Daily Economic Update: October 13, 2023

 

CPI came in above expectations including a rise in rents and owners' equivalent rents. On the Friday the 13th ahead we get JPM earnings, Import Prices and UofM survey of gas prices (kind of).

Heading into the weekend we still have many of the same question marks around wars, strikes, China's economy, the next House Speaker, impact of continued high deficits.

Lev Menand on Macro Musings 10/2/2023:  The thing to keep in mind is that the federal government has three core strategies for dealing with a mismatch between its revenues and its expenditures. It can increase taxes, it can borrow existing money, or it can print new money. There are obviously other things that the federal government can do, but we don't think of those as core strategies. It can seize goods, in kind..... We generally think of the US government only using the first two that, that third strategy of printing money is generally not thought to be on the table.

Reuters had a good infographic on the Hawk/Dove spectrometer which includes some of the recent quotes from Fed members

XTOD: CPI analysis:  Ex food, healthcare, transport, energy, vacation, entertainment, medicine, baseball cards, Rolex, Tesla, Perrier, dog food, vacuum cleaners, office supplies, light bulbs, batteries, diapers, matches, cable TV, vinyl albums, pretzels, real estate commissions, real estate, pots and pans, sunglasses, glasses, goggles, pizza, pasta, cookies cake coffee tea, and soda, it was a historically weak report.

XTOD: XTOD: Core #CPI remains persistently elevated. Full stop. You can slice and dice the data to tell the story you want to see in the data, but that's a dangerous game to play. .....What's it all mean? * The journey from 4% to 2% will be harder than 9% to 4%. *The longer inflation remains above target, the more entrenched it becomes. *Additional rate hikes aren't inevitable, but definitely not off the table.  10/10

XTOD: 'This is no longer about when the peak will get here – it's about where inflation is going to decline to. From 6.6% to 4.1% was the easy part. From 4.1% to 3% is going to be difficult. From 3% to 2%? So far, I don't see anything that gets us there.' https://inflationguy.blog/2023/10/12/summary-of-my-post-cpi-tweets-september-2023/

XTOD: Yields spike on fears Fed will have to hike more meaning the Fed will not have to do more meaning yields will now drop

XTOD: Do traders mislead salesmen by feeding them false narratives?  Of course, often.  Whenever they want to get rid of stuff on their books for which they can't find a home, especially if it's underwater.  Do salesmen collude with traders to mislead customers? ALL THE TIME.  If a salesman tells you the sky is blue, look out of the window before you believe them.  Same with "research".  It's all painting a picture to get you to buy stuff. 

XTOD: Ozempic--the new weight loss drug--is an appetite suppressant. No more buying a cart full of Cheetos!  Will Ozempic be bad for business?   Just think about all those poor companies suffering from less demand!  Introducing: The Fixed Window Fallacy https://www.economicforces.xyz/p/the-fixed-window-fallacy

XTOD: On Day 2 of the Hedgeye Investing Summit, Danielle @DiMartinoBooth dropped the TRUTH BOMBS Wall Street doesn't want you to hear...💣"After the pandemic, you gave people the money directly, and they spent it directly. That's what caused inflation. 💣2 individuals have been confirmed to the Federal Reserve Board who advocate for: - Universal basic income - Modern monetary theory - The Fed's ability to address climate change - Central Bank digital currency - Reparations  That's why, I joke (but not really) ...  💣If we get a Blue Wave and somehow, someway, they manage to have Special Ops take out Powell, I'm going to Italy. At least they embrace their socialism.  💣What progressives dream about every night is the Federal Reserve not actually existing to make policy. All they want is for interest rates to be 0. 💣Zero interest rate policy is NOT monetary policy. It's not. It's just a state of existence in third-world countries. But that's what the progressives want."

XTOD: Delete this shit. How dare you?

Daily Economic Update: October 12, 2023

 

Ahead of today's CPI release the curve continues its recent bull flattening with the 2Y down ~2bps to 4.99% and the 10Y down 4bps to 4.56%. Yesterday's  PPI came in above expectations and the FOMC minutes seemed to support the "for longer" part of higher for longer and stressed the data dependence. 

• A majority of participants judged that one more increase in the target federal funds rate at a future meeting would likely be appropriate, while some judged it likely that no further increases would be warranted. All participants agreed that the Committee was in a position to proceed carefully and that policy decisions at every meeting would continue to be based on the totality of incoming information and its implications for the economic outlook as well as the balance of risks. 
• Several participants commented that, with the policy rate likely at or near its peak, the focus of monetary policy decisions and communications should shift from how high to raise the policy rate to how long to hold the policy rate at restrictive levels
• A vast majority of participants continued to judge the future path of the economy as highly uncertain. Many noted data volatility and potential data revisions, or the difficulty of estimating the neutral policy rate, as supporting the case for proceeding carefully in determining the extent of additional policy firming that may be appropriate.
• most participants continued to see upside risks to inflation

This morning's data features CPI, jobless claims, the 30Y auction and the ECB minutes.  Data this morning out of the UK showed a resumption in growth.  

As usual, the latest Howard Marks memo is worth a read.  In it he re-discusses how he believes we’re entering a new structural regime, one without ultra low interest rates, and how some investors are ill prepared to navigate a higher for longer rate environment.  He posits that the days of easy returns by buying assets on leverage may be behind us. Marks is a fan of current yields on offer from high yield credit in today’s market.

XTOD: NEW: Wrote about a semi-secret Discord that Google runs for heavy users of Bard.  

In it, Google PMs, designers & engineers tasked w/ developing Bard say they don't know what LLMs are truly useful for, don't trust LLM output before verification, and more 

https://bloomberg.com/news/articles/2023-10-11/google-insiders-question-usefulness-of-bard-ai-chatbot?

XTOD: UAW workers strike biggest Ford truck plant in surprise move http://reut.rs/3ZQ4QTW

XTOD: "We should all be embracing uncertainty... Uncertainty is a much more accurate representation of the world of any prediction of the future."

XTOD: "Access to a CBDC (or a “digital dollar”) is not the same as having access to a bank account. Where a bank account opens the door for receiving loans, lines of credit, and other financial services, a CBDC does little more than offer access to digital payments." Exactly

XTOD: Ellison: I said I was more in favor of going under the radar. Sam replied, Same except the absolute opposite.

AUSA: Did Michael Lewis spend time with you in the Bahamas?

Ellison: Yes. Sam was cultivating an image as an eccentric founder....

XTOD: amidst this financial fraud there’s also a simple story of possibly the worst breakup in the history of all time

XTOD: There's a working assumption that many have (myself included) that when a society comes under external threat it will find ways to cohere. I wonder if that's still true in the age of social media. 

If 9/11 happened today, with our current political divisions and the proliferation of fake videos online would half the country even believe that it happened or that it wasn't a false flag? 

I'm not sure and that sort of freaks me out.

XTOD: Private Equity cash looking to opportunities to invest into isn't only sweeping through the equity markets. It's rolling through Private Credit, too...  "The New Kings of Wall Street Aren’t Banks. Private Funds Fuel Corporate America."

XTOD: After careful deliberation and too many hours poring over rosters, we are pleased to present the 2023-2024 All-Name Teams.  STORY: https://burnerball.com/the-all-name-team/

Daily Economic Update: October 11, 2023

Focus remains on the war in Israel.  Yields rallied strongly yesterday and continue to do so today with the 2Y down 2bps to 4.96%  and the 10Y down ~10bps to 4.56%.   Yesterday's NY Fed Survey of Consumer Expectations showed an increase in median inflation expectations at the 1 and 3 year horizons and households' reported some deterioration in respondents financial situations.  Fed Governor Waller spoke at 'The Legacy of Bennett McCallum and Lessons for Monetary Policy Today' conference, using his speech as an opportunity to discuss the importance of the credibility of the central bank, the Fed's responsibility for returning inflation back to target, and his view that the Fed will stay the course to achieve their inflation objective.  

ExxonMobil has confirmed they are buying Pioneer in an all-stock deal valued at $59.5bln. On the day ahead, PPI and FOMC Minutes are the economic highlights.  We also may have a vote on Speaker of the House at some point.

XTOD: Wall of Worry 1. Uncompromising U.S. Govt. Resorting to extreme  measures and lack of compromise led to credit downgrades by Fitch and S&P. If Moody's downgrades the US, Treasurys will no longer be triple-A and some investors will not long be allowed to own or Repo them. 2. U.S   Debt. Ironically almost the opposite of the first "worry," U.S.   government debt is   now in excess of $33 trillion   and growing. It is literally a time-bomb waiting to explode.  3. CMBS and commercial Real Estate Loans. Work-from-home policies have left offices in major cities partially vacant. Companies will take less office space and negotiate   lower rents, leaving many   commercial assets potentially insolvent. Another time bomb in waiting.  4.   China. China's economy will eventually crash similar to Japan in the early   1990s. Many market   commentators say "China   is the exception," but there never is an exception.  5.   Regional Banks. Their investment portfolios own US Treasurys, CMBS, and   commercial real   estate loans; at the same   time there is more competition for deposits due to higher interest rates.   Another time bomb waiting to  go off.

XTOD: AUSA: What was his involvement in the crimes?

Ellison: He was the head of Alameda then FTX. He directed me to commit these crimes.

AUSA: What makes you guilty?

Ellison: Alameda took several billions of dollars from FTX customers and used it for investments.

AUSA: What was the defendant's role?

Ellison: He set up the systems and told us to take the money.

AUSA: How much did Alameda take to repay its lenders?

Ellison: In the ballpark of $10 billion. Ultimately around $14 billion

XTOD: "You get in this vicious circle, where higher interest rates cause higher funding costs, cause higher debt issuance, which cause further bond liquidation, which cause higher rates, which put us in an untenable fiscal position." -Paul Tudor Jones

XTOD: Almost half of publicly-listed US companies are unprofitable, according to @GoldmanSachs

.  "Higher funding costs [viz higher interest rates] could force some of these companies to cut labor costs or even close."

XTOD: ECB Steps Up Scrutiny of Banks’ Commercial Real Estate Loans  @business  #CMBS  

The ECB has asked property valuers to explain the methodologies they use, as concerns grow that banks in the region have been too slow to mark down the value of commercial real estate loans.

XTOD: Veteran banker calling for "TARP 2.0" in Op-Ed to help banks with steep unrealized losses on their securities holdings  

Proposal would lend up to $1 Trillion against securities that have lost value to Fed's "meteoric increase" in interest rates ....Here is full piece (paywalled):

https://americanbanker.com/opinion/u-s-banks-need-tarp-2-0-a-trapped-asset-relief-program

Daily Economic Update: October 10, 2023

 

Long end of the yield curve is down double digit basis points to start the day as they catch a flight-to-quality/haven bid and Fed officials seemed to lean slightly dovish yesterday.  The 2Y is down ~8bps to 4.99% and the 10Y is down ~12bps to 4.67%. 

Yesterday's Fedspeak seemed to indicate higher bond yields can have an impact on the path of policy rates, perhaps leading to no additional rate hikes.  Both Logan and Jefferson highlighted the tightening of financial conditions driven by the recent rise in the 10Y yield as important consideration in assessing whether rates are sufficiently restrictive to return inflation back to 2%.  Logan pointed out that the reason for the increase in long-term yields matters for policy, if the driver of the increase is more driven by increases in the "term premium", then Logan would be more inclined not to hike.  Jefferson highlighted that rising yields could change investors attitudes to risk and uncertainty and act as additional tightening.  However, both officials were careful with their words, also noting that higher yields could be investors assessing the underlying economy as stronger than anticipated.  The nuance in both officials words seems to indicate that they might be familiar with Milton Friedman's interest rate fallacy whereby he stated: "Initially, higher monetary growth would reduce short-term interest rates even further. As the economy revives, however, interest rates would start to rise. That is the standard pattern and explains why it is so misleading to judge monetary policy by interest rates. Low interest rates are generally a sign that money has been tight, as in Japan; high interest rates, that money has been easy."

The IMF revised up their U.S. growth forecast (in real terms) for 2023 to 2.1%.  The forecast for U.S. 2024 is 1.5%. This morning's NFIB Small Business Optimism index fell to the lowest in 4 months and continues to cite inflation and labor quality as tops concerns.  Ahead on the day is Wholesale Inventories, more Fedspeak and the ongoing developments in the Middle East.

XTOD: Israel's response to the unprecedented multi-pronged attack by Palestinian gunmen from the Gaza Strip will 'change the Middle East,' Prime Minister Benjamin Netanyahu said

XTOD: Dallas Fed President Lorie Logan, who has been at the hawkish end of the FOMC, takes seriously the recent run-up in Treasury yields and term premiums, in particular. 

Her conviction about the need to hike again sounds like it is diminishing as a result.

XTOD: According to WSJ, "Evergrande had the equivalent of more than $332 billion in liabilities by June, which included money owed to suppliers, unfinished projects and its bond and loan obligations."

This is substantially more than Argentina's external debt.

XTOD: Claudia is a baller. Create a whole new field. Win the Nobel Prize. Put out a short and understated tweet with a typo to celebrate.

XTOD: Overall Leasing Demand Turns Negative ⁦ @CoStarGroup Property Markets Give Back 26 Million Square Feet, Add 151 Million Square Feet of New Supply #CMBS

XTOD:  @MBAMortgage ,  @NAHBhome , and @nardotrealtor  just wrote a letter to Fed Chair Jerome Powell.  They’re asking for… 1. No more rate hikes   2. The Fed to “not sell off any of its MBS holdings until and unless the housing finance market has stabilized”

XTOD: My continued takeaways - The real estate industry faces a massive recession (in early stages), Fed should continue MBS roll off, the Fed should hike another 25bps. This industry and these people are destroying the future of America.

Daily Economic Update: October 9, 2023

The U.S. bond market is closed today, but equity markets are open.  While markets continue to interpret the large headline Jobs number from Friday, it is the unanticipated attack by Hamas on Israel has markets attention, especially oil markets where crude is up 3% this morning.   While geopolitics slide back into focus, markets will still get a slew of data this week with the highlights being the inflation reports (CPI and PPI) as well as the minutes of the last FOMC meeting.   Bank earnings and plenty of Fedspeak are in the mix as well.  On the week ahead:

Today:  Fedspeak from Logan and Barr

Tue: Wholesale inventories, NY fed inflation expectations, Fedspeak

Wed:  PPI, FOMC Minutes, moar Fedspeak

Thur: CPI, jobless claims, more Fedspeak

Fri:  import prices and UofM

XTOD: Iran Helped Plot Attack on Israel Over Several Weeks: WSJ  here we go

XTOD: Nonlinearity: Could Ozempick cause a deflation in the price of food? A mere 1% drop in demand can cause a significant overload.

XTOD: Brookfield Property Risks Being Cut to Junk on Refinancing Needs  @business  #CMBS 

S&P is considering cutting Brookfield to junk status because the company has “substantial” amounts of maturing debt to refinance during a time of higher interest rates and lower property values

XTOD: Goldman Sachs raises $15bn to buy stakes in private equity funds via @FT  “an appropriate discount”  Wait, they weren’t worth what they were marked at?  Well knock me over with a #volatilitylaundered feather.

XTOD: Crowding out is a real thing.

XTOD: "I continue to be amazed that people think you can do what we’ve done over the last 15 years, then jack rates this high and everything’s going to be fine. 

Am I open to being wrong? Yes, but it's kinda gonna be one of those 'Paul on the road to Damascus' moments where if I'm wrong, my religion needs to change. If I'm wrong, everything I know about finance needs to be uprooted and spun around on its head." Well put by  @KYRRadio

.

XTOD: Treasury yields were already challenging the Fed’s control over interest rates (see link below). Global financial uncertainty connected to attack on Israel (and repercussions) may cause turmoil in Treasury market if foreign holders start scrambling for U.S. dollars; while Treasury securities are traditional “safe haven” when global tensions rise, we saw in March 2020 that the Treasury market froze while demand for dollars skyrocketed. Are Fed officials gaming out enhanced use of FIMA repo facility (repurchase agreement that allows foreign central banks to get cash from Fed in exchange for their Treasury securities so they don’t just dump them) and currency swap arrangements? Perhaps we need to exercise greater discernment over which foreign central banks are entitled to this privilege? Under Bretton Woods, the goal was to provide for currency stability among allied nations. And what are the monetary policy implications of providing vast amounts of dollars to foreign central banks with no control over how they are further loaned. 

The autumn bond rout is challenging Wall Street’s longstanding belief that the U.S. government can’t sell too many Treasurys https://wsj.com/finance/investing/government-spending-hurting-bond-portfolio-8a063f39?st=5lmkje3nh7kwef5 via  @WSJ

Daily Economic Update: October 6, 2023

Jobs Day in 'merica.   Yields are up slightly this morning with the 2Y at 5.04% and the 10Y at 4.74%.  Forecast calls for headline of +170K, a decline in the unemployment rate to 3.7% and average hourly earnings growth of 0.3% mom and 4.3% yoy.  Jobless claims again remained extremely low and, per Reuters reporting, additional data from Challenger, Gray & Christmas showed that September layoffs were down 37% from August, but up from a year prior.  Oil remains off recent highs having one of its worst weeks since March, down ~9%.  And in energy a huge deal is in the works a energy space as Exxon is reported to be near buying shale giant Pioneer Natural Resources.  Fedspeak yesterday from Daly and Goolsbee was largely in the pause with no need to hike further camp.  Daly was adamant that we're not seeing any signs of a wage-price spiral  On the Fed front we'll get a speech from Governor Waller at noon today.  

XTOD: What's the most Gothilocky reaction for NFPs tomorrow?

#1 = Strong NFP, followed by an Equity bounce and a Bond puke ("strong economy bro!")

#2 = Weak NFP, followed by an Equity puke and a Bond puke  ("it's never been more over")

XTOD: "We find that funds with facial unattractive managers outperform funds with attractive managers by over 2% per annum. We next show that good-looking managers attract significant higher fund flow..."

XTOD: Wall Street keeps thinking nothing of lasting significance happened in the spring of 2020, so they keep pounding away with all the same pre-pandemic rules and then "struggle to explain" when none of these rules work anymore?

In other words, don't be @Austan_Goolsbee. He is "puzzled" about higher rates because he still thinks it's 2019, and why his speeches about how things work have been way off the mark.

* The answer may be that we are in a higher inflation world!!!

* The labor market has changed forever (see the strikes and remote work)

* Deglobalization is a thing that is not going away

* Energy output is now a political weapon.

Want to know who does not understand this? Analysts Wall Street droning on and on about used car prices and airline tickets. This assumes, again, that nothing of lasting significance changed the inflation outlook in the spring of 2020. Instead, what is needed is a new understanding of how post-pandemic inflation works. It is not the same as the pre-pandemic inflation world. It is higher, and yields are following inflation higher.

Do this, and the "struggle" to explain rising yields will disappear.

XTOD: Anecdotally, from speaking with investors, this rings true. People were completely caught off guard by deficit coming in at $1.9 trillion - then they study the unsustainable outlook & see total dysfunction in DC = higher rates

XTOD: “sustainable” results is another mystery the CBO does not explain."  Of course, if interest payments really rose to 20%, even 10% of GDP, they would likely have big economic effects. The most obvious thing is increase spending, GDP and likely demand side inflation. But if they did that, the ratio of interest payments to GDP would fall. The reason this doesn't happen in the standard forecasts is, as I've said, they simply don't model the effects. It's easy to get a number to go to infinity in a model, but presumably we care about reality This is where the Fed comes in. If the Fed is raising rates, than its because they think the rising private interest payments drain demand more than the interest income adds to it. But if that's true, than again we're back to asking why we care if economic factors are good.  If these interest payments don't have macroeconomic effects, why should we care (outside of impacts on inequality)? This brings us to the final issue. As economist Scott Fullwiler pointed out 7 years ago, these models also don't model private debt ratios...Here the "Schrödinger's interest payments". issue gets especially stark. household and business interest payments relative to GDP would likely rise faster and crash the economy well before government interest payments got that high...Thus what won't be "sustainable" is Fed interest rate policy, not debt or deficits. On the other hand, if for some reason private sector debt to gdp (and thus private sector interest) stayed much lower than the public sector's, we're back to "lowering rates would reduce spending"

XTOD: “More fiction has been written in Excel than in Word.”    - Pythagoras, 544 BC

XTOD: This is not a meme stock, not the U.S. dollar, not yields and not even the global debt. 

This is the chart of orange juice futures 

Daily Economic Update: October 5, 2023

 

Yields are down another couple of basis points with the 2Y at 5.03% and the 10Y at 4.716% after a reversal of some of their recent bear steepening trend following yesterday's ADP employment data coming in below expectations. The move lower in yields was despite better than expected factory orders and ISM services data showing continued strength in the service sector.  The Kaiser Permanente health care 'temporary' strike became official, adding to a growing list of striking workers in 2023.  European data this morning has shown weakness again in Germany with both exports and imports falling more than expected.  Ahead of tomorrow's Jobs Report, we'll get another look at the job market with initial jobless claims this morning and there will be more Fedspeak.

XTOD: Is the Fed finally getting tighter financial conditions (via a term premium bump)? 

“These types of things often take on a life of their own until they self-correct” through weaker data or “a more sinister mechanism, such as a financial stability scare.”

XTOD: Two implications of the incredible run-up in real interest rates over the last month: 

1. The Fed should have a higher bar to raise rates again--to the degree they have more work to do this is doing some of it. 

2. More deficit reduction would be really helpful right now.

XTOD: The $MOVE is back above 140, time to send the bond market to its room for a time out.  The MOVE @ 140 implies a yield change of ~9bp a day for the next month, that is not sustainable; similar to the VIX near 50, or ~3.1% a day for a month.

XTOD: 5yr TIPs with current real yields at 2.6% will be the most compelling risk-return asset vs cash over the next couple years.  These bonds are offering boom level yields at a time when the economic cycle is softening and recent market moves suggest further softening.

XTOD: Will Michael Lewis's exposure as a fraud finally wake people up to the more general problem of rampant Lex Fridmanism?

XTOD: If long rates continue to rise we are not out of the woods for additional banking problems.  In addition, office and other challenged CRE will be harder to refinance, raising non-performing loans at the same time of large held to maturity securities losses.

XTOD: I am expecting 'unseasonality' over the balance of the year

*  In the coming months we will be forced to face and to navigate the hangover caused by years of quantitative easing and ZIRP

* Mounting consumer, corporate and government debt, the lack of discipline in fiscal

XTOD: In our latest infographic, economists from our #CenterForInflationResearch answer the question: How does raising interest rates help to lower #inflation?

Explore now: http://clefed.org/3Burp5e

XTOD: Hang onto the first people you hire. They're crucial to the company.

XTOD: I think the thing that offends me the most about this book is how Lewis gives a microphone to SBF to speak grandly about all kinds of broad philosophical, social, political, and economic conditions, as though an oracle, when, in fact, he sounds like a spoiled child.

Daily Economic Update: October 4, 2023

 

This October is already making history as McCarthy was forced to vacate the speakership, a first in U.S. history.  Of course this raises the prospect of a government shutdown. Everything sold off yesterday with the 10Y yield crossing 4.80% as bonds continued to bear steepen, and stocks falling by over 1%.  The USD-JPY touched 150 before it is assumed the BoJ intervened to support the Yen.  This all following stronger than expected job opening data. The 2Y is currently yielding 5.14% and the 10Y at 4.81%.

On the day ahead we'll get ADP employment, services data and plenty of Fedsleak.

XTOD: Every past market decline looks like an opportunity, every future decline looks like a risk.

XTOD: Could 10-year Treasury rates hit 13%?  @RickSantelli  charts the path to much, much higher yields, and warns that the Fed is running out of tricks

XTOD: The JOLTs summary - hiring rate stays below 2019 levels, quits remain right at it, openings have a slight reversal (though v/u remained the same for August).

XTOD: The Beveridge Curve has Normalized in a big way…. Solid progress, but economic strength continues - that’s a good thing when people have jobs. 

XTOD: Markets in a very dangerous spot here. Statistical risks flashing red. Banks and Utilities too. Credit starting to move. Lev loans liquidity sucked out. CRE unwind accelerating and housing market about to freeze. 

XTOD: But here’s the thing: the trade in 1987 was to play an equity crash. The trade today is to play the bond crash in 2023. Buying bonds then or shorting equities now was/is a deriv that may or may not work (worked in 87).

XTOD: He will go down in history as the man who reversed 30 yrs of ZIRP insanity. like him or not, he pulled the punch bowl away. Those that fail to see this, either support returning to an overleveraged ZIRP environment, or just dont understand how truly insane Greenspans spawn were.

XTOD: A Nobel Laureate Offers a Biting Critique of Economics - Angus Deaton says Larry Summers and other great minds in the profession have lost sight of its most important mission: Improving people’s lives.

XTOD: New monthly GDP estimates from S&P Global are out! NGDP grew at a 10.6% m/m ar (annualized rate) in August, accelerating from 9.2% in July....Consider the notion that inflation is what happens when there is too much money (NGDP) chasing too few goods (RGDP)....It's highly doubtful that RGDP can sustainably grow above 2%. Therefore, if NGDP growth is too high as S&P Global's estimates indicate, we should be ready for inflation to show some resurgence. Will be closely looking at NGDP when BEA releases its Q3 data on 10/26.