Last week was a good week for equities, despite Friday's UofM report showing further concerns about inflation with rising year ahead inflation expectations (likely due to gas prices). Speaking of inflation, on the week ahead it's all about CPI. The internet and fintwit was ablaze with creating a CPI coffee controversy, with the BLS supposedly removing coffee from the CPI. The story was based on this https://www.bls.gov/cpi/additional-resources/discontinued-series.htm however all indications that coffee is very much still in CPI and is an incredibly small component.
Anyway, we'll see what CPI brings unless something else comes along to change the narrative. Lest we forget about two wars, including an apparent assassination attempt against Zelensky in Ukraine. Or the Kendrick Lamar v. Drake beef for that matter (apparently the Biden campaign used Lamar's diss track "Euphoria" in a campaign video and Lamar's "Not Like Us" broke a Spotify streaming record to become the most streamed American hip-hip song in a single-day with 6.59 million).
If you're not into following Kendrick vs. Drake diss tracks, you could read the latest posts from John Cochrane's Substack called "Fiscal Tidbits". As a starting point, remember, "Fiscal theory does not say that deficits cause inflation. It only says that the fraction of deficit people do not expect to be paid back, either by higher future surplus or by lower future interest costs, is inflationary." In the first post there is an interesting thought on how at higher levels of debt, deficits have a lower impact on inflation.
"surpluses relative to debt drive inflation. Given deficits and expected surpluses, more debt means less inflation. Your intuition about debt being bad is also correct, because it typically means it will be harder for a country to promise future surpluses to pay off deficits. Beware in reading history, or judging whether more debt makes inflation more likely, just what is actually held constant and what is not".....
"The interest cost is important. 1% interest rate means 1% of GDP primary deficit at 100% debt to GDP. It means 2.5% primary deficit at 250% debt to GDP. That’s a reason that, contrary to last point, more debt means more inflation danger. It means more exposure to interest rate changes."
Taking stock we have 2Y yield at 4.87% and 10Y at 4.50%. The last Atlanta Fed GDP Now is at 4.2% vs. 2.23% for the NY Fed GDP Nowcast and the Cleveland Fed Inflation Nowcasting has inflation still running above target.
On the week ahead it's:
Monday: Fed Jefferson
Tuesday: NFIB Small Business, PPI, Powell speaks at 10am
Wed: CPI, Retail Sales and Fedspeak
Thur: Jobless claims, Housing Starts, Philly Fed, Fedspeak including Williams
Friday: Leading indicators, Fed Waller
XTOD: The birth rate is the first indicator of a people’s hope. Without children and young people, a country loses its drive for the future.
XTOD: I think one of my biggest fears is that the ‘fake economy’ just collapses over my lifetime. As in after 40 years of escalating corporate BS and proliferation of prestigious makework “Strategy Director” and ppt-making jobs, society collectively just realizes it’s all pointless
XTOD: Only one investor can say their competitive advantage is "I'm smarter than everyone else" and it's clear that was Jim Simons.
XTOD: I am gonna go full-on plunger on Blackstone. That stock is a zero.
XTOD: Here’s how I think of this concept. Govt “money printing” or deficits add a money-like instrument to the aggregate domestic economy. This money printing also creates a liability for the aggregate domestic economy. Money (in financial asset form) is always an asset and liability.
The key question is whether the subsequent spending of that instrument has a multiplier effects which results in the creation of the real resources that make it inflation neutral.
Like all debt creation the answer is more complex than just “debt/money creation = inflation”.
But Lyn is correct. It creates a surplus of money and all else equal this would be inflationary. All else isn’t always equal of course. Reality is messy.
.XTOD: Money is emotional, not rational. That's why debt is often the result of deep-rooted mindset issues, not income levels.
XTOD: That was the most remarkable inning I have ever seen in person.
5:24 PM: Paul Skenes pulled in the 5th after allowing two hits. 6-1 PIT.
5:26: Kyle Nicolas comes in and gets two quick outs.
5:28: HBP loads the bases.
5:29: 4 pitch BB. 6-2 PIT
5:31: 4 pitch BB. 6-3 PIT
5:33: 4 pitch BB. 6-4 PIT
PITCHING CHANGE
5:37: 5 pitch BB: 6-5 PIT
5:40: Infield single. 6-6 CHC
5:41: Game delayed by rain
PITCHING CHANGE
8:01: Game resumes
8:03: 4 pitch BB. 7-6 CHC
8:04: 5 pitch BB. 8-6 CHC
8:05: Inning ends
https://x.com/Pontifex/status/1788894251243172216
https://x.com/BuffaloBillCo/status/1788894129323126868
https://x.com/morganhousel/status/1788979637743427626
https://x.com/dailydirtnap/status/1788686235117944913
https://x.com/cullenroche/status/1788982029222310343
https://x.com/joyofcompoundin/status/1789456185411743792
https://x.com/CespedesBBQ/status/1789449683191857383
No comments:
Post a Comment