Posts filed under “Inflation”

Gold vs. Inflation

Click to enlarge:

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Source: Merrill Lynch

 

We have pointed this out before, but its worth repeating: As Merrill Lynch pointed out earlier this week, “the link between inflation and gold is very limited.

The correlation between Gold and Inflation is not what most people believe it to be. This variant belief could be significant in light of the most recent QE.

Here’s Merrill:

Opened-ended QE is causing some investors to worry that inflation will get out of hand. That has helped drive gold prices higher, as investors look for places to hedge against a potential rise in inflation. [See charts above]

First, gold is not part of the CPI bundle, so a movement in gold will not impact inflation. Second, gold is not a good predictor of inflation. As the nearby charts illustrate, gold prices are much more volatile than headline inflation. Finally, with the correlation between gold and inflation on a yoy basis of just 0.42 and on a month-over-month basis of 0.11, gold is not a great hedge against inflation. Investors would be better off owning TIPS if they are looking for protection against a potential rise in inflation.

This is worth paying attention to in the world of QE ∞.

 

 

Source:
BofA/Merrill Lynch
September 17, 2012
Morning Market Tidbits

Category: Gold & Precious Metals, Inflation

1st of the July inflation #’s rolls in

The first of the July inflation reports over the next week was just released. Import prices fell .6% m/o/m and 3.2% y/o/y vs expectations of up .2% and down 2.5% respectively. Taking out the influence of food and fuels, prices were still down .4% m/o/m but still up .2% y/o/y. Import prices specifically from China…Read More

Category: Inflation, MacroNotes, Think Tank

Rents On The Rise

Click to enlarge: The Wall Street Journal – Rents Increase as Vacancies Dry Up Landlords boosted apartment rents to record levels in the second quarter as demand from tenants sitting out the home-buying market pushed vacancy rates to their lowest point in more than a decade, according to a report to be released Thursday. Despite…Read More

Category: Inflation, Real Estate, Think Tank

Inflation Ex-Deflation (this time, INCLUDING energy)

Here is a twist: We used to discuss how the Fed loved their core (ex food & energy) inflation measures. I termed that Inflation Ex-Inflation, and if you look around TBP, you will see lots of mentions of that measure.

Take a closer look at Energy, one of the biggest non-housing components. As noted this morning, Commodities have entered a Bear Market. Gas & Oil are not contributing much inflationary pressures. If anything, Energy costs now are acting as a drag on Inflation.

Call it Inflation Ex-Deflation (Do you want to guess what that means for the Fed’s love of the Core Inflation (ex food & energy)?

Consider the Federal Reserve inflation target of 2.0%. Jim Bianco notes that inflation is moderate at 1.73%. However, if you take a closer look at the chart below of core CPI — you will see a 2.3% on a year-over-year basis (blue line) and a heady 2.71% on a three-month annualized basis (red line).

Sum it up and it means inflation less energy is largely running above the Federal Reserve’s target.

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Energy Now A Drag On Inflation

Click to enlarge:

Source: Bianco Research

 

 

More charts after the jump

 

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Category: Energy, Inflation

Emerging Markets, Not Inflation Drives Gold

Click to enlarge:     Kudos to Bloomberg’s Dave Wilson for spotting this study last week by Duke University Professor Campbell R. Harvey and his collaborator, Claude B. Erb. They discovered that “Gold’s prospects are less dependent on inflation than on demand from emerging markets.” As the chart above shows, “The relationship between gold and…Read More

Category: Gold & Precious Metals, Inflation

The Not So Golden Years, Revisited

Over the years, debate has waxed and waned over the effects of the minimum wage and/or immigration policy on employment, particularly teen/youth employment. When the issue flared up most recently, a couple of years ago, I posted a rebuttal to that argument here, my point being that it was – at least this time around…Read More

Category: Contrary Indicators, Cycles, Data Analysis, Economy, Employment, Inflation, Really, really bad calls

Will Soaring Rents Lead To Higher Core Inflation?

Chicago Real Estate Daily – Rents rise again in sizzling downtown apartment market Downtown apartment rents hit another high in the first quarter, and more hikes may be in the offing amid a red-hot rental market. The average effective rent at top-tier, or Class A, downtown apartment buildings rose to $2.50 a square foot in…Read More

Category: Inflation, Real Estate, Think Tank

MIA: Bond Vigilantes

Following up on a previous matter, Karl Denninger  posted what is supposed to pass for a rebuttal to my recent post on government spending. To my eyes, as Jay Bookman so aptly put it, it looks like “the octopus trick, squirting black ink to cloud your retreat.” True enough. Anyway, done with that discussion. Paul…Read More

Category: Contrary Indicators, Data Analysis, Economy, Inflation, Markets, Really, really bad calls

Wow! Bundesbank “accepts” higher inflation

Australia’s unemployment rate declined to a one year low of 4.9% in April, from 5.2% in March and as opposed to a rise to 5.3% forecast. However, the data reveals that the decline was caused by an increase in part time employment (+26k), with full time unemployment down (-10.5k). The A$ rose on the news….Read More

Category: Inflation, Think Tank

Great Britain as a case study: which sticky price?

Steve Waldman was a software developer who became fascinated by finance and started writing about it. He is now a doctoral student in finance at the University of Kentucky. He blogs at Interfluidity. ~~~ Richard Williamson offers a report from the UK. Combining bits via Tyler Cowen and Williamson’s own excellent blog: I think there…Read More

Category: Inflation, Think Tank