Archive for May 2023

Y-o-Y CPI is now 4.9%, down from 9.1% in 6/22, and core CPI is 5.5%, down from the 9/22 peak of 6.6%. Similarly, producer price inflation is just 2.3%, well off its high. Further, shelter inflation is now finally starting to officially decline, and it’s 42% of the CPI. The issue consuming the Fed is…

The median length of time from the Fed’s last rate hike to the first cut, dating back to the 1957 rate rising cycle, is four months. The shortest gap was one month in 4/80 and 1/81, and the longest was 20 months in 11/70. As for the three worst recessions since the depression, namely 1974/75,…

The Friday File: Wholesale egg prices started 2022 at about $1.60/dozen, essentially rose steadily over the course of the year and ended up at an eye-watering $5.20/dozen. That said, 2023 has been the reverse on steroids. After starting the year at $5.20/dozen, wholesale eggs are now selling at just $0.80/dozen, a staggering 85% decline from…

Prior to the Silicon Valley Bank failure, interest rates on bonds issued by money center banks like JP Morgan were about 15bps lower than for bonds issued by large regional banks like Huntington Bankshares and M&T Bank. That gap has since widened substantially and is now about 135bps. This gap exists because investors fear the…

While CPI inflation continues to steadily fall and April is only up 4.9% Y-o-Y, down from 9.1% in 6/22, core-inflation remains troublingly high and stubbornly stable. It rose 0.4% M-o-M and 5.5% Y-o-Y, exactly where it was in 1/23. However, because the Fed Funds rate now finally exceeds the inflation rate, the Fed probably keeps…

In the five years before Covid, revolving credit card debt/GDP was flat at 6.5%, well down from the staggering Housing Boom level of 9%. The level sank to 5.5% in 5/20 and remained there through late 2021. Since, it’s been steadily rising but at 6.2% remains below its pre-Covid level. This partly explains why households…

April payrolls grew a surprisingly strong 253,000, the unemployment rate fell to a 55-year low of 3.4%, the rate for Black Americans hit an all-time low, and M-o-M wage growth was reasonably hot at 0.5%. But February and March job growth was reduced by 149,000 jobs, and three-month average employment growth was 222,000 jobs, the…

The Friday File: The world’s largest Cinco de Mayo celebration is in Los Angeles. September 16 is Mexico’s Independence Day, while May 5 commemorates the Battle of Puebla. There are 36.6 million US residents that trace their heritage to Mexico, and while the inventor of the margarita is hotly debated, it was invented between 1936…

The Fed’s currently preferred bond market signal is not the traditional spread between the 2-yr Treasury rate and the 10-year rate, it’s the near term forward spread. That is the spread between the rate that a three-month Treasury bill is expected to yield 18 months from now, versus the current yield on a three month-Treasury…

Hooray, rate hikes are over! With yet another bank (PacWest) disintegrating before our eyes, a debt ceiling debacle that looks suspiciously grave, and a 3-month 10-year yield curve that is profoundly inverted, the Fed finally hauled out language suspiciously similar to what’s been previously used to signal the end of a tightening cycle, while still…