Today’s CPI data looks promising, however our concern is that there will come a day when the market comes to the epiphany that inflation really isn’t transitory and that we are in a new world defined by secularly tight labor, tariffs, isolationism and commodity volatility all of which beget higher long-term rates, higher cost of capital and slower growth.

So far, amid AI mania, the market has shrugged off the indicators of an inflation reacceleration, but a new study from the San Francisco Fed tells us we should be hyper-vigilant as new inflationary data comes available.

Bonds have been weak over the last month as various inflationary data have come in hotter than expected. CPI, PPI, the prices paid component of both the NY and Philly Fed, NFIB pricing expectations, and import prices.

This week’s Fed minutes reinforced the idea that the Fed will need to see a weaker economy, tighter financial conditions, and a resumption in the downward trend of inflation before making any changes.

What begets that pessimism, I don’t claim to know. But, when we do see it, be prepared. The greatest traders in the world can’t pick bottoms or tops. They buy the speculation and greed phases of bull markets for sure, but they take profits, and they buy some protection along the way.

This unprecedented wage growth is a two-edged sword. Stronger wages are inflationary, but it also means that people have more money to spend and they are clearly spending it. So where does that leave us? Confused firstly.

Ten True Contradictions from Tim Pierotti

Secularly tight labor markets mean higher wages which translate to greater demand and continued pressure on services inflation. The disinflation trend is slowing if not bottoming out.

This week Tim Pierotti writes about America's new found unwillingness to promote international cooperation and the risk that the end of "Pax Americana" drives secular inflation.

Tim pays homage to the late Byron Wein, and offers ten views that we believe will come to fruition.

Tim discusses how recent market rallies have occurred despite lower corporate earnings and a continued credit crunch. What happens next is anyone’s guess but these issues still prevail.

Tim discusses the link between Tesla’s stock price and the S&P 500 and what we can glean from this relationship.

A new study from the St. Louis Fed informs us that the many Americans are choosing to work less following the pandemic. This is a paradigm shift that could have a significant impact on our economy. In The Disillusion of the Grindstone, Tim explores this research and what it means for labor moving forward.

On Friday, November 10th, 2023, Moody’s lowered its outlook on the U.S. Credit rating to “negative” from “stable”. This move comes amidst increased policy paralysis on Capitol Hill and a looming government shutdown.

It was just over a year ago that Bloomberg ran the now infamous headline: “Forecast for US Recession Within One Year Hits 100%”. Q3 GDP growth numbers suggest the contrary but is the economy due for an acceleration to the downside?

Markets appear to be set-up for a relief rally in both bonds and equities.

This week Tim focuses on the positives and as the great basketball coach Jim Valvano said, “NEVER, EVER, GIVE UP”

This week Tim looks into the latest CPI numbers and what they mean for the long term inflation numbers.

We have been saying for a while that inexorably high energy prices are part of “The Secular Drivers of Inflation.” The article excerpted below from today’s WSJ affirms our view. The point is simple. US Oil companies aren’t going to use excess cash to drill more because their investors want the cash returned to them. That isn’t going to change, not in the face of the energy transition. The unprecedented pricing power of the Saudi’s exists not because there isn’t spare US capacity, but because there isn’t really cheap spare capacity.

We have been saying for a while that inexorably high energy prices are part of “The Secular Drivers of Inflation.” The article excerpted below from today’s WSJ affirms our view. The point is simple. US Oil companies aren’t going to use excess cash to drill more because their investors want the cash returned to them. That isn’t going to change, not in the face of the energy transition. The unprecedented pricing power of the Saudi’s exists not because there isn’t spare US capacity, but because there isn’t really cheap spare capacity.