Rampant Inflation Paints Fed Into a Corner 14 comments
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Let's see, with inflation growing the fastest it has in 17 years last month - a whopping 0.8% - the twelve month inflation rate is now 5.6%. We've not seen annual inflation like that since 1991. Wow. The Fed really should do something (i.e. raise rates), but the lesser-told yield curve story may have them trapped between a rock and a hard place. More on that below.
The culprits were the usual suspects - energy and food.
Of course, the immediate discussion following the announcement was centered around whether or not this would finally prompt the Federal Reserve to do something about it. That got me thinking....does the Fed have any kind of discernible track record when it comes to fighting inflation. So...
First of all, I confess - I have access to too much data. I'm a junkie in that regard, largely because I like to see things (and test cause-effect relationships) for myself. If you happen to be the beneficiary of my addiction, so be it.
Anyway, the chart below shows us what we need to know. (continued below)
The upper data is just the S&P 500; I want to see just how 'bad' inflation is for the market, and to what extent - if any - a higher Federal Reserve arte can harm it.
The lower portion of the chart overlays historical annual inflation rates with the Fed Funds rate. Though the two shouldn't match perfectly, there should be a discernible correlation of some sort. Inflation is in red, and the Fed's rate is in blue. (If you're color blind, inflation is the thicker line, and the Fed's interest rate is the thin line.)
Fed Funds Rate Versus Inflation
One thing about this chart immediately sticks out to me - the Federal Reserve's interest rate has historically been higher than, or at least no less than, inflation. Beginning in 2002 though (right about when the bull market started), things changed.
I don't know if that's by design, or coincidence. Regardless though, long-term, it seems to work. It makes me curious as to what's so radically different now the Fed sees fit to break tradition. In their defense, maybe they do see something. I gotta' be honest though - this recession/contraction really isn't all that different than any others. (They all 'feel' different at the time, but fundamentally, they're the same.)
Likewise, I'm not saying the Fed needs to push interest rates above inflation just for the heck of it. I'll repeat something though...that condition seems to have been successful before. I don't think it's a one-fix formula, but it couldn't hurt.
The argument against higher rates is simply that it will push the economy, the lending market, and the real estate market all over a cliff. If that's the worry, I have some bad news for you...all three are already on their death bed. You can't kill something twice. What have we got to lose at this point?
On a semi-related note, all this interest rate chatter got me thinking about the yield curve (the difference between short-term rates and long-term interest rates). I'll throw in that chart as well.
I like to compare the 10-year bond yield to the 3-month T-Bill yield. It seems to be the most common yield curve comparison.
On the chart below, the S&P 500 appears at the top, and overlaid on the lower part, the 10-year yield is in blue (thin), while the 3-month yield is in red (thick). With the former at 3.9% and the latter at 1.7%, the yield curve is modestly positive. However, I think this may be part of the Fed's worry.
Yield Curve
There's some room for short-term rates to go higher. However, look what happened the last time the Fed tried to raise rates in 2004. Short-term rates crept up, but long-term rates stayed pretty much flat. That's not the Fed's fault (entirely), but it's still not something they want to get in a hurry to work their way towards again - in case the result is the same.
Of course, the fear of an inverted yield curve is clear - the last two inversions did indeed jump-start a bear market.
So, here's the dilemma...the Fed probably doesn't want to push short-term rates above long-term rates, but long-term (10 year) rates thus far have been pretty stagnant at 4%. At the same time, annual inflation is now topping 4% to 5%. To control inflation, they'll have to push rates more than just a little higher - they may have to push them into another inverted yield curve.
I wish I had some sort of advice for them, but I don't. They have to rob Peter to pay Paul. It's not an impossible situation, but a tough one.
The only thing I wanted to pass along to you today was an explanation of what's rally going on behind the scenes. Most of the media just went hog-wild spreading the gloom-and-doom of inflation, without describing the whole scenario.
I'll revisit these charts as needed in the TrendWatch, and I'll watching both almost daily.
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This article has 14 comments:
Quite a lot, actually, because things are not nearly as bad as you seem to indicate. The economy certainly isn't dead - ailing a bit, perhaps. The lending market certainly isn't dead, but if it were, changing interest rates would have no effect on the economy, would it? The real estate market isn't dead, and by most accounts has some ways to go before recovery begins.
"Of course, the fear of an inverted yield curve is clear - the last two inversions did indeed jump-start a bear market."
You really think there's causation here?
"but long-term (10 year) rates thus far have been pretty stagnant at 4%. At the same time, annual inflation is now topping 4% to 5%."
What does this indicate? The market clearly does not believe that inflation is a long-term problem - otherwise the market would demand a higher return on these bonds. Pretty fundamental stuff.
"To control inflation, they'll have to push rates more than just a little higher..."
Why would the Fed believe that this current inflation spike is anything more than a run in commodities? Especially now, when commodities prices across the board are already down significantly from recent highs.
As indications abound of a slowdown in the world economy, raising short-term interest rates now would be a toxic step. We've seen a significant increase in the value of the dollar, both in terms of commodities and in terms of other currencies, over the last month. This strengthening is deflationary - each dollar buys more stuff. Don't be surprised to see a negative inflation number or two in the August-December timeframe.
Well, you've certainly worked hard to live up to your name. My concern is this....are you trying to highlight BS so much that you'll point out anything that could be argued? Having an opinion is fine. Having a specific bias is dangerous.
If I ever implied or stated this model was iron-clad an inarguable, I apologize. I'm just trying to give investors some perspective they won't have gotten from the media. All of it's up for debate...which is a healthy thing.
I'll try and respond to your points in the same order you voiced them..
1) You said...."Quite a lot, actually, because things are not nearly as bad as you seem to indicate. The economy certainly isn't dead - ailing a bit, perhaps. The lending market certainly isn't dead, but if it were, changing interest rates would have no effect on the economy, would it? The real estate market isn't dead, and by most accounts has some ways to go before recovery begins."
I say...THINGS AREN'T BAD? Seriously? Yeah, they can always get worse. But brother, yes, things are bad. You are correct in that changing rates probably won't heal the lending market. What I don't get is why you're arguing with me....I said the same thing. That's why I said "what have we got to lose"...because changing rates won't matter to lenders. But, slightly higher rates will curb inflation.
You call it 'ailing'; I call it 'bad'. Semantics. It's far from good.
2) You said..."Of course, the fear of an inverted yield curve is clear - the last two inversions did indeed jump-start a bear market."...You really think there's causation here?
I say....actually you make a valid point. I'm not always a fan of economic reasons for the market's performance. So, no, I don't know that the yield curve caused a bear market. I do think it was a symptom of what causes the bear market. Cause or symptom? Doesn't really matter. The CORRELATION is too uncanny to ignore though.
3) You said.....(this is me) "but long-term (10 year) rates thus far have been pretty stagnant at 4%. At the same time, annual inflation is now topping 4% to 5%." Then YOU said....What does this indicate? The market clearly does not believe that inflation is a long-term problem - otherwise the market would demand a higher return on these bonds. Pretty fundamental stuff.
I say....you're reading too much into the absolute levels. The fact that long-term yields and inflation were about the same level is coincidental. I was just suggesting that a Fed Funds rate higher than inflation (whether it was 4% or 14% historically has been healthy). The yield curve inversion could still be a problem whether it happened at 4%, 2%, or 10%.
As for the market not worrying about long-term inflation based on accepting a relatively low yield on long-term bonds, THERE IS NO STATISTICAL CORRELATION BETWEEN INFLATION AND YIELDS, NOR IS THERE A CORRELATION BETWEEN YIELDS AND EXPECTATIONS OF INFLATION. (I can show you my math.) As you asked earlier yourself, you really think there's causation here?
OK, I'm running out of room. I'll continue in another post below.
4) You said....Why would the Fed believe that this current inflation spike is anything more than a run in commodities? Especially now, when commodities prices across the board are already down significantly from recent highs.
I say...all inflation spikes are led by commodity spikes. Even then, inflation has been above 4% for the last three months....July's figure wasn't wildly out of control...just higher than recent levels, which were also significantly high.
Yes, seriously. We've yet to see NBER declare even the mildest recession! While I fully expect revisions to show one beginning in the first two quarters, and while ANY recession will be worse than 2001, is the current state worse than 1991? No. Worse than 1981? Not even close. So yes, seriously - things aren't that bad.
"Yeah, they can always get worse." Completely at odds with your statement "What have we got to lose at this point?"
"You are correct in that changing rates probably won't heal the lending market. What I don't get is why you're arguing with me....I said the same thing."
No, you said that the lending market is "on its death bed." If that's the case, why would you want to tighten spreads, which could only hurt this market?
"...because changing rates won't matter to lenders." Ask one. If you want to REALLY kill the credit markets, then go for that inverted yield curve.
"But, slightly higher rates will curb inflation." Here's my central point - we don't need to curb inflation. Look at what's happened to the dollar in the last 30 days: up 7.7% against the Euro, up 19% against crude, up some 20% against corn, up 17% against gold. This is all indicative of a deflationary environment, just as rising commodities and foreign currencies was indicative of inflation. I expect the CPI to level off at the very least in the coming months. In any case, the universal rise in the dollar is evidence that there should be no urgency in taking contractionary rate actions, especially given that damaged credit markets would be adversely affected.
"The fact that long-term yields and inflation were about the same level is coincidental." The levels are irrelevant - that long-term yields have remained relatively flat in the face of actual inflation isn't.
"THERE IS NO STATISTICAL CORRELATION BETWEEN INFLATION AND YIELDS, NOR IS THERE A CORRELATION BETWEEN YIELDS AND EXPECTATIONS OF INFLATION. (I can show you my math.)"
Oh, yes, please do show me your math.
wake up----- bs is right the post is wrong
Of course, you've failed to define 'bad', or establish the various degrees of 'bad'. Until you can do that, I'm unable to compare now to any other recession. You're unable to do the same. Moot.
Yes, things can get worse for the economy and its barometers. They can't get worse for the consumer...even if they get worse for the economy. (Sorry if there was any ambiguity there)
The last half of the 90's, and between 2002 and 2006, spreads were tightening. Yet, the market (stocks) did great then. If you don't believe it, go look at the yield curve chart. Why would narrowing the spread - without inverting the yeild curve - be different this time? As I said, the trick is raising rates enough to temper inflation, without inverting long and short-term yields.
Yes, I said the lending market is on its death bed. Whether you agree or don't is irrelevant for now....if you understand my point, then by default you agree that raising rates isn't going to do any more damage. (If you think the lending market is still breathing, then you disagree with me....and you think rising rates would create more pain.)
With that in mind, I'm back to a previous point....I want to avoid the inverted curve. It has nothing to with lending though....there's nothing that can be done to salvage lending (IMHO). I just don't want the curve to invert for the market's sake. You can't' REALLY' kill anything....something only dies once - like lending.
With all that being said....
Why do you think the dollar is suddenly on the rise? Part of it has to do with weakening currencies overseas. Most of it has to do with the likelihood of rising interest rates (from the Fed) here in the United States. The Fed saw what happened in July, and the market factored in the likely action the Fed would have to take. The effect was seen (for the dollar) before the Fed even needed to take action...adn they might now now. But make no mistake - the dollar is completely linked to domestic interest rates. Like it or not, interest rates here are on the rise one way or another, or will be soon. Which brings me back to the original point....
The Fed needs to raise rates to temper inflation, but not so much that the yeild curve inverts. That's tough - but not impossible - to do.
The November 2001 trough was announced July 17, 2003.
The March 2001 peak was announced November 26, 2001.
The March 1991 trough was announced December 22, 1992.
The July 1990 peak was announced April 25, 1991.
The November 1982 trough was announced July 8, 1983.
The July 1981 peak was announced January 6, 1982.
The July 1980 trough was announced July 8, 1981.
The January 1980 peak was announced June 3, 1980.
Six months to a year late every time. The fact that they haven't said we're in a recession yet means nothing.
Anyway...
One last thing.....you asked for the correlation relationship between long-term (10 year) yields and inflation. I can't show you my math, but I can tell you how to find it and do it for yourself.
Excel has a tool called 'correlation coeffecient', which measures how related or unrelated two data sets are. A 'high' correlation would score in the high 0.90's, while a low correlation would score closer to 0.00.
The correlation cooefficient of the change in 10 year yields and the change in inflation (monthly) is -0.01244....extremely low.
You can find the 10-year yield data here....
finance.yahoo.com/q/hp...
(To do the correlation test yourself, be sure to start them both at the same value - or normalized - and change each one appropriately for each month.)
Or, you could do the easier thing and just look at this chart :)
bigtrends.com/images/0...
BS correctly pointed out the dollar's recent rise should help ease inflation. What he didn't point out was that the dollar is still just slightly above multi-decade lows, and that inflation is still at multi-year highs. The dollar could rise more, and inflation could fall, but we'd still be at almost-unprecedented levels for both. It's a good start, but we need to see about 12 more months of the same before we're healthy again.
On the chart you can also see the correlation between the dollar and the Fed Funds rate.
BS also pointed out that the failure of the bond market to demand higher rates from 10 year bonds meant that they weren't worried about inflation. He may well be right - bond owners may not be worried about inflation. However, what he he failed to point out was that they weren't worried about it in 2006 either, AND THEY WERE WRONG NOT TO HAVE WORRIED ABOUT IT. The 10 year yield didn't even begin to creep higher until after inflation popped above 10 year yields then....right as inflation started to sink - way too late then. (Just because someone does something doesn't mean they're right.)
As for those of you in the 'things aren't that bad' camp....
If you're ok with the fact that inflation is above 10 year yields, and above the Fed Funds rate, for the FIRST TIME EVER IN MODERN HISTORY, well, then we'll have to agree to disagree. I just know when I see things I've never once seen in my lifetime, caution is merited. If you don't think things like that are a problem, then do what you gotta' do.
"7 months of increasing unemployement [sic] which is worse than any previous recession since the depresion[sic]"
You might want to make sure you have the facts straight before telling others to do some research. But beyond that, this string of increasing unemployment has brought unemployment to levels not seen since... January 2004. Was 2003 HORRIBLE when unemployment reached 6.3%? Is the current situation as bad as 1993 when unemployment reached 7.8%? Is it anything at all like 1982, when it got to 10.8%?
"or the massive debt of the US and its cittizens [sic],worse than anytime in US history"
Again, do your research. The national debt was far larger at the end of WW2 than it is now, by any logical measure.
"BS Detector, you just exposed yourself as a fraud. You should know better than anybody the NBER won't declare we're in a recession until we're just about out of it....as I wrote in January."
Wait, if YOU wrote about it in January, shouldn't YOU know better than anybody? You might also look up the word "fraud," because it doesn't seem to fit. I could be wrong, but fraudulent? Of course, since I stated that I thought we entered a recession in the first half, I don't know what you're complaining about.
"you've failed to define 'bad', or establish the various degrees of 'bad'. Until you can do that, I'm unable to compare now to any other recession. You're unable to do the same. Moot."
Moot? Try pathetic. Pick whatever measures you like, and compare where the economy is now to 1992 or 1982. Go ahead. NOT THAT BAD.
"They can't get worse for the consumer...even if they get worse for the economy."
You complain about me not defining terms and then you say "they can't get worse for the consumer"? Does that qualify as fraudulent in your dictionary? Let's see - in 2004, when the economy as a whole was much better, unemployment was 0.6% higher. Would you agree that for those consumers who are now employed who would not be if unemployment were higher, things could get worse? Or am I being too abstract for you?
"...spreads were tightening. Yet, the market (stocks) did great then... Why would narrowing the spread - without inverting the yeild curve - be different this time?"
First off, you again seem to be indicating a causal link where there is none. Here's the difference - credit markets were not in the same kind of sire straits they are in now. Or at least, I don't think so - but then again, I'd need to provide you some definitions for you to discuss this, right? The more damaged the credit markets, the more difficult borrowing becomes, the less investment occurs, the slower the economy grows... are you following me? If wide spreads are helping to ameliorate problems in the credit market at this time, great - they need it.
"...if you understand my point, then by default you agree that raising rates isn't going to do any more damage."
Your logic is truly bizarre. You believe that anybody who understands your statement that the credit market is on its death bed, whether or not they agree with it, must agree with you that raising rates can't do any damage. Can you truly not fathom that somebody could understand what you're saying without agreeing with it?
Here's what I've said all along: the credit market is not dead, or mostly dead. If it were, the economy would be much worse. But before you go and ask me to define what "worse" means, why do you think that raising short term interest rates, which can do nothing if not reduce profitability in lending, couldn't hurt the banking industry?
"there's nothing that can be done to salvage lending (IMHO)."
So let me understand this - you think that this function, fundamentally important to the health of the economy, should be abandoned? You think that there are no companies out there lending money EVERY DAY?
And you think what I've written makes no sense?
"Why do you think the dollar is suddenly on the rise?"
Um, because it is.
"Part of it has to do with weakening currencies overseas."
Weakening relative to what?
"Most of it has to do with the likelihood of rising interest rates (from the Fed) here in the United States."
If you're talking about currency moves, I'd say you're leaving out half the story. This kind of change happens due to changes in the relationship between interest rates in two (or more) countries. The Euro is just as likely to weaken against the dollar if the EU is expected to cut interest rates - which it is.
"The Fed saw what happened in July, and the market factored in the likely action the Fed would have to take. The effect was seen (for the dollar) before the Fed even needed to take action."
If so, then why haven't rates reversed course since the Fed did not act in the way you think the market expected?
"...the dollar is completely linked to domestic interest rates. Like it or not, interest rates here are on the rise one way or another, or will be soon."
Again, half wrong, the relationship between currencies is linked to the relative rates of return available in different countries.
Regarding NBER: "Six months to a year late every time. The fact that they haven't said we're in a recession yet means nothing." Just how long do you think it SHOULD take? One month? Two months? Better question: when do you think a recession started, and how much do you think GDP's declined so far?
"I can't show you my math," You said you could. Does that make you a "fraud"? I'll look at the correlation tomorrow.
However, running CORREL against the opening values of the 10-yr bond series and the 12-month change in CPI-U (for the period 1/1963-7/2008 generates a value of .5885. For the last 40 years, it's .5388. For the last 30 years, it's .618. Pick a time period - it's over 50%. Which is pretty damaging to your emphatic statement: "THERE IS NO STATISTICAL CORRELATION BETWEEN INFLATION AND YIELDS, NOR IS THERE A CORRELATION BETWEEN YIELDS AND EXPECTATIONS OF INFLATION."
"He may well be right - bond owners may not be worried about inflation. However, what he he failed to point out was that they weren't worried about it in 2006 either, AND THEY WERE WRONG NOT TO HAVE WORRIED ABOUT IT."
This is just a fundamental misunderstanding of investment analysis. The long bond holders are simply not focused on short-term changes in inflation. Why would they be, if their investment horizon is ten years?
"(Just because someone does something doesn't mean they're right.)"
Absolutely true. And just because the thousands of actors in the market have determined the current yield of the 10-year bond, it doesn't mean it's the appropriate level. However, I'd highly recommend the fine book "The Wisdom of Crowds," and caution you to ignore the market at your peril.
"As for those of you in the 'things aren't that bad' camp....If you're ok with the fact that inflation is above 10 year yields, and above the Fed Funds rate, for the FIRST TIME EVER IN MODERN HISTORY..."
I guess you don't think 1974-1980 was "modern history."
You asked why would long bond holders be worried about short-term inflation if their time horizon is ten years? Great question - you tell me. You were the one who brought it up initially. My question for you is, why are they not worried about it now, but were worried about it previously? Back to square one.....because they aren't worried about inflation now, but were then. Fine, but it raises the other question...why were they worried then and not worried now? What's different?
You also stated... "just because the thousands of actors in the market have determined the current yield of the 10-year bond, it doesn't mean it's the appropriate level."
That was the whole point I made in the initial article....it's not the appropriate level. You said it was because inflation wasn't a worry, and now you're saying it's not. Make up your mind.
Do I think 74 to 80 is modern history? No, I don't, but I'm glad you do. We had the same inlfation scenario then (inflation higher than funds or interest rates). The market returned (SP500) returned about 10% for the entire span. THAT'S WHY I'M WORRIED NOW! LIke I said, if you don't want to worry, be my guest.
I've read 'Wisdom of Crowds'. Good book. I recommend 'The Art of Contrarian Thinking'...an equally good book.
Final thoughts....
*"Why do you think the dollar is suddenly on the rise?"
Um, because it is.
Is that a serious answer? Try, because Europe bought about $15 billion worth of dollars versus the eurs over the last month.
*"Part of it has to do with weakening currencies overseas."
Weakening relative to what?
Again, seriously? Against the dollar.
*"Most of it has to do with the likelihood of rising interest rates (from the Fed) here in the United States." ...If you're talking about currency moves, I'd say you're leaving out half the story. This kind of change happens due to changes in the relationship between interest rates in two (or more) countries. The Euro is just as likely to weaken against the dollar if the EU is expected to cut interest rates - which it is.
Fair enough - that was half the story. We got word today the eurozone is quite fearful of recession now, which could drive their rates lower. That will fuel the problem. The question is, has it already been priced in? (our rates move higher while their's move lower)
* "The Fed saw what happened in July, and the market factored in the likely action the Fed would have to take. The effect was seen (for the dollar) before the Fed even needed to take action." ...If so, then why haven't rates reversed course since the Fed did not act in the way you think the market expected?
Rates never changed direction to reverse from. Give it time though (for movement in either direction)
* "...the dollar is completely linked to domestic interest rates. Like it or not, interest rates here are on the rise one way or another, or will be soon."...Again, half wrong, the relationship between currencies is linked to the relative rates of return available in different countries.
See previous answer.
Other thoughts....
Sorry about 'if you understand then you agree'. I phrased that badly...you can understand and disagree.
When should the NBER call a recession? If they can't do it until it's half over (or more), they shouldn't at all - unless for academic purposes. That's why I don't really care what they say. The only reason I brought it up was because you brought it up - as evidence that we weren't in one yet because they didn't say so.
Also, you wrote this...
"First off, you again seem to be indicating a causal link between the market (and an inverted yield curve) where there is none. Here's the difference - credit markets were not in the same kind of sire straits they are in now.....The more damaged the credit markets, the more difficult borrowing becomes, the less investment occurs, the slower the economy grows... are you following me? If wide spreads are helping to ameliorate problems in the credit market at this time, great - they need it.
I agree - if it helps spur lending, I'm all for it. There is a causal link though....you said it yourself - tighter spreads diminish investment. Ultimately, that hampers corporate growth. The price to pay is inflation....which also hampers corporate growth.
You said go ask lenders if an inverted yield curve would hurt lending, but I don't have to....I agree with you that it would. Now I'll ask you to go ask any corporate management team if inflation is hurting their business....they'll say the same thing.
So once again, the Fed needs to find the balance, because one or the other is going to kill us.
On a side note, the reason it's hard to respect you is just that you're argumentative at the expense of being objective. I'm not always right, and may well be wrong now. My goal is to inspire thought and conversation. Your goal is just to argue.
You're a smart guy (or gal, maybe) with valid points. Thanks for that. But, when you start using arguments that you and I both know are shaky (specifically, the NBER data and the 74/80 'modern history' questions), it just makes me wonder what your agenda is.
You should be writing these articles rather than just picking apart others. (You can do both, I think.) You've only commented though....take a look at your comments - your goal looks destructive rather than productive.
seekingalpha.com/user/...
This is my last post here, as I have to move on to other things.
Like I said (often repeatedly) in August and shortly after in the comments section....
"The argument against higher rates is simply that it will push the economy, the lending market, and the real estate market all over a cliff. If that's the worry, I have some bad news for you...all three are already on their death bed. You can't kill something twice. What have we got to lose at this point?" (credit markets froze two months later)
and
"Of course, the fear of an inverted yield curve is clear - the last two inversions did indeed jump-start a bear market." (which we got in spades)
and
"THINGS AREN'T BAD? Seriously? Yeah, they can always get worse. But brother, yes, things are bad. " (and the market got destroyed)
and
"I don't know that the yield curve caused a bear market. I do think it was a symptom of what causes the bear market. Cause or symptom? Doesn't really matter. The CORRELATION is too uncanny to ignore though." (yep...bear market followed)
and
""As for those of you in the 'things aren't that bad' camp....If you're ok with the fact that inflation is above 10 year yields, and above the Fed Funds rate, for the FIRST TIME EVER IN MODERN HISTORY...""
and then followed that up with.....
"Do I think 74 to 80 is modern history? No, I don't, but I'm glad you do. We had the same inflation scenario then (inflation higher than funds or interest rates). The market returned (SP500) returned about 10% for the entire span. THAT'S WHY I'M WORRIED NOW! Like I said, if you don't want to worry, be my guest. "
Those who ignored the signs paid the price. I'm not saying I saw it coming the way it did to the degree it did, but I had a lot of folks argue my points only to eat their words when the economy wiped out. The Fed chose the 'low rate' route after the market imploded and credit froze (as a warned of). They were still painted into the corner though....thank God commodities got crushed.