I heard one of my old favorite bands from Kiwi land today and realized that I’ve not imposed my taste in music on you for a long while, so here is a weird and beautiful song by the Chills. Have a nice weekend.
- Gold… and a Ramble –NFTRH [biiwii comment: he’s bitching and moaning again about the misperceptions game surrounding the monetary value relic]
- Bracing for Stagnation –Raghuram Rajan [biiwii comment: errr… one of my heroes. thx for the link, Hammer]
- Will QE Work for ECB? –Dr. Ed
- VDAX Set to Rise? –GaveKal
- January 22 2015 Opening –Across the Curve
- What is a Dollar? –Alhambra
- Jobless Claims Disappoint Again –B.I.G.
- Stocks Rise as on China Growth, ECB Bets as Dollar Rises –Bloomberg [biiwii comment: surprised? anyone? the theme is up and down chop, i.e. swings, that will eventually lead to resumption of or negation of trend. oh, and the media are busy manufacturing reasons as usual]
- Martin –Josh Brown [biiwii comment: 3 simple quotes; read them]
- Global Monetary Policy Amidst Deflationary Concerns –Ana Maria Santacreu @ St. Louis Fed
- January 20 2015 Opening –Across the Curve
- What Next for the CHF? –Daily Forex
- SNB’s Move and What it Means for Gold Investors –Hebba Investments
- The Retail FX Market is a Complete and Utter Joke --Kid Dynamite
- Sound and Fury –Springheel Jack
- Stefan Kremeth on SNB action –Incrementum AG
- The Dangers of Leverage –Alhambra
Guest Post by James Howard Kunstler
E vents are moving faster than brains now. Isn’t it marvelous that gasoline at the pump is a buck cheaper than it was a year ago? A lot of short-sighted idiots are celebrating, unaware that the low oil price is destroying the capacity to deliver future oil at any price. The shale oil wells in North Dakota and Texas, the Tar Sand operations of Alberta, and the deep-water rigs here and abroad just don’t pencil-out economically at $45-a-barrel. So the shale oil wells that are up-and-running will produce for a year and there will be no new ones drilled when they peter out — which is at least 50 percent the first year and all gone after four years.
Guest Post by Michael Ashton
Below is a summary and extension of my post-CPI tweets. You can follow me @inflation_guy:
- Core CPI unchanged – which is amazing. I can’t wait to see the breakdown on this one.
- Core 0.003%, taken out one more decimal. I thought y/y had a chance of rising to 1.8%; instead it fell to 1.61%.
- Last Dec, core was 0.10%, so part of this may be faulty seasonal adjustment. It is December, after all.
- Core services +2.4%, down from 2.5%. Core goods down to -0.8%, worst since mid-2007.
- Medical Care Commodities +4.8%! Biggest increase since 1993. Oh ACA, we hardly knew ye.
- Housing weakened, which isn’t insignificant. Primary rents 3.38% from 3.48%; OER 2.61% from 2.71%.
- We still think housing is headed higher but that was part of the surprise. Apparel too, -2.0% y/y from -0.3% previous.
- The apparel move is likely related to dollar strength. Most apparel isn’t made here.
- Accelerating major groups: Food/Bev, Med Care, Rec (28.2%). Decel: Housing, Apparel, Transp, Educ/Comm, Other (71.8%)
- Decline in apparel prices may be a story. In recent yrs Apparel had been rising after many years of dis/deflation. Weakness in Asia…
- Apparel y/y decline was largest since 2003.
- Core ex-housing down to 0.69%. Much lower than crisis lows. That’s where to look if you’re worried about deflation, not the headline.
- Very interesting core goods. Our three-item proxy is Apparel (-2%), New cars (-0.1%), and Medical Care commodities (+4.8%). Figure THAT out.
- This CPI is hard to dismiss. Hsng dip is most concerning (think it’s temporary tho), but broadening of decel categories worrisome.
- Core ex-housing looking really soft. Now, some of that is probably energy sneaking thru…not a prob normally but for BIG moves – maybe.
- That being said, market is pricing in 1% core for next yr, 1.25% for 2 years, 1.37% for 3 years…so infl market has overshot. A lot.
- number of categories at least 1 std dev above deflation went from 43% to 20% in one month.
- Now here’s something to not be worried about yet: our “relative inflation angst” index reached its highest level since 2011. Still low.
This was a wild report, full of interesting items. Let’s start with Apparel. In recent years, I have watched Apparel closely because one of my theses was that the domestic benefit from exporting production to cheap-labor countries was ending. Apparel is a nice clean category that went from normal inflation dynamics when most apparel was produced domestically (prior to 1993), to disinflation/deflation over the years where virtually all production was moved offshore, to normal inflation again once the cost savings on labor had been fully realized and so no longer a source of disinflation (at which time, costs ought to begin to track wage inflation in the exporting country, adjusted for currency moves).
- GDX vs. SPY; Different This Time –NFTRH [biiwii comment: what is different is that the main gold sector hype has been how deflation is going to destroy gold stocks; Ukraine was so summer of 2014]
- SNB Unexpectedly Gives Up Cap on Franc, Lowers Deposit Rate –Bloomberg [biiwii comment; wow…]
- What, Us Worry? Economists Stay Upbeat as Markets See Trouble –Bloomberg [biiwii comment: look, things may indeed be fine for now; the forward data will tell the story. but how many mainstream economists saw the bubble top in 2000, the credit bubble, housing bubble and the coming liquidations of all manner of leveraged excess in 2008? answer… see no evil, hear no evil, speak no evil…]
- All Eyes on the ECB –Market Anthropology
- Dr. Copper is Turning Bearish Dr. Ed [biiwii comment; it’s been bearish for at least 2 years]
- Retail Sales Miss Dents Theory That Consumers Will Spend Gas Savings –Naked Capitalism [biiwii comment; spend spend spend… print spend and print some more. but is America be changing its ways?]
- Betting on India –Global Economic Intersection
- Reminiscences of an Old Bond Trader –Across the Curve
- Further Growth Seen for Semiconductor Equipment and Materials –SEMI [biiwii comment: we’ll let the coming book-2-bill data decide]
- Crude Oil and the S&P 500 –MacroTrends [biiwii comment: 1000 words, 1 picture]
- Jamie Dimon thinks big banks are under attack –MarketWatch
- The Bottom Line –Springheel Jack
- Boston –Jeff Saut
- It’s Still All About the Fed –GaveKal
Well actually, one Hommie is getting hammered and the index is getting dinged. We have been following this chart of the Homebuilders Index for probably a year or so now. It has been moving along in a large, bullish Cup & Handle.
Today KB Home grossed out the market (thanks for the heads up, Hammer) with talk about stuff that you would not expect to see in a low energy and (some) materials and low interest rate environment.
“We are projecting our first quarter 2015 gross margin will drop significantly from the first quarter of 2014 hitting the low point for the year before improving sequentially for the remaining three quarters of 2014,” Chief Executive Jeffrey Mezger said on a conference call after the company released quarterly financial results. He said there was a “softening in demand” in some markets during the fourth quarter, more sales incentives, and pressures from construction, labor and material costs.
Unbelievable. It reminds me of what I posted a few weeks ago about my trash man boosting prices due to increased costs – of nearly everything other than powering his trucks. There have been other surprising instances of late as well that I don’t quite recall at the moment.
Could the payback for the balls out inflationary operation in play 24/7 and 365 over the last 6 years be brewing?
- The Charlie X Solution –Tim Knight
- A 2015 Comeback for the Middle Class? –Josh Brown
- A Little Fear About the ‘Fear Index’ –Opp ID’d
- Central Bank EUR Reserves Plunge –GaveKal
- Mixed Employment Report –Dr. Ed
- Demand factors in the collapse of oil prices –Econobrowser
- A Closer Look: Commodities –Alhambra
On a weekend where I took my daughter to Boston for two nights of voice coaching/recording, needed to watch the Patriots game (on DVR) and a late Rangers game, on a taxing California road trip (it may have been taxing for them too ), I somehow managed to get 35 quality pages done with NFTRH’s 325th edition.
I am happy with the report for the reason I often am when I think I’ve done a good job; I feel I am personally a better investor today than I was on Friday afternoon.
- ‘V’ Bounce, Part 3? –NFTRH
- Why Gold May Finally be Turning Higher –MarketAnthropology [biiwii comment: ref: MA’s commodity view over the last year; I don’t always agree w/ MA, but I do find it to be one of the most intelligent blogs out there]
- Euro Stocks Soar on QE Expectations –SeekingAlpha
- New Jobless Claims a Bit Higher Than Expected –Doug Short
- Don’t be Shocked –Josh Brown
- Monetary Death by Proxy –Alhambra
- Very Interesting Hilsenrath –Across the Curve