Seeking Alpha
View as an RSS Feed

The Inflation Trader  

View The Inflation Trader's Comments BY TICKER:
Latest  |  Highest rated
  • Patience Is A Pain [View article]
    AND NOW THE TALE OF THE TAPE CAN BE TOLD:
    March CPI: 236.642 (the base figure)
    April CPI: 237.1110
    May CPI: 237.658
    June CPI: 237.984
    July CPI: 238.217
    August CPI: 238.340
    September CPI: 238.686
    October CPI: 239.120
    November CPI: 239.304
    December CPI: 239.445
    January CPI: 239.871
    February CPI: 240.247
    March CPI: 240.793 (released today)

    And the winner is...Inflation Trader by a nose. It actually was a bit more than I had thought it would be when I posted last month, with the y/y coming in at 1.754%.

    While I would note that, as I did last month, this is all but a push - I won't be doing any victory dances for the 0.054% victory - I will also note that it is unambiguous in that both Median CPI and Core "Sticky" CPI...the other two reasonable measures of central tendency for CPI are well above 1.7%. Sticky was 2% y/y as of Feb (don't have today's yet) and Median was 2.2%. Trimmed Mean CPI was 1.77% through last month. So, while this was close it was ONLY close because Core CPI is aberrantly low. (I actually included core PCE on the list, and was fortunate that Mr. dlA didn't choose it because the same aberrations that have held Core CPI down are exaggerated in core PCE).

    Where I was right was that core inflation was clearly not going to fall, and the aberrations that were holding down core CPI last year (mainly medical care from sequester effects) would fade. Where I was wrong was that money velocity has not picked up, and that there were additional aberrations which replaced the 2013-14 ones.

    All in all, it ended up to be much closer than I expected. I congratulate Mr. dlA for a close contest and a gentlemanly bet.
    Apr 17, 2015. 10:36 AM | 2 Likes Like |Link to Comment
  • 2 Quick Items: Negative Interest Rates And A Minimum Wage Increase [View article]
    I confess that I am completely ignorant of that particular chapter in financial history! Hazarding an uneducated guess: Poland was behind the Iron Curtain until about 1990, so I suspect that when it first emerged it had serious capital controls to prevent flight from the zloty. By the late 1990s, Bloomberg tells me that 2-year interest rates were in the 15-20% range, which I suspect was closer to a free market rate. But again, this is a wild guess. Seems I have a lot of those today. :-)
    Apr 13, 2015. 07:44 PM | Likes Like |Link to Comment
  • 2 Quick Items: Negative Interest Rates And A Minimum Wage Increase [View article]
    If they pay as dividends, their stockholders pay taxes a second time on income that has already been taxed.

    If they buy other companies, they are throwing money away because the prices are too high.

    They could invest in R&D, and they do. But I suspect they don't have enough really juicy opportunities to invest in. Thus, the cash piles up.

    Of course all of this is just a wild speculation on my part!
    Apr 13, 2015. 07:37 PM | Likes Like |Link to Comment
  • 2 Quick Items: Negative Interest Rates And A Minimum Wage Increase [View article]
    Yes, there is no question that the "market" is underestimating. However, recognize in this case that the "market" on breakevens is significantly affected by the very large amount of nominal Treasuries that the Fed holds, pushing interest rates (and hence breakevens) lower than they would otherwise be in a free market. (One place you can see this is in the way nominal Treasuries are becoming more and more "special" in the repo market). So my view is that nominal rates are mispriced, relative to TIPS.
    Apr 13, 2015. 07:35 PM | 2 Likes Like |Link to Comment
  • Lots To Worry About But Nothing To Fear? [View article]
    I don't think it matters much. It isn't as if we get oil cheaper because it's in dollars. When the dollar is weak, we get oil more expensively than oil priced in Euro or other currencies; when the dollar is strong, we get it more cheaply than oil priced in other currencies. Remember, the Brits don't use dollars to buy oil. They use sterling, to buy dollars, which they then trade for oil. But the basic transaction is sterling for oil. The only difference is that the volatility of the oil price in non-dollar currencies is different than the volatility in dollars. That's all. It's not even necessarily higher volatility...depending on how the dollar covaries with oil.

    Having the dollar no longer be the currency in which oil is priced would be embarrassing, but it wouldn't really change anything otherwise.
    Mar 29, 2015. 09:18 PM | Likes Like |Link to Comment
  • Lots To Worry About But Nothing To Fear? [View article]
    Thank you 17741882. If that is your REAL name. :-)

    I actually think that leaving the Eurozone would be better for the Greeks. Not in the abstract, but in the concrete. Staying means indentured servitude basically forever. Leaving means two years of humanitarian nightmare - which we can financially help with, by the way, as humanitarians - followed by a much faster and more enduring growth. In my opinion.
    Mar 29, 2015. 09:15 PM | Likes Like |Link to Comment
  • Lots To Worry About But Nothing To Fear? [View article]
    Okay, good point except that 2020 is only 5 years away. And low interest rates means that there is almost no discounting at that horizon.
    I know, right? Seems crazy that 2020 is almost here!
    Mar 27, 2015. 02:56 PM | Likes Like |Link to Comment
  • Patience Is A Pain [View article]
    March CPI: 236.642 (the base figure)
    April CPI: 237.1110
    May CPI: 237.658
    June CPI: 237.984
    July CPI: 238.217
    August CPI: 238.340
    September CPI: 238.686
    October CPI: 239.120
    November CPI: 239.304
    December CPI: 239.445
    January CPI: 239.871
    February CPI: 240.247 (released today)


    We have had 1.523% core inflation so far (1.66% at an annual rate). With 1 month to go and 240.665 the push, Mr. de los Angeles needs aggregate core inflation to be 0.17% or less (2.09% at an annual rate). I need the over.

    LOL. Folks, unless something REALLY WEIRD happens next month, we'll be within 0.1% of 1.7% on core. Today on a trailing-12-month basis, it's 1.694%. Seriously.
    Mar 24, 2015. 08:40 AM | Likes Like |Link to Comment
  • That's Not How Any Of This Works [View article]
    Well, it isn't the TBTF banks any more. Most of them can't really carry net positions of much size, or anyway no where near the size they used to. That's why Wall Street employment keeps shrinking. The TBTF banks are really struggling, in fact.
    Mar 18, 2015. 10:05 PM | 2 Likes Like |Link to Comment
  • Just One Thing [View article]
    That would be great, if the Fed had ever showed the slightest interest in unwinding imbalances. But while they occasionally say they see the need to do so, they are unwilling to deal with the fallout of actually doing it. Correcting imbalances like this can't be done in a painless way. Raising rates will probably crack asset markets - or anyway, if Gross is right and people save more and stop reaching for risk, they will - and I have seen no evidence since 1987 that the Fed is willing to let bad stuff happen. So while this may be their INTENT, what is the old Mike Tyson quote? A plan only lasts until someone punches you in the mouth.
    Mar 16, 2015. 11:05 AM | Likes Like |Link to Comment
  • The Answer Is No [View article]
    Economics is a 'science,' but you really need to keep the quotation marks. Economists fundamentally don't like experiments and evidence, and like their theory clean. Worse, since Samuelson they also love math because they think that makes their theory more meaty-seeming when what it really does is obscure what's wrong with the theory and make it more opaque to outsiders. So I don't know about "religion" but "guild" is more like it.

    Like any other area of knowledge, there's too much for one person to know and most professional economists also don't spend any time exploring models and doing experiments (the fact that Shiller DOES is one of the reasons he keeps getting the bubble question right and is one of the things that makes him really interesting). So they rely on what other people have said or done, even if it doesn't really make any sense. There is no scientific method in economics that can be used to refute silly things. It's just who yells louder in the bigger journal.
    Mar 13, 2015. 04:30 PM | Likes Like |Link to Comment
  • The Answer Is No [View article]
    Yes. He's wrong.

    Let me be less pithy. And let's assume that in general, people know when they are doing better or worse in the world. If wages generally CAUSED price pressures, then inflation would be a wonderful phenomenon for most people, who would see their wages rise BEFORE prices went up - creating a windfall gain. In practice, we know that people hate inflation. Why? Well, it's because we all know that our wages TRAIL inflation. Inflation is a windfall loss.

    It's much harder to show this econometrically, but it can be done. But, for a couple of generations, "cost-push" inflation has been taught in the schools. Even though there is no evidence that's how inflation works, old economists still chant the litany as if there actually is evidence.
    Mar 13, 2015. 02:42 PM | 2 Likes Like |Link to Comment
  • Patience Is A Pain [View article]
    Note that because of seasonal revisions our starting point has been revised (in favor of Mr. d).

    March CPI: 236.642 (the base figure)
    April CPI: 237.1110
    May CPI: 237.658
    June CPI: 237.984
    July CPI: 238.217
    August CPI: 238.340
    September CPI: 238.686
    October CPI: 239.120
    November CPI: 239.304
    December CPI: 239.445
    January CPI: 239.871 (released today)


    We have had 1.365% core inflation so far (1.64% at an annual rate). With 2 months to go and 240.665 the push after the annual revision, Mr. de los Angeles needs aggregate core inflation to be 0.331% or less (1.65% at an annual rate). I need the over.

    With two months to go, this is looking amazingly like a tie. I think we will end up above 1.7% y/y, but whether we are above that or below that it will not be by very much!
    Feb 26, 2015. 10:02 AM | Likes Like |Link to Comment
  • The Answer Is No [View article]
    I don't know much about the plan. Generally, wages follow inflation rather than leading it, so if they're raising wages it's a sign that they already believe they have sufficient pricing power to raise prices. It ain't coming out of their profits. :-)
    Feb 25, 2015. 11:00 AM | Likes Like |Link to Comment
  • The Answer Is No [View article]
    Actually, the distinction is that interest rates are a result, not a cause, of tightening. Hiking interest rates by using a corridor, without removing all of the excess reserves, will do absolutely nothing to slow money growth and will tend to accelerate inflation since velocity is correlated with interest rates.

    If the Fed were to begin to remove excess reserves - which it turns out is almost impossible at this point without causing a major debacle, which is why they have turned to the corridor approach - then it would be tightening, even though interest rates would likely not rise for some time since there remains a surplus of liquidity at zero duration (excess reserves). But that's not their plan.

    I wrote about this last summer, when the Fed started mooting the current plan: http://bit.ly/1uGdqhH
    Feb 19, 2015. 03:15 PM | Likes Like |Link to Comment
COMMENTS STATS
2,098 Comments
3,562 Likes