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30 Minutes to Important Inflation Data

We have just 30 minutes until the release of important inflation data with the consumer price index (CPI). The reason this should be considered important is because the Fed ‘claims’ they need to see a number of good data points before they cut rates. Since we are looking at June at the earliest and more likely July or later before we see a rate cut we need to see good data points starting now.

Now do I want to see rate cuts? I have mixed feelings–I am really liking that folks that want my investment dollars are forced to pay me to use it. We went through a period of 10 years where we were lending money to banks etc and they didn’t even have to pay us (much). On the other hand the longer rates stay at elevated levels the deeper the hole the government is digging for itself as cheap treasuries mature and high coupon debt is sold to replace it–and we all know this will come home to roost at some point in time.

So the forecast for the headline inflation number is 3.4% (year over year) which would be up from 3.2% last month. The core rate is forecast at 3.7% versus 3.8%. Obviously we need numbers within a 1/10th or so on these to keep markets stable–if we are off by a number of 1/10th it is possible we see some fireworks in equities and/or interest rates.

My personal take on inflation is it is not slowing much (if any)–this is based on almost nothing. I do almost nothing when it comes to paying the household bills–I seldom ‘shop’–seldom buy groceries–my wife runs everything around this house. What do I do—work, work, work. But even though I do little shopping etc I do see some signs of continuing inflation–today what caught my eye was the cost of a 1st class stamp is likely going from 68 to 73 cents. Honestly I was shocked–I thought stamps were around 50 cents–talk about out of touch. I do buy fuel for my vehicle–and that is way up in the last number of months as west Texas intermediate trades up in the mid 80’s. I have completed a number of new construction house appraisals lately and I can guarantee prices remain sky high – you don’t get much for $500,000 anymore at least in Minnesota. Well we will see what happens shortly.

As noted I purchased a add on position to my Carlyle Credit Income Fund 8.75% term preferred (CCIA). No other purchases are contemplated this week–always subject to change of course.

The 10 year treasury is steady right now at 4.36%–obviously awaiting news. Equities are also little changed–we’ll see if this remains the case in a few hours.

25 thoughts on “30 Minutes to Important Inflation Data”

  1. Rates are fine where they are, pretty much normal in my opinion. ZIRP distorted things so badly younger investors think that was normal. I bought my first home in 1968 for 15K and a 7.75% FHA loan. I remember a lot of my neighbors were older folks who bought their homes new in the early 50’s and were not about to sell as they had the unheard of rate of 5.0% loans (mostly VA & FHA). After WW2 the government offered these low rates to jump start the economy, so they too were somewhat artificial. Nothing new under the sun I guess.

    1. Looking at some CD’s on Schwab this morning, rate is ok, about the same as MM, but why do I hesitate to buy ? Ha !

      Bank of Bird-in-Hand PA 5.1% CD 10/20/2025 Callable

      1. Bill. I agree on one levels. It is financially better for me and for so many eldery people on fixed income.

        (Unlike after the financial crisis of 2008 and the following years of QE. My mother worked into her late 80s because fixed returns were near zero and she would not put money in the stock market. And being a proud Texan from the depression she refuese to accept from her childred.)

        However, the big downside of higher rates is the rsing cost of service on the debt. Higher rates are not good for my children and grand children as they will bear the burden of higher taxes, and eventually austerity.

        Oh what a tangled web we weave when first we practice to deceive’. Marmion, Sir Walter Scott 1808


        1. One can only hope that higher rates will put a spotlight on the need to do something about deficit spending. Lord know low rates don’t put a spotlight on it.

          Personally, I think rates need to be at least where they are now. Low rates distort the economy in my humble opinion. The also cause people to invest in things they might otherwise never invest in.

        2. windyducat;
          God bless your Mom, sounds like she was a strong person with her priorities in the right place. My folks were both that way too.
          I have to disagree with you though, the country serviced our debt just fine when rates were even higher than this, the problem is the insane government spending our money like a drunken sailor. As long as they keep overspending, our kids and grand kids will be paying for it regardless of interest rates. these are not “high” rates, they are normal rates, the budget is what’s too high.

  2. People flying around the country looking at the Eclipse…we travel a fair amount….people are spending money…probably mostly baby boomers

  3. 3 rate cuts, ha? P-o-l-i-c-y m-i-s-t-a-k-e, there you go spelled it out for you Mr. Jerome “transitory Inflation, and bumpy path to 2%” Powell.

    1. If powell truly wanted 2% inflation he would have taken rates higher and caused a recession. Not that I want a recession, but it is a sure method to soften labor prices and cut demand.

    2. I was a large hospital president for 35 years before I retired. If Mr. Powell were a M.D., he probably would be sued for malpractice. If a patient has a serious bacterial infection (inflation) you do not skimp on the antibiotic (rate increases, etc.) . Taking a patient off too early could cause the infection to come back even stronger and with a vengeance.

      1. RJB—I agree with your sentiment–I am concerned Jay will give into the political pressures. 4 or 5 % inflation is not acceptable to me personally on a long term basis.

    1. Indeed. Although I don’t doubt some will try to excuse it away

      * Record High Inflation the last 3 years
      * Over the last three months core CPI has risen at a 4.6% annual rate. That is faster than any three month period from August 1991 to 2020.
      * The last 3 months CPI came in hotter than expected – not boding well for any rate cuts
      * Continued price pressure on consumers, which hits the poor hardest

  4. IMO the CPI short-term trend is going in the wrong direction, up, for a rate cut in June. Cheers!

  5. And not surprising, inflation was driven by higher prices for petrol and rental housing, as the housing markets are frozen because of owners keeping their super low mortgage rate, and most new rental housing coming on the market is higher end.
    If portability was introduced, that would free up the housing markets in an instant.

    1. Justin, you will pry my 2.75% mortgage note from my cold dead hands! I want some high interest rate/high inflation rate panic mania to hit the market. Tired of sitting at and below in 20% fixed perps. Market give me a reason to buy!

      1. Gotcha beat Grid ….. Symbolically burned the
        mortgage a decade ago. Not only no house mortgage but no car loans, credit cards, nothing. Zero debt! Not the American way, but sure feels great……

        1. Dj, debt and the use or not there of is definitely a personal one. I certainly am not cashing in 5% CDs to pay off a 2.75% note, but Im more comfortable with debt. I have 7 year car loan, 2 years into at 0%, and a small amount of 0% credit card debt. Yes, I could pay it off, but I like cheap and free money.
          Now if the treasury would only just start back up the program of selling dollar coins to me with a credit card so I could get 2% cash back max buying them and dump them back to the bank……

    2. Justin:

      I blame the FOMC (I now call them the Federal Open-Mouth Committee) for completely distorting the current housing market. 15 years of low interest rate policies followed by the last big burst of ZIRP between COVID and the start of 2022 has caused the supply issues you mentioned and the paradox in housing we are seeing now.

      A more than doubling of mortgage rates over the last 2 years and you still have home prices up the last 7 months in a row and reaching all-time highs in many areas again (like Tim’s comment above about sky high home prices in Minnesota). Single family rental behemoths like REIT AMH consistently get 6% annual rental increases on their same-store portfolio.

      Good luck if you are Millennial (28-43 years old) or early Generation Z member trying to buy or even rent your first home now.

      As the Fed has hurt so many people….you have bozos like Bernanke writing best-selling memoirs called “The Courage To Act” and getting awarded Nobel prizes for Economics. Only in America….what a country.

      1. Kid, Back when I was a working stiff, a few of us used to have a cute nickname for Bernanke. “10K Ben”. Every time the man spoke resulted in a quick 10K loss in my then 401k. Good times.

    1. 3.5 up from 3.4? Good to know that they’re inflating inflation along with everything else.

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