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Strong FOMO Reaction to Consumer Prices

Investors are piling into stocks this morning after the consumer price index came in about as expected. Investors who have ‘sat out the rally’ are dumping money in as fast as they can and the S&P500 is up 1.25% at this moment.

The CME FedWatch tool has the chance of a rate hike at the September FOMC meeting at 9% now – there is an awful lot riding on this number given that the meeting is 40 days away yet. But as always investors do what they do. As in all rallys there are always some who will say the sky is falling and that equities are dramatically overvalued–of course this doesn’t matter if the great majority say ‘buy, buy, buy’.

Interest rates are falling a bit with the 10 year treasury now back under 4% at 3.98%–just can’t seem to hold above 4%. Helping interest rates to lower levels were 1st time jobless claims coming in higher than expected–but honestly 1 weekly number means very little–1 is not a trend.

I nibbled into a bit more of the Jackson Financial 8% perpetual–at $24.97. It is about the best 8% yielder I can find out there. For the time being I have given up hoping for higher CD rates – seems like the bankers have all the deposits they need for now.

16 thoughts on “Strong FOMO Reaction to Consumer Prices”

  1. Rudy re: Jackson:
    Interesting. THAT is why Powell is “normalizing” interest rates. Move one thing in a Flibbertyjibbit and many other ripples occur in many directions especially if there is a tilt to equity and reach to subprime which spell enhanced risk to the domain of an annuity-type manager. Turning the ship around is a b…. and MANY swaths of or economy and politic are seeing it on the horizon whether acknowledged or not, now that ZIRP is historical,. I’ve been studying the concepts of Cognitive Dissonance since I’ve been back during summer heat. It’s a REAL risk…and I’m looking in the mirror which I placed here on my desk.

    1. Rudy thats a good write up. What it’s saying is that markets have changed with higher rates. In 2 ways.

      1. No need to pay (1.2%) an insurance co for a living benefit (5%) when you can get that for free. All those existing contracts where the industry are on the hook for potential 5% payouts ? Poof that risk is greatly diminished!!…and all those old VAs are 1035 material.

      2. Structured investments for market based contracts make it possible for new VA’s to have little to no fees, while being able to guarantee against loss!!

  2. Tim, its not about the bankers having all the deposits they need. Its about that they have are just choosing to borrow even more from the Fed window and maybe there is a plan in motion to bail them out next year. But net, they are not chasing after deposits anymore.

  3. I’ve been stacking nickels with the Plym-a call coming 9/6. At today’s 25.18 and call at 25.34 (ex date 8/24) I get IRR of 8.775 annualized. I’ve been doing this in series with a bunch of called ones this year for a decent return.

    1. Welcome to the club, Irish. to me it’s such a good way to do better than MM funds, Treasuries or CDs with money you’d prefer to have sidelined anyway.

    2. Check your numbers on PLYM-A. Although I used YTC using a bond calculator and not IRR, we usually are close to getting the same numbers… I get approx 7.53% YTC using 8/14 settlement.

      1. Check that….I’m wrong… I was reading a YTM number generated when putting in a made up maturity date to satisfy the calculator…

  4. With energy & agriproducts still relatively elevated, would it be unreaonable to assume Cenex will continue to have good/strong earnings?

    1. Tropical–they canned the CEO a few years ago and the new regime seems to have gotten ship righted. They are on my list for more adds when the time is right.

  5. About time in the cycle for your local cable guy, next door neighbor, co-workers to mention some really hot stock buy, buy, buy tips to go after….LOL’s

    Been here before!

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