Deflation, Disinflation, Inflation, Stagflation, ???

Today we got the March 2011 CPI inflation data and it shows that the FOMC has won (for now) the disinflationary battle they undertook with the QE2 program. The year-over-year core inflation rate has now risen for six consecutive months. The March figure of 1.19% is the highest year-over-year core inflation rate since a 1.34% [...]

Beige Book notes

Today’s Beige Book report provides updated economic information collected before April 4th, 2011. Below are my highlights from the report: economic activity improved since last report Manufacturing strong Loan demand flat to up slightly Residential & commercial real estate weak No wage pressure Higher commodity costs Auto sales improving Tourism improving Labor markets improving. March [...]

Jeremy Grantham

This 30 minute interview with Jeremy Grantham is one of the smartest I have seen recently. Watch it!

FOMC Minutes – bullet points

The minutes of the March 16th Federal Open Market Committee (FOMC) meeting were released this afternoon. Below are the highlights: nearly all of the Fed’s special liquidity programs are closed and there are no market strains spreads on ABS (asset-backed securities) remains tight Fed’s balance sheet grew to $2.3 trillion All maturing agency debt and [...]

CPI Report – good news for FOMC members

Today’s CPI Report from the Bureau of Labor Statistics is welcome news to FOMC members. They appear to have won their battle against deflation for now. The headline CPI increased 2.72% year-over-year and the core CPI increased 1.82% year-over-year. The following chart illustrates the CPI rates over the past two decades.   What is especially [...]

Savings Bonds? Remove the limits!

Today, the U.S. Treasury announced the updated Series I and Series EE Savings Bond rates. Series EE savings bonds purchased between November 2009 and May 2010 will earn a 1.2% fixed rate.  Series I Bonds purchased between November 2009 and May 2010 will earn a 3.36% annualized composite rate. The I Bonds composite rate consists [...]

Personal Consumption Expenditures (PCE) inflation update

This morning (6/1/09) the Bureau of Economic Analysis (BEA) released the April Personal Income report. Below is a 5 year chart of the headline and core PCE inflation rate. In April, the headline rate fell to +0.44% year-over-year and the core rate rose to +1.89% year-over-year. One thing is very obvious from this chart – [...]

December PCE update

This morning, the Bureau of Economic Analysis released the December 2008 personal consumption expenditure (PCE) price index data. The following chart plots the headline and core PCE for the most recent five year period. Due to delayed release of this data, we were not able to include it in today’s investment letter. In December, the [...]

Inflation Expectations

The following two charts illustrate the 5-year and 10-year inflation expectations by comparing the 5 & 10 year nominal treasury (pink line) versus the 5 & 10 year TIPS (blue line). As you can see, inflation expectations (yellow line) remain well anchored. 5-Year Nominal vs. TIPS 10-Year Nominal vs. TIPS

May 14th – What we’re reading

Freddie Mac raising $5.5 billion April 2008 CPI report  released this morning. Year over year figures are: Headline CPI +3.9%. core CPI +2.3% Fed is ready to boast TAF loans again if needed LIBOR/TED spread improving

R&D and GDP

Interesting analysis of R&D and its potential effect on GDP if it were included. Final 2nd Quarter 2007 GDP is 3.8% [link] August year-over-year core PCE is 1.8% [link]

Housing starts and completions

We knew that housing starts had plunged. We now see completions are plunging. Next up…construction jobs are expected to plunge. The nonfarm payroll numbers will begin facing a very strong headwind in the months ahead as these workers fall off payrolls. By late summer, if not sooner, fed rate cutting should commence. Click here to [...]

Venezuela’s inflation up 78% in just four years

An interesting article that reveals why government price controls typically fail. A massive influx of petrodollars obviously compounds the problem. Such shortages have sporadically appeared with items from milk to coffee since early 2003, when Chávez began regulating prices for 400 basic products as a way to counter inflation and protect the poor. Yet inflation [...]