Friday’s better than expected NFP was followed by a strong rally, which faded by day’s end. My guess why is that parts of the BLS data was looked at askance, as the Birth Death adjustment Goosed NFP. When we look at various employment charts, the picture remains downright fugly.

Perhaps that introspective process continues today. Not only about Employment, but about rates also. This is the other headwind the market now faces — rising interest rates. Despite quantitative easing and a zero percent Fed Funds rate, the 10 year Bond has now hit a high rate for 2009.

The Bond sell off, which has been sending rates appreciably higher, is being caused by two distinctly different camps.  The first are those who believe that the recession has crested and is coming to an end, that global growth will soon resume, and the Fed will therefore be raising rates.This is the Green Shoot crowd.

The other camp sneers at the Green shooters, but does not disagree with their conclusion that the Fed will soon be tightening. This is the inflation camp, and includes the gold bugs, commodity bulls, dollar bears, and hyper-inflationistas.

With Oil up 100% for the year, and the Dollar down nearly 10% from its recent peak, I find this group harder to disagree with. The irony is that each sees the Fed tightening and rates going higher. This is the conundrum the Fed finds itself in . . .

>

click for updated futes
6809-futes

>

Previously:
NFP is . . . -345k (June 5, 2009)

http://www.ritholtz.com/blog/2009/06/nfp-is-4/

Birth Death Adjustment Goosed NFP (June 6, 2009)

http://www.ritholtz.com/blog/2009/06/birth-death-adjustment-goosed-nfp/

Roundup of Employment Charts (June 7, 2009)

http://www.ritholtz.com/blog/2009/06/roundup-of-employment-charts/

Category: Federal Reserve, Fixed Income/Interest Rates, Inflation, Psychology, Trading

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

57 Responses to “Green Shoots or Inflation Pressure Futures”

  1. Steve Barry says:

    Maybe the 130 P/E is will affect the S&P’s future returns? (hey, it’s not much higher than the 45 all-time high seen in 2000)…Or perhaps it is the 370% Total credit per GDP? (again…a pittance above the GD high of 270%). I can’t make up my mind.

  2. Bruce in Tn says:

    Gotta get going early, but it appears the socialists took a hammering in Europe.

    Wonder if anybody in congress noticed?……….

  3. Dennis says:

    Gold remains attractive (even at at $950).

    Any pullback towards $85 on GLD and I am a buyer

  4. matt says:

    A third group says that there is just too much supply (of Treasuries) + foreign central banks and SWFs moving from the long end to the front of the curve. This increases the rollover risk for the USG.

  5. super_trooper says:

    You’re telling me that the “experts” who predicted a 500k+ increase in unemployment had no idea about the Birth Death adjustment? Is the Birth Death adjustment arbitrary every month or can you tell me what it will be next month?
    As for oil, it’s over valued, too much money in money market funds following for the trend, the oil inventories have more than 60 days supply .

  6. Bruce in Tn says:

    Hussman is still the skeptic…he should let Krugman run his funds for awhile and he’d really make them some money!

    http://www.hussmanfunds.com/

    “There is a far weaker prospect for a return to 2007-like profit margins than investors seem to recognize. Economic expansions are paced not by major growth in consumption (which tends to be fairly smooth even during economic downturns), but instead by gross investment in capital goods, technology and housing, as well as debt-financed durables such as autos. Yet our policy makers have aggressively crowded out private investment through this bailout policy, which allocates good capital to the worst stewards, and they have done virtually nothing to abate the housing downturn. Add deleveraging pressure to that mix, and an absence of opportunity for mortgage equity withdrawals (which fed GDP growth during the last expansion), and we have an economy that is likely to produce a very stagnant recovery even if one has begun – of which I am also skeptical.”

  7. Marcus Aurelius says:

    The Fed has committed to a policy of keeping the banks solvent, yet we’ve only just begun to unwind the bad debt that set us on this inalterable course. The “market” (such as it is), is a reflection of nothing but that commitment (the reaction of the masses is much more akin to theology than science and/or pragmatism). While the Fed might head-fake higher interest rates to give it some plausible, short-term credibility, the forces of debt unwinding will make any such adjustment nothing more than a momentary respite from having to deal with the reality of our situation.

    To extend the often used Titanic analogy, we have flooded the ballast tanks in the stern of the ship to offset the water rushing through the gaping hole in the bow. For the moment, we are leveling out — the deck chairs have been put back in place, drinks are being served (at no cost, to those wishing to get hammered), and the band has struck up a lively number. Most of the passengers haven’t noticed that the life boats are gone, and the first-class passengers are missing.

  8. ben22 says:

    What about the credit deflation camp?

  9. call me ahab says:

    B in T posts-

    “Yet our policy makers have aggressively crowded out private investment through this bailout policy, which allocates good capital to the worst stewards, and they have done virtually nothing to abate the housing downturn. ”

    and this is why i am leaning towards the Japan model- and a decades long slog- I am becoming convinced that the USG will protect the banks indefinitely- with the banks never writing down to true value- with the hope that the economy will improve and save them-

    contraction and no growth for the foreseeable future

  10. danm says:

    And what about those who see the fed keeping rates artifically low but the private market and investors making them shoot up?

  11. AmenRa says:

    There are no economic releases to help goose the market. The 10yr reached a high of 3.90% in overnight trading. The question is which market are they going to try to reign in today. Will it be bonds or equities? The Fed can’t prop up markets when they’ll need the funds for the 3yr, 10yr and 30yr auctions this week. Now that the Chrysler bankruptcy is help up the question is will the same things hold up the GM bankruptcy.

  12. cvienne says:

    There is a THIRD camp that believes this is simply an engineered YO-YO…

    Phase 1: Treasury & Fed talk up the markets and get $$ to move out into risk
    Phase 2: Stock market rallies on “stress test” nonsense, and changes to FASBY
    Phase 3: Banks “sucker-in” capital on secondary offerings
    Phase 4: Trading desks of banks bid up commodity prices to give false sign of recovery
    Phase 5: Long Bond keeps rising, making it tougher to hold bonds

    Now we reach the inflection point…
    Phase 6: When 10y reached 4% yield, (& capital raising is completed), SELL button is hit on equities
    Phase 7: Banks are first ones IN to long bonds
    Phase 8: 10 bond yields back down to 2.5% by fall, equity market at new lows, commodities crushed
    Phase 9: “Oh woe is me” chorus rises again…(now the banks will want even more capital)
    Phase 10: Rinse & repeat cycle

  13. call me ahab says:

    b22 Says-

    “What about the credit deflation camp?’

    as Edward Harrison writes from Credit Writedowns re debt deflation-

    ‘This is also what is happening right now in the UK and in the US. These two countries have much too much debt and cannot take on further credit. Easy money is no panacea because it cannot counteract the inherent deleveraging of an overleveraged financial sector.”

    I think we’re all with you 0n that ben- as Harrison also writes-

    “Economic stimulus in the form of easy money has no effect on this process because low interest rates and monetary liquidity cannot force people to lend or borrow when credit is contracting.”

    USA 2009 = Japan 1990

  14. cvienne says:

    @call me ahab

    A chorus of agreement from me as well…

    There is a simple “tell” to all this…

    If we were REALLY out of the woods, first of all the banks would be “minting” money using the yield curve to their advantage and making loans…Instead, not only are they NOT making loans, their PULLING BACK credit lines…Furthermore, their trading desks are using TAXPAYER money to bid up oil & commodity prices…

    The FED just watches all this…There will be no interest rate hike because they know the economy is actually is still in deep do-do…So they’ll “jawbone” a few words about inflation, and let the banks quietly (or not so quietly) reverse their trades from commodities & equities and back into long bonds…

    By this fall everyone will be talking about DEFLATION again when oil is back down to $40, unemployment starts doing negative ticks again, benefits run out, and equities sell off to below the March ’09 lows…

  15. cvienne says:

    “they’re”…not “their”

  16. ben22 says:

    USA 2009 = Japan 1990

    except the fact that the Japanese had savings and people here don’t.

  17. Mike in Nola says:

    Chinese seemed to have learned a few things from Easy Al. Continuing to blow their own bubble in the face of declining fundamentals. What happens when it pops? Also subsidizing exporters which hurts other exporting countries and not helping to rebalance world trade which was one of the bases of the problem. I don’t think there is much risk of the Chinese bailing out of our bonds as long as they want to continue mercantilism; lending money to buyers is the only way to finance it.

    http://mpettis.com/2009/06/stimulus-%e2%80%93-at-what-cost/

  18. cvienne says:

    I think what’s “funny” about the whole scenario I described is that Obama is probably there “crapping his pants” and saying to the banks…”Come on guys, you GOTTA keep this positive equity market rolling until August when my HEALTHCARE PACKAGE comes up for a vote…I gotta get that through”…

    If the bond vigilantes take the yield on the 10y to 4% – 4.5%, it’s going to be tough NOT to reverse…

    And so, if you see that yield, and a subsequent selloff in equities…it’s GAME OVER for a trillion in healthcare spending…

  19. call me ahab says:

    b22 @8:17

    and export surplus- but- easy it is easy to increase savings- default on your mortgage and stop paying your credit card bills-

    bingo- instant savings

    cvienne @ 7:58

    good breakdown- may play out just that way

    also cvienne Says re banks-

    “Furthermore, their trading desks are using TAXPAYER money to bid up oil & commodity prices…”

    and cvienne says re the Fed-

    “There will be no interest rate hike because they know the economy is actually is still in deep do-do…’

    yes and yes

  20. call me ahab says:

    actually it was b22 @ 8:19- don’t want to create mass confusion

  21. Moss says:

    It is an inflection point where we go nobody knows.

    Could have rising rates, falling equities and falling commodities.

  22. “Yet our policy makers have aggressively crowded out private investment through this bailout policy, which allocates good capital to the worst stewards, and they have done virtually nothing to abate the housing downturn. ”

    Exactly how would you like them to address the housing downturn? Should the Gov’t start bulldozing houses? Because short of that, there is not much they can do. There is just way too much supply due to the bubble. Made worse of course by all the job losses(meaning lots of people either can’t afford a house, or aren’t buying for fear of future job loss).

  23. Bruce N Tennessee says:

    Meanwhile, in Europe, voters decided they didn’t really care for Obama-type socialist answers…Again, I am fiscally conservative, so please….I post this because of the economic ideas, not whether you think Obama is great or Bush was the devil, but because of why these ideas will work or not…

    http://www.ft.com/cms/s/0/c2d03006-53b7-11de-be08-00144feabdc0.html

    Socialists across continent left licking wounds

    “In France, for example, the socialists were set to lose roughly half their seats to President Nicolas Sarkozy’s ruling centre-right UMP. “People are looking for practical solutions to lift us out of the crisis,” said Joseph Daul, a UMP member and the leader of the EPP.”

  24. Mike in Nola says:

    Calvin: Re: abating housing downturn.

    You have to read Hussman’s previous articles for that. Generally, he advocated modifying the loan prinicpal to reflect real valuations and in return giving banks who do so a share of any appreciation in the price of the house when sold. This makes the payments affordable and gives the owners an interest in staying instead of sending jinglemail. Current loan modification programs makes them debt slaves.

    The problem is that it would require banks to write down the loans from the fantasy levels they are at now.

  25. call me ahab says:

    make large- live small has always been my motto- however-

    if i was one who was upside down in a home in a depreciating market- had credit card balances that would be impossible to repay- I would advise them to-

    send in their house keys and stop paying the unsecured debt-

    look after yourself- go rent- put some money away- screw your credit rating- who gives a shit- it’s survival we are talking about

  26. rob says:

    @Barry and Steve Barry, I know how you love Ben Stein and his market timing concept of if the PE is below the 15 year average then it is a good time to buy. If it is above the 15 year average, then bad time. This month brings an interesting chart… Inverted cliff dive???? http://yesyoucantimethemarket.com/pe.html

  27. phb says:

    ahab – you are spot on. This is the quiet revolution happening right now, period. When in survival mode, you look for any buoy. Gonna be an interesting summer to watch.

  28. Scott Frew says:

    Camp the third? How can you laugh at the green shooters, and yet expect the Fed to tighten? I certainly think the thought of the Fed tightening is even more laughable than that the economy might be zipping down a double black diamond rather than being off the cliff, and no longer attached to skiis, which seems logical and correct to me. And I expect the Fed’s attempts to control interest rates through QE or the monetizing which Bernanke insists the Fed is not doing to be, at best, like Alice running as fast as she can to stay in the same place, or at worst to fail miserably, if only at that point when the dollar’s decline goes “uncontrolled”, and the Fed is forced to cease and desist.

  29. jc says:

    Midweek Goolsbey was saying the unemployment numbers looked dreadful, then deus ex machina, we had +220 B/D adjustment and he another admin flack were booked on sun morn talk shows crowing about the apparent jobs bottom. Now he must have been booked for the talk shows by mid week and his mission wasn’t to go on and talk about how bad things are. Almost as carefully orchestrated as The Stress Test.

    I get the feeling the B/D number can be tweaked to pull an occasional rabbit out of the hat. Unemployment rate is up to 9.4%

  30. hopeImwrong says:

    Bearish sideline crowd is getting to the point of, “do you want to make money, or be right?”

    Will they look stupid again? Will, “it’s different this time” really be true?

    I think the sub-prime blow up and aftermath emboldened bears forcasting optimism way too much. Finally they were right! After decades of warnings, their analysis proved correct! Now they think this (temporary) vindication indicates the high potential for further “rationality” (a la bearishness) in the markets: “finally the markets are making sense.”

    This will keep them out of the market all the way up. No?

  31. rob says:

    @ Calvin: For the most part in my neck of the woods (Gulf Of Mexico Coast northwest Fl) The retail joe mentality is that housing is overpriced (which I believe also) but the rent has fallen through the floor locally! Hell I’ve considered defaulting on my home and renting for seven year contract because it is about a third of my mortgage payment. Plus no upkeep! Stuff that was renting for $1500 three years ago is going for about $450 now as the speculators are desperate for anything to help cover the payments. Amazingly foreclousures (auctions and court steps) are still going for more than they can generate in a monthly rent! Still crazy times around here.

  32. The Curmudgeon says:

    The 10 year bond yield controls our fate. I think cvienne has an interesting scenario, positing that bonds yields will plummet again once the stock market gets around to figuring out it is doomed with higher rates, but I don’t think it will happen quite so, because we are about to be revealed for the fraud that we have become. We are a paper tiger internationally, yet one with very real teeth in the form of nuclear weapons. Nuclear reduction treaties proposed by the Administration endanger our tottering standing even more. The world will soon start turning away. Were it not for the nukes (don’t be fooled–bond rates and dollars depend heavily on continued military hegemony) we’d really be toast. But the empire has to shrink.

  33. hopeImwrong says:

    Even if the bearish case plays out (dollar debasement, high inflation, lower standard of living), it will play out over many, many years: maybe 1-2 decades. This means the stock market doesn’t need to crash again. The stock market doesn’t need to hit new lows again.

    The path to a lower standard of living (not even guaranteed) does not mean “stay out of stocks.” It depends on the path taken, and the gov’t is against any shock adjustment, but will let it play out over the long term. So, stock market investing cannot be determined by the bear case.

    We are not alone here. Other countries who play a roll in our fate do not want a shock adjustment either. Lower stock prices are not off the table, but a crash is getting less likely every day, and new lower lows are also getting less likely every day.

  34. leftback says:

    cvienne @7.58am:

    I agree completely with this elegantly outlined scenario. As soon as the TARP is repaid, Super Jamie and Lispin’ Lloyd will no longer need to buy the SPOOS at the end of the day, or buy SPG or short SRS or any of the other market-lifting manipulation trades we know they have been making. They will sell the SPOOS and buy the TWOs.

    The 10-year may reach 4% but I doubt it will go beyond that point before the next downward leg is initiated. The idea of the Fed tightening is ludicrous. There may be some jawboning, but that is all.

  35. call me ahab says:

    good artlicle from Jesse’s Americain Cafe re USO being a pyramid scheme-

    http://jessescrossroadscafe.blogspot.com/2009/06/is-uso-oil-fund-scam-or-even-pyramid.html

    analysis from you commodity/oil folks out there would be appreciated

  36. The Curmudgeon says:

    As for the housing market green shoots crowd:

    “The number of Americans signing contracts to buy previously owned homes climbed 6.7 percent in April, largely on cheaper financing costs, according to the realtors group. The Mortgage Bankers Association’s index of applications to purchase a home or refinance a loan fell 16 percent to 658.7 in the week ended May 29 as borrowing rates climbed.

    “The more rates go up, the more we need home prices to go down to equalize consumers’ payments,” said Donald Rissmiller, chief economist at New York-based Strategas Research Partners. “It’s those payments that have brought about a level of stability” in home sales, he said.

    Rising volatility, which exposes investors to bigger potential losses, risks pushing up rates on everything from mortgages to corporate bonds. Norfolk Southern Corp., the fourth-largest U.S. railroad, sold $500 million of 5.9 percent debt on May 27. The coupon was higher than on the $500 million of 5.75 percent notes due in 2016 that the Norfolk, Virginia- based issued in January. ”

    http://www.bloomberg.com/apps/news?pid=20601087&sid=axq3ToKyUXnE

    >When Bernanke and Co. came out with the MBS purchase program in March, having experimented with it starting in late 2008, I figured they’d succeed for at least a couple of quarters in deluding people into that 2006/7 type of thinking that you better buy now or be priced out forever. It appears it won’t have lasted a whole quarter. Their program is already blowing up in their face, and it’s not been three months.

    This, too me, is actually a green shoot. The quicker we get past the notion that monetary manipulations have any efficacy whatsoever in changing what is real, (except in the very short term as the half-life of monetary delusion grows ever shorter) the better. Neither the Fed’s monetary mischief nor Krugman’s neo-Keynesianism can save us. Salvation will only come from within in the form of changed habits, lowered expectations, and a return to the reality that all wealth is created at the bottom and flows upward, not the other way ’round.

  37. I-Man says:

    You know things are bad when the only thing keeping a bid under financials and banks are the financials and banks themselves…

    I know its just the reality… but it still disgusts me. Oh well.

  38. Mannwich says:

    @Curmudgeon: The wife and I just put our re-fi (and appraisal) on hold until rates go back down to 5/under 5. No sense going forward in the mid to high 5′s when we may be out of here later this year or next anyway. We reset in ’12. If we’re still here by then, we’ll probably just pay off much of the remaining balance before the reset/re-fi. Too much uncertainty for us to re-fi at these higher levels (even though they are low historically) when our current rate is 5.25%. Do you have any thoughts/advice on that?

  39. leftback says:

    I-Man: I and I is not tradin’ dis shit no mo’. Not until the TARP repayment charade is over. That should coincide with Op Ex and we may then see something more like a “free market”.

  40. The Curmudgeon says:

    @Mannwich…I’d probably sit tight for now, but it is complicated. First, you should never refi if there is a good chance you’ll be selling soon. Rarely is the deal good enough to pay closing costs incidental to the refi in less than, say, a year, and forgive me if I seem to be talking down–doing this every day just puts me back into lowest common denominator mode. Having seen some pretty outlandish ideas through the years, I’ve trained myself to expect the least, and though I know you’re not that, it’s a habit hard to break.

    A 2012 reset is tricky. While I would not want to be in an ARM, just because of the volatility, this is really a question of interest rate expectations. If things puddle along like they are, a reset in 2012 may mean a reduction in payment, depending on the particular loan. Personally, I don’t have much confidence that the fed can keep playing whack-a-mole w/ rates much longer–a bit of the evidence being the last few weeks. So I guess I’m saying I don’t know. I’m very risk-averse, always worst-casing everything (which has served me well, lately, but I’ll never get rich in the markets). Because of that, if I were in your shoes, I’d refi, but maybe hold out for a while, maybe until the June meeting of the Fed, and see what happens. Even if rates are going to 10%, they won’t get there in a straight line. The Fed will likely have to preach about inflation hazards, fiscal deficits (because they’ll blame all this on the politicians), etc., which might mean a spike down in rates/up for bonds. Or, not. Things are very volatile. That’s why I’d get out of the ARM if I thought I might be there when it resets.

    Long-term, a time-horizon that I can see the edges of but am not too sure about it’s distance, I can’t see anything but rates going higher. It’s a matter of when.

  41. The Curmudgeon says:

    @mannwich…my comment got eaten, I suppose. Long story short: If you are leaving soon, don’t refi. If you aren’t, the answer is trickier, but I still would because of the inherent volatility–if interest rates go to 10%, will your income increase accordingly?

    A strategy: wait until after the Fed meeting this month. They are going to have to address the faltering treasury bond, and that may drop yields a bit.

    Long-term, IMO, rates are going up, but there’s no way of knowing when. May be six months, may be six years.

  42. Mannwich says:

    @Curmudgeon: Thanks for the guidance. It’s tough call for us. If my wife’s company doesn’t make it, then we may be out of there within a year or so but it’s still up in the air right now. I know that we’re taking a bit of a risk not re-financing even at the mid to high 5′s, but if I had to guess, I think we’ll probably be out of here before ’12 when our ARM resets. Who knows though? Maybe we won’t be able to sell the house by the time we move? A lot of moving parts right now.

  43. thetanman says:

    rob,

    I am a little north of Fl, but here cheap money has induced a mini construction boom into a massively over supplied market. Rents are already soft, and apartments and houses are springing up everywhere. Even the local university is adding a few thousand units. Oh, and there is a new boom in bank construction and drug stores. We have a couple of banks and a CVS everywhere you look. My father used to say “if money’s cheap, they’ll build whether its needed or not.” I got an increased bid on some land, by a developer that seems to be afraid he’ll miss the new boom.. You also see brand new Hummers rumbling through traffic. The massive cycle of malinvestment has started again. Who knows what happens now and when.

    On a side note be careful of Hussman, he was wrong for years before he was finally right. If you believe his forecasting has any validity, then you haven’t been reading him for the last 9 years.

  44. karen says:

    OT for Bruce.. article in the economist on gun laws in TN. “Bread, milk, handgun.” http://www.economist.com/world/unitedstates/displaystory.cfm?story_id=13788631

  45. manhattanguy says:

    Roubini says Double dip recession could be on the horizon. This is what I said on this blog last Friday.

    http://finance.yahoo.com/tech-ticker/article/yftt_260080/Roubini-Scoffs-at-Green-Shoots-Sees-Dangerous-Complacency?tickers=dia,spy,qqq,xlf

    As I predicted, Oil and COF short trades are doing great today.

  46. Tax Lawyer says:

    The Birth/Death model is even more absurd than you think. I am an attorney who forms literally hundreds of corporations per year, that will never have employees. These corporations are formed for liability protection, holding real property, and other non-hiring reasons.

    The correct way to measure births of new entities, is to use IRS applications for employer identification numbers. They require estimates of when the entity is expected to hire its first employees. The IRS does this so they know when, of if, to expect payroll tax reporting.

    This would actually be reliable data.

  47. Bruce in Tn says:

    Karen,

    Well, I am now officially a citizen of the mountains. My wife and I got our carry permits in the mail last week. Doubt I will ever use it, but the wives wanted to do it, and it wasn’t too bad.

    …Now if I lived in Detroit, I would probably have a completely different outlook about whether I might want to carry a weapon or not.

  48. Pat G. says:

    I believe it was Karen the other day who said that one of her cohorts indicated, that the FED doesn’t normally raise rates until the jobs numbers show gains for six consecutive months. If that’s correct rates won’t be raised for sometime. Until then, the FED’s just jawboning.

  49. DL says:

    I think the Fed will do more or less what Obama wants them to do.

    What Obama wants is for the unemployment rate to be as low as possible in October of 2012.

  50. recommender11 says:

    I find it very noteworthy, the suddenness with which this ‘meme’ of raising rates has come about. To me, it smells like a jawboning campaign by the Fed, to threaten to do something that they have no intention of doing, and indeed, cannot do at the present time.

    I find that you can learn a lot by looking the body of language of people when they talk. I watched Ben Bernanke’s testimony before Congress last week. When he was talking about the millions of people who are currently unemployed, he looked like he was back in eighth grade, explaining to his parents how he got that B- on his algebra quiz, and how that would never happen again; when he talked of the dangers of inflation, his body language showed that he was contemptuous and dismissive of the possibility of real inflation taking hold.

    Raising rates would serve only one purpose at the present time: to keep the prices of the long bonds from cliff-diving. If the Fed did raise the federal funds rate, that would just hinder the profitability of the banks, because they would no longer be able to borrow short and lend long at higher rates, and making the banks more unprofitable is the last thing they want to do. Raising rates wouldn’t even curtail lending, because the banks aren’t lending anyway, they are just collecting interest on their reserves with the Fed, since the Fed started paying interest on reserves back in October. Does anyone really see inflation in so-called ‘core’ items anyway? (Core items being the things that the Fed really cares about, supposedly.) The only inflation is showing up in food and energy, and these are non-core items. Core items are probably still in deflation.

    To me, this talk of raising rates comes across as part of a marketing campaign to help sell long bonds. How convenient, because the Treasury is trying to sell a ton of long bonds this week.

  51. leftback says:

    “Double dip recession could be on the horizon”

    Absolutely baked in the cake.

    Drop money from helicopters to stem panic and then retire to a safe distance and begin jawboning, while accumulating canned goods. Paul Kasriel called this one from the start of the year almost, also Paul Kedrosky.

    Just when you thought W was out of the way, it’s the W-shaped recovery. The $ has already begun to rally. More ugliness lies ahead.

  52. Pat G. says:

    10yr at 3.86%. Hurry Ben, time to monetize more debt. Eastwood; “Make my day.” lol

  53. karen says:

    Don’t forget DLM if you are thinking canned goods or Daniel Craig popsicles…

  54. Whammer says:

    @Karen — unfortunately, you got me curious about the Daniel Craig popsicles…….

    Turns out DLM isn’t doing it, but a licensee of their name is responsible:

    http://www.reuters.com/article/bigMoney/idUS378154280220090603

  55. karen says:

    Whammer, that is so interesting.. i’ve actually played around on the Del Monte site… it’s quite consumer friendly.. thanks for following up.

  56. leftback says:

    Yields on the 2-yr are still increasing, 1.42% mama mia!

    Karen, not surprising you like Del Monte. We all think you are a peach…

  57. [...] case in point is the absurdly foolish Green Shoots compost.  As we have detailed since this nonsense first started spreading earlier this year, the data simply did not support the notion of  [...]