Posts filed under “Inflation”
The last refuge of scoundrels is their blind insistence that all data points must be adjusted for inflation.
I was reminded of this earlier in the week when Nasdaq, after 15 long years, closed above the 5,000 mark. The immediate response from parts of the bearish contingency was to demand that the numbers take into account the rise in prices.
There are many, many reasons why this is irrelevant to investors. Let’s focus on just three:
The first is technicals. When practitioners of this form of analysis look at support and resistance lines in a graph of a stock or index, they are actually delving into the world of psychology. Traders recall that when they bought stocks at a specific price, they were rewarded. That muscle memory keeps them coming back for more at those prices. This is true for stocks, exchange-traded funds and even indexes.
Similarly, they remember being punished when they paid too much at specific prices. Who among hasn’t thought to ourselves, “Dear Lord, let me just get back to break-even”? That is why share supply often appears at specific prices. It is a sign of investors recalling an earlier purchase that has been painful.
Are Oil Price Declines Good for the Economy? Kevin L. Kliesen Federal Reserve Bank of St. Louis Economic Synopses, 2015, No. 3 As expected, falling crude oil prices lead to falling gasoline prices and lower inflation. Since mid-June, the spot price of the U.S. benchmark for crude oil, West Texas Intermediate (WTI), has…Read More
From Torsten Slok, Deutsche Bank: The next ECI will be released on Jan 30 and the NFIB data that just came out points to more upward pressure, see chart below. Also, remember that the wage data used in the Fed’s FRBUS model of the US economy is the employment cost index and not average hourly…Read More
The Risks to the Inflation Outlook Vasco Cúrdia FRBSF Economic Letter 2014-34 November 17, 2014 Although inflation is currently low, some commentators fear that continued highly accommodative monetary policy may lead to a surge in inflation. However, projections that account for the different policy tools used by the Federal Reserve suggest…Read More