Latest Inflation Data and report

[aja8888]

It looks like inflation is continuing to rear its ugly head. I'm sure the FED's plan to taper asset purchases and raise interest rates next Spring will help tame this inflation and, of course, throw the "markets" into turmoil.

Here's a short read, and really look at the graphs and read the reader comments:

https://wolfstreet.com/2021/12/10/w...s-worst-inflation-in-40-years/#comment-393873

The broadest Consumer Price Index (CPI-U) spiked by 0.8% in November from October, and by 6.8% from a year ago, the highest since June 1982, according to data released by the Bureau of Labor Statistics today.

But it gets better. The Consumer Price Index for All Urban Wage Earners and Clerical Workers (CPI-W), the index upon which the Social Security COLAs are based, spiked by 7.6% in November year-over-year — exceeding even Mexico’s soaring inflation rate — and the worst since January 1982.

 

[SecondCor521]

The Fed chair the other day said they were removing "transitory" from their opinion and language. They also indicated that they were likely to accelerate their taper from a $15B per month reduction to $30B per month reduction.

Whether that will work or not, I guess we will see.

 

[Montecfo]

Yes taper accelerated. Good.

Investors cautioned, especially bond investors.

 

[njhowie]

It's all simply for show. You also have to look closer at the words and the messaging. It's not exactly going from $15B per month reduction to $30B per month reduction - it's $15B per month reduction maximum to $30B per month reduction maximum. They have still left themselves able to do whatever they want. Whether they do reduce by the maximum amount each month is to be seen.

My belief is that they're going to go their merry way until the stock market reacts negatively. Then, same as 3 years ago, they'll stop in their tracks and focus on supporting the stock market...which is not part of the Fed's mandate.

Interest rates are ultimately not going to move very much higher.

 

[Koolau]

I'm afraid this is one of those very complicated situations where "academics" understand the levers involved in dealing with inflation, but neither the academics nor the folks actually pulling the levers have much of a clue how hard to pull those levers. No one really knows how this will all turn out. Fasten your seat belts. It's going to be a bumpy ride though YMMV.

 

[aja8888]

I'm afraid this is one of those very complicated situations where "academics" understand the levers involved in dealing with inflation, but neither the academics nor the folks actually pulling the levers have much of a clue how hard to pull those levers. No one really knows how this will all turn out. Fasten your seat belts. It's going to be a bumpy ride though YMMV.

If you look back in history, the 1960's in particular, when Johnson started spending like mad to support the Vietnam war, that period and what followed is a guide to the choices that may need to be made to control this runaway inflation. Eventually, putting on the brakes ends up in a recession and/or a devaluation of the currency.

 

[NW-Bound]

The market went up good today. Investors shook off the bad inflation news like a duck shaking off water.

Will see how long until they realize that this is something serious, particularly young investors who were not yet born in the 70s.

 

[JDARNELL]

I watch the fed balance sheet each week to see if they are actually tapering or just jaw boning. Now we are in the 2 week blackout window before their meeting so no data can be released. It will be interesting to see what they are really doing.

 

[aja8888]

The market went up good today. Investors shook off the bad inflation news like a duck shaking off water.

Will see how long until they realize that this is something serious, particularly young investors who were not yet born in the 70s.

The word out tonight is that next week when the FED reports (15 th), the tune sung will be accelerated tapering to $30 B per month instead of $15 B. And once the taper is over, maybe an interest rate hike next June or so, depending on the results of the tapering. They said that today to prep the news ahead of time.

Remember when Bernanke tried to taper, it all went to hell quickly. Maybe this time around it won't.

 

[dmpi]

I've been though inflation in the 70s but I was just a kid. This time around I'm amazed inflation can be so 'bad' but still hardly seem to affect my life. Maybe it's because inflation only attack select products and I (as a informed consumer) can switch to something else. 70s inflation drove gas prices higher and there was no escape. Also helping me is I've already bought a home (or two) and already paid for my education. My biggest fear is future medical cost. Take medicare premiums as a example. There's no escaping that.

 

[brucethebroker]

It looks like inflation is continuing to rear its ugly head. I'm sure the FED's plan to taper asset purchases and raise interest rates next Spring will help tame this inflation and, of course, throw the "markets" into turmoil.

Here's a short read, and really look at the graphs and read the reader comments:

https://wolfstreet.com/2021/12/10/w...s-worst-inflation-in-40-years/#comment-393873

Wolf Street is one of the best, and a daily read. Also covers auto industry and San Francisco/CA real estate.

 

[Blueskies123]

Wolf Street is one of the best, and a daily read. Also covers auto industry and San Francisco/CA real estate.

Did you watch the movie? I am not listening to him.

 

[aja8888]

Wolf Street is one of the best, and a daily read. Also covers auto industry and San Francisco/CA real estate.

I've been reading Wolf's reports for years now. Good stuff and to the point, no politics.

 

[NW-Bound]

Wolf Street is one of the best, and a daily read. Also covers auto industry and San Francisco/CA real estate.

Did you watch the movie? I am not listening to him.

Movie? Are you thinking of "The Wolf of Wall Street", a movie based on the memoir of the same title by Jordan Belfort?

The Web site Wolf Street is owned by Wolf Richter, a different person.

 

[aja8888]

Movie? Are you thinking of "The Wolf of Wall Street", a movie based on the memoir of the same title by Jordan Belfort?

The Web site Wolf Street is owned by Wolf Richter, a different person.

Wolf Richter never made a movie but he wrote a book about the car business as an insider. Really a good read.

 

[Montecfo]

Bond investors seem to believe the taper acceleration and jawboning will tame inflation. 10-year bond at 1.4 percent.

That's encouraging.

 

[mrfeh]

I find it interesting how inflation was stubbornly low for 10 years (under 2%), and now people are freaking out because it's up for the last 6 months.

It won't last.

 

[chassis]

Bond investors seem to believe the taper acceleration and jawboning will tame inflation. 10-year bond at 1.4 percent.

That's encouraging.

Good post as always @Montecfo.

Yes the 10yr is lower than it has been in a while and the 10/2 spread is 0.7% which is a good bit lower than it has been in a while.

More and more smart people are calling the top in inflation. I am with them.

I have a dashboard built on FRED and many commodities have peaked.

Ag products, wood, iron, plastics, gold and copper have peaked or are showing signs of resistance. Aluminum and fuels remain high.

Labor is coming into the workforce. Things are starting to get better. Prices are not going down, and probably will not go down, generally. Inflation is coming down.

 

[milford]

I find it interesting how inflation was stubbornly low for 10 years (under 2%), and now people are freaking out because it's up for the last 6 months.

It won't last.

You basically answered your own question... it is because its been stubbornly low for so long that's why people are freaking out when its all of sudden jumping to 7% and that's excluding housing cost.

Also I'm assuming you are not on fixed income and own your own home or else you would be singing to a different tune.

 

[gcgang]

One difference between now and 1970’s-80’s inflation, cash is absolute trash this time. Money market funds allowed you to almost keep up with inflation back then. Cash just lost almost double digits in purchasing power in the last year.

 

[Closet_Gamer]

One difference between now and 1970’s-80’s inflation, cash is absolute trash this time. Money market funds allowed you to almost keep up with inflation back then. Cash just lost almost double digits in purchasing power in the last year.

Ironically, this may be why its hard to get interest rates up in the real world.

My own behavior may be an indicator:

We're saving to buy a beach house next year dance. In days gone by, that money would be in a MM fund or something similar. But in the face of 5%+ inflation, its a serious meling ice cube.

So I chase yield -- any yield -- to try and blunt the fall. I'm in a mix of VTEB, MLN and PFFD. Maybe I can knock that 5% melting down to 3% or so (while taking on interest risk myself).

In chasing yield I marginally bid up the price of the assets...which of course serves to depress the interest rate on them.

If lots of people are doing this, its a vicious circle. The Fed is a major participant in this process and their balance sheet gives them enormous power, but they may find it harder to move rates than they suspect.

 

[mrfeh]

You basically answered your own question... it is because its been stubbornly low for so long that's why people are freaking out when its all of sudden jumping to 7% and that's excluding housing cost.

Also I'm assuming you are not on fixed income and own your own home or else you would be singing to a different tune.

Folks should try to not be myopic. Yes, it's frustrating that all fixed income options are losing money today, but if one looks at inflation over the last decade instead of 6-12 months, this is not a big deal.

 

[Dtail]

One difference between now and 1970’s-80’s inflation, cash is absolute trash this time. Money market funds allowed you to almost keep up with inflation back then. Cash just lost almost double digits in purchasing power in the last year.

Yup, no interest rate raises to affect the short term market.

 

[Chuckanut]

The January year over year inflation rate was 7.5%. Not so good.

My [-]platinum plated solid gold[/-] bronze and pine teacher's pension has a COLA in it for which I am grateful. But, it is capped at 3% a year max. I gave up a lot to get and keep that pension and I still think the opportunity cost was worth it. Nevertheless, thank goodness for SS and my meager investments.

 

[NW-Bound]

Commodity prices are rising to way above the values pre-Covid times. This includes nearly all industrial metals. Magnesium and tin are up by 2x to 3x, copper and zinc by 2x, etc...

Is the demand higher than pre-Covid, or is it because supplies dwindle? I suspect it's the latter.