Posts filed under “Fixed Income/Interest Rates”


Barron’s agrees with our assessment that, CPI not withstanding, there is actually some inflation out there. Add Oil and Fed tightening, a voila! That’s a recipe for a slowdown: 

"If we didn’t know better, we’d suspect the good governors are actually recognizing, as they’ve given broad hints they are, that inflation is very much alive and kicking, whatever the absurd government price readings show . . ."

Conditioned by the fiction that the price of energy isn’t all that important to the economy anymore and numbed to the effects of rising interest rates by the regularity, predictability and modest size of the increases, investors have grown to shrug off their impact. Yet, rationally, by itself, either would be enough to cause serious economic discomfort. Together, they are really bad news.

Merrill Lynch’s David Rosenberg points out in a Friday dispatch that "we’re witnessing an event that has happened barely more than 15% of the time in the past five decades: a year that sees the Fed tighten (liquidity pinch), oil prices rise (margin and personal-income squeeze) and the equity market head lower (wealth effect, discount mechanism) — a triple play.

Such a triple play has occurred only eight times in the past 50 years, and on seven such occasions, gross-domestic-product growth either slowed or stopped dead in the water. The odds, then, of a slowdown in 2006 are 88%, which David says without fear of contradiction, is not "a track record worth betting against." The decline in growth in the wake of triple-play years has averaged 2½%. 

"So," David comments, "if past is prescient, we could well be in store for 1%-ish-type growth next year." And, he adds, wryly, "Something tells us that equity valuation, credit spreads and the dollar are not presently priced for such an outcome." Whatever could make him think that?

The Merrill data is attached as a PDF



Hello, Columbus


Barron’s MONDAY, SEPTEMBER 26, 2005         

Thought of the Day: U.S. Economy Out on a Triple Play
David Rosenberg
Merril Lynch Economic Commentary,  22 September 2005 
David Rosenberg Merrill.pdf

Category: Commodities, Economy, Fixed Income/Interest Rates, Markets

CPI versus Core Inflation

Category: Economy, Fixed Income/Interest Rates

The History of Inflation ex-inflation

Category: Economy, Fixed Income/Interest Rates

Parsing the Fed

Category: Economy, Fixed Income/Interest Rates

Deficits and Interest rates

Category: Economy, Fixed Income/Interest Rates

Its Gold Jerry, Gold!

Category: Commodities, Economy, Fixed Income/Interest Rates

Except for Inflation, there’s no Inflation

So let me make sure I completely understand this: If we back out all of the inflationary data from the CPI, and PPI, there is, um, no inflation? 

Thanks for clarifying that.

While the Dismal Set — and the majority of CNBC guests — continue to spout such foolish nonsense, its nice to see that at least the WSJ wasn’t bamboozeled. Their online headline read:  Consumer Prices Climb 0.5%

"Gasoline prices shot up 8.3%, the biggest increase since February 2003.
Food prices, however, were unchanged for the first time in nine months.
Medical-care prices were unchanged after nearly 30 years of increases.
Housing prices grew more slowly in August, falling to a 0.2% rate from
0.4% in July. Automobile prices fell 0.5%, half the rate of decline
recorded in July."

You can see more from the dismal set below . . .

UPDATE I: September 16, 2005 10:54 am

Its the ultimate Hedonic adjustment:  Chart of the Day shows us graphically that without the items that are going up in price, there is hardly any inflation at all! 


UPDATE II: September 17, 2005 11:54 am

The first official chart from the weekend WSJ:


UPDATE III: September 24, 2005 2:54 pm

Here’s a round up of all our recent discussions on inflation

Consumer Prices Climb 0.5%
Katrina Helps Propel Jobless Claims
To Highest Level in Nearly 10 Years
WALL STREET JOURNAL, September 15, 2005 5:44 p.m.,,SB112678676740241720,00.html

Read More

Category: Economy, Fixed Income/Interest Rates

3 and 2 year yield curve inversion

Category: Economy, Fixed Income/Interest Rates

Sunday Nite Linkfest

Category: Economy, Fixed Income/Interest Rates, Investing, Psychology, Weblogs

Understanding the Inverted Yield Curve

Category: Economy, Fixed Income/Interest Rates, Psychology