The Morning Call---Inflation

 

The Morning Call

 

11/10/21

 

 

The Market

         

    Technical

 

            Tuesday in the charts.

            https://www.zerohedge.com/markets/teslammed

 

            This is a no rules market.

            https://www.zerohedge.com/markets/goldman-start-thinking-1999-watch-your-shorts-no-rules-market

 

            Long bond yields are tumbling on fears of Fed policy mistake.

            https://www.zerohedge.com/markets/bond-yields-are-tumbling-policy-error-panic-resumes

 

    Fundamental

 

       Headlines

 

              The Economy

 

                        US

 

Weekly mortgage applications were up 5.5% while purchase applications were up 2.7%.

 

                          Weekly jobless claims totaled 267,000 versus forecasts of 265,000.

 

Month to date retail chain store sales grew at a slower pace than in the prior week.

 

October CPI was reported at +0.9% versus consensus of +0.6%; core CPI was +0.6% versus +0.4%.

                          https://www.zerohedge.com/personal-finance/us-consumer-prices-are-spiking-their-fastest-40-years

 

 

                        International

 

October Chinese CPI was up 0.7%, in line; October YoY Chinese PPI was up 13.5% versus +12.4%.

https://www.zerohedge.com/economics/beijing-trapped-chinese-producer-prices-soar-fastest-pace-26-years

 

October German CPI was up 0.5%, in line.

 

October YoY Japanese machine tool orders rose 81.5% versus estimates of +68.0%.

 

                        Other

 

                          The economic pulse.

                          https://alhambrapartners.com/2021/11/08/weekly-economic-pulse-divergence/

 

                          Total household debt climbs to over $15 trillion.

                          https://www.calculatedriskblog.com/2021/11/ny-fed-q3-report-total-household-debt.html

 

            Inflation

 

Here is an argument for ‘transitory’ inflation.  I think that the author is incorrect in his assessment on two counts (1) he is assuming ‘slack’ in the labor force that may not be there.  That is, he is tallying employable citizens that may have chosen not to work as unemployed.  They may ultimately go back to and so he may be correct; but so far, he is not and until something changes, I see no reason to assume that he will be, (2) he claims that the labor market is ‘weak’ and employees are unable to demand higher wages.  As you know, I have been carefully recording in these pages under the title of cost push inflation the strikes, sick outs, etc. that have led to higher wages.  So, I have no idea where he gets that notion.

              https://www.project-syndicate.org/commentary/us-inflation-pressures-not-a-cause-for-worry-by-j-bradford-delong-2021-11

 

Ed Yardini has a different and more reasonable take on how the labor shortage won’t lead to inflation---it will force businesses to make productivity enhancing investments and said productivity will rise faster than wages.  But I question that also since for the last decade management has chosen to invest in stock buybacks instead of productivity improvements in order to jack up their bonuses.  Will higher wages force managements to change that paradigm?  I don’t know but as I said above so far that is not happening and until something changes, I see no reason to assume that it will.

https://www.linkedin.com/in/edward-yardeni/detail/recent-activity/

 

Barry Ritholtz makes an even better argument.

https://ritholtz.com/2021/11/productivity-wage-gains/

 

US inflation continues to run hot.

http://www.capitalspectator.com/us-inflation-outlook-continues-to-run-hot/

 

                          US/China trade and inflation.

              https://politicalcalculations.blogspot.com/2021/11/us-china-trade-and-inflation.html#.YYrF0WDMKUk

 

Winter heating bills loom as next inflationary threat.  But note this sentence in the middle of an otherwise alarmist article:  ‘The latest outlook from the National Oceanic and Atmospheric Administration suggests a decent chance of a milder-than-average winter.’

https://www.nytimes.com/2021/11/08/business/economy/home-heating-prices-winter.html

 

                          The cost of government/central bank unforced errors.

              https://alephblog.com/2021/11/08/unforced-errors/

 

    Bottom line.

 

            The perils faced by the long term investor.

            https://behaviouralinvestment.com/2021/11/09/long-term-investors-must-make-a-ulysses-pact/

 

                        What if rates go to zero?

                        https://www.pragcap.com/what-if-its-all-going-to-zero/

 

    News on Stocks in Our Portfolios

 

3M (NYSE:MMM) declares $1.48/share quarterly dividend, in line with previous.

What I am reading today

 

            Inside the camp and the mind of the greatest marathon runner ever.

            https://www.irishexaminer.com/sport/othersport/arid-40732662.html

 

            A false sense of certainty.

            https://abnormalreturns.com/2021/11/07/a-false-sense-of-certainty/

           

                        Quote of the day.

            https://cafehayek.com/2021/11/quotation-of-the-day-3704.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+CafeHayek+%28Cafe+Hayek%29

 

 

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