Stocks are down and bonds are in selloff mode too. Late last year, I saw the mainstream press and the Keynesian economists say it was time to start lowering interest rates.
I called bunk.
If you followed me on Twitter (@pointsnfigures1) you saw it. I am not trading every day now at all. I am too distracted but I follow the market. I looked at Fed Funds early this year and they had interest rate cuts priced in. Clearly, the market was buying the Biden Administration and Keynesian narrative that inflation was tamed. Here is a three-month chart on Fed Funds from the CME.
Interest rates move inverse to price, so the spike you see was an expectation that rates would go lower. To read this, take 100-94.680 and you get the current rate, 5.32%. Powell spoke and today we had the hot CPI number, and boom, they took a rate cut off the table.
I don’t think the CPI accurately reflects what is going on in the broader economy as it relates to inflation. There is isolated anecdotal evidence that illustrates it. For example, today the city of Elmhurst, IL announced 28% increase in the rates it charges for water and sewer. In places like California which had mandatory left-wing government-enforced big increases in the minimum wage, fast-food restaurants have increased prices to cover their labor costs. Grocery prices are higher when Keynsians expected to see price relief. Sure, gas/fuel prices are “lower”, but they are still significantly higher than they were in 2020. Lately, futures on energy have gone higher because overall supply is lower and they are not as insulated from shocks. CPI cannot capture what is happening at the margins, and that’s where the real price of goods and services is set.
If you were hoping for the housing market to crack, it won’t. Mortgages are still going to be at high rates and that will incentivize people to stay in their homes. The best deal for people wanting to be in a home is to buy new construction where the deals on rates are subsidized.
The inflationary pressure on the economy due to government policy is too strong for it to abate anytime soon. It’s not just a singular government policy. It’s many many government policies all at once exerting strong inflationary pressure on various sectors of the economy. In the parlance of the tech community, they are not “e/acc”.
These are committed people. They aren’t objective in the least. Ideological. From the linked WSJ opinion page article.
“If we’re only pursuing policies to benefit people as consumers, and those policies are actually impoverishing those people as workers, the entire system doesn’t work,” she lamented. No longer does Washington aim to lower trade barriers and expand American access to foreign markets. It wants trade share and production regulated by governments.
Ms. Tai’s senior adviser Elizabeth Baltzan explained USTR’s trade illogic last winter in a speech at the Wilson Center: “The focus on ‘efficiency’—which is really a euphemism for the lowest possible cost—is precisely what facilitates the kind of arbitrage that puts downward pressure on labor and environmental regulation and enforcement.”
They are intensely pro-centralization. They are anti-capitalists. We know that doesn’t work for governments if they want to improve the lives of citizens. Governments should decentralize and empower individuals to make decisions for themselves.
Virtually every instinctual move anyone in this Presidential administration makes is against capitalism and individualism. It’s against freedom. From trade policy to regulatory policy to foreign policy, their instincts are wrong. They don’t do a thing right, but we don’t have mean tweets.
I don’t think “Business News” is any more objective than the regular mainstream news. They push narratives all the time. They also take their cues from the spinmeisters in the Democratic Party who push their agendas via the media.
I watch business news pretty closely. In the last year, I have watched a formerly relatively objective publication, the Wall Street Journal, take a particularly left-wing move on the pages of its regular news. The Financial Times out of London has always swung to the left but has gone harder left in recent years. The WSJ opinion page is still establishment Republican. Bloomberg and CNBC have always been biased to the left. Fox Business to the right.
Business news has a chance to get it right. Hot takes in business are often wrong. Deep dives as long as they are objective can really bring insights. The key to great business news is not the accounting of what happened, but figuring out the undercurrents that will become new trends. That helps investors try and get ahead of the wave.
Here is an example of a blog that is pretty good. Steve Blank opines on why he thinks the new Apple Vision product will fail. It’s hard to get objective business news these days but if you follow the right people on Twitter, you can synthesize information so you get an objective view.
If you want a prediction, here it is.
The stock market will be higher on December 31, 2024, than it was on January 1, 2024.
The Fed won’t move on interest rates this entire year.
Position yourself accordingly.
Instead of a presidential debate how about the two candidates sit down at a desk with an econ 101 quiz.
Inflation is rampant
Housing
Food
Energy
Out of control
Go buy a dozen eggs