conventional economists) consider to be inflation.

[edit] this link from BLS was kindly sent by a reader:  US city average, water and sewer trash collection services.


Is Inflation Over Sold?

Some guy over here is asking that question.


soda.jerkWell, now that the title has hopefully gotten your attention I’d like to talk about the ‘d’ and ‘i’ words that so many financial types – myself included – throw around so often.  This is due to a reader/subscriber KR’s aggravation at my use of the word deflation, which he had thought was meant sarcastically, but then came to find out I am serious when I use it.

First I want to note that I seem to have been pissing everyone off lately, gold bugs (one of which I am) and gold bears in particular.  That is due to my writing style being one where if I’ve got something to say, I say it.  Sometimes that’s bad for business, as I can get a little heavy handed.

I’ll try to be less heavy handed going forward but in criticizing what I view as promotion with little backing substance (whether bullish or bearish), I don’t retract any comments aimed at the type of people that I think are not being square with readers or are simply not doing the work required (i.e. promoting lazy analytical thinking).

Continue reading Deflation!

Draghi Speaks the Truth

Draghi Speaks the Truth; ECB Will ‘Do What it Must’

Words are important.  This is not just a headline, it is a reality…

Draghi says ECB will ‘do what it must’ on asset buying to lift inflation

Not ‘do what it thinks would be the best course for the European economy’, not ‘choose the path of least resistance in guiding the financial system to recovery’… the ECB will DO WHAT IT MUST.

As I have written til I’m blue in the face for the last 10 years, we are in the age of ‘Inflation onDemand‘©, 24/7 and 365.  “…do what it must”… let that sink in for a moment.

Japan is trying to kill the Yen, China is dropping interest rates and the world over we have a rolling inflationary operation that is little more than a game of Whack-a-Mole.  BoJ popped up a couple weeks ago and now this one…

Source: MarketWatch

US Situation

Continue reading Draghi Speaks the Truth