DrStool Posted November 11, 2022 Report Share Posted November 11, 2022 Core CPI has now followed PPI final core finished consumer goods downward. This comes seven months after the Fed started QT. This lag is par for the course. Inflation seems to follow the size of the Fed's balance sheet with a lag of 6-12 months. That lag is due largely to the BLS's methodology of smoothing and lagging the phony input it uses to measure housing inflation. That measure, called Owner's Equivalent Rent, which I have explained here for years, is a completely phony, suppressed, lagged, BS measure of housing prices. The BLS number for OER now shows a rise of 6.9% y/y, the highest level yet. It includes a 2.8% increase since June. As a result the monthly change in the Core CPI looks like this. In contrast, the NAR's median home price in September, a real time measure derived from MLS most current sales data, dropped by 7% from September to June. In reality, housing prices are falling and they are the largest component of CPI. But the CPI doesn't measure actual house prices. It measures a made up joke that massively understated and lagged actual housing inflation on the way up, and now will lag, and overstate housing inflation on the way down. Total inflation including housing prices is now lower than the CPI now shows. But reality doesn't matter. The Fed bases policy on government statistics. The problem is also that other measures of CPI, best represented by the PPI core finished goods, have so far, and are likely to continue to, come down only slowly, based on the correlation with the Fed's balance sheet. If the current trends continue, core CPI will drop to around 5% over the next year where it should merge with the Fed's favorite measure, core PCE. Meanwhile, market interest rates, as reflected in the 13 week T-bill rate will trend toward 5% and reach it in early 2023. The Fed will follow, ratcheting its fake funds rate up by another 1-1.5% over that time. At that point, we'll have a neutral interest rate. But the Fed's balance sheet reductions will still be on autopilot unless the markets break. They're showing no sign of that at the moment, obviously. So the Fed will keep the real tightening, which is QT, going. And remember, the Fed's goal is 2%, not 5%. So, party on Wayne. Party on Garth. Enjoy your delusional highs. Meanwhile, on the ES 24 hour S&P futures, the 5 day cycle projection is 4000. We're close enough as of 5:30 AM ET. To break this absurd meltup, the market would need to be below 3960 by the end of the day. Click the links below for moron the markets. Gold Slot Racing Leading Nowhere November 8, 2022 Swing Trade Screen Picks –100% Buys – Yikes! November 7, 2022 What To Do About an Anxiety Ridden, Conflicted Market November 7, 2022 Bad News for the Markets – Not Just Withholding Boomed in October November 3, 2022 Surge in Withholding Tax Collections in October Indicates Faster Jobs Growth November 2, 2022 Signs of an Intermediate Bottom in Gold Falter November 2, 2022 Bear Market Isn’t the Mirror of a Bull October 31, 2022 We Can Now Project When Fed Will Pause, But Not Reverse October 13, 2022 If you're serious about the underlying forces of supply and demand that drive the markets, join me! If you are a new visitor to the Stool, please register and join in! To post your observations and charts, and snide, but good-natured, comments, click here to register. Be sure to respond to the confirmation email which is sent instantly. If not in your inbox, check your spam filter. Link to comment Share on other sites More sharing options...
Jorma Posted November 11, 2022 Report Share Posted November 11, 2022 Yesterdays spike in the GBP at 8:30 is hilarious. How in the hell do they do that? Link to comment Share on other sites More sharing options...
DrStool Posted November 11, 2022 Author Report Share Posted November 11, 2022 The euro has rallied 6% in 6 days. Link to comment Share on other sites More sharing options...
DrStool Posted November 11, 2022 Author Report Share Posted November 11, 2022 Markets are unhinged because there's no liquidity. Link to comment Share on other sites More sharing options...
DrStool Posted November 11, 2022 Author Report Share Posted November 11, 2022 Just updating my Primary Dealers data. In the last 6 weeks, they have finally gone heavily short Treasury futures across the maturity spectrum. And naturally, now they're getting killed. I don't know how these guys stay in business. How they consistently report profits. Their fixed income positioning is constantly wrong. Link to comment Share on other sites More sharing options...
MisFit Kid Posted November 11, 2022 Report Share Posted November 11, 2022 Today is Bank Holiday for Veteran's Day.......(No Bond MKT in US) Pivot-Bot and Flo-Bot seem to be at work.... Link to comment Share on other sites More sharing options...
Jimi Posted November 11, 2022 Report Share Posted November 11, 2022 "I'm really sorry, again...." Link to comment Share on other sites More sharing options...
DrStool Posted November 11, 2022 Author Report Share Posted November 11, 2022 50 minutes ago, MisFit Kid said: Today is Bank Holiday for Veteran's Day.......(No Bond MKT in US) Pivot-Bot and Flo-Bot seem to be at work.... Armistice Day in Europe. Major national holiday in the EU. Link to comment Share on other sites More sharing options...
DrStool Posted November 11, 2022 Author Report Share Posted November 11, 2022 Dad always called it Armistice Day. Link to comment Share on other sites More sharing options...
Jimi Posted November 11, 2022 Report Share Posted November 11, 2022 Just now, DrStool said: Dad always called it Armistice Day. Ukrainians will call it, "Get Back Across the Dnipro" Day.... Link to comment Share on other sites More sharing options...
DrStool Posted November 11, 2022 Author Report Share Posted November 11, 2022 Thanks Break Out for supporting your local Stool Board! 😁 A waste is terrible thing to mind. Link to comment Share on other sites More sharing options...
MisFit Kid Posted November 11, 2022 Report Share Posted November 11, 2022 1 hour ago, DrStool said: Armistice Day in Europe. Major national holiday in the EU. they have been "saluting the troops" before each football match in England this week >: I did not recogonize what the military band was playing during the salute Link to comment Share on other sites More sharing options...
PullMyFinger Posted November 11, 2022 Report Share Posted November 11, 2022 UNH getting Old Yellered behind the barn today. Link to comment Share on other sites More sharing options...
MisFit Kid Posted November 11, 2022 Report Share Posted November 11, 2022 28 minutes ago, PullMyFinger said: UNH getting Old Yellered behind the barn today. and yet the Dow Fraudex is about to go green #4 in the SOW is AMGN (-8) #1 UNH (-28) It is hard to believe the "math" anymore.....much less "the science"........ >: Ah......GS +7 (that is all P-Bot and F-Bot need to know, I guess) >:: Then again, it is the 30 stock "price weighted index" Link to comment Share on other sites More sharing options...
MisFit Kid Posted November 11, 2022 Report Share Posted November 11, 2022 Looks like nothing has changed in "mentality" Link to comment Share on other sites More sharing options...
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