Consumer Prices, Vacations, Reflections on Deflation

First things first:  The latest Consumer Prices report is hot off the wire from the Bureau of Labor Statistics:

“The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in March on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today.

Over the last 12 months, the all items index declined 0.1 percent before seasonal adjustment. Increases in the energy and shelter indexes more than offset a decline in the food index and were the main factors in the rise of the seasonally adjusted all items index.

The energy index rose 1.1 percent as advances in the gasoline and fuel oil indexes outweighed declines in the electricity and natural gas indexes. In contrast, the food index declined 0.2 percent, with the food at home index posting its largest decline since April 2009.

The index for all items less food and energy rose 0.2 percent in March, the same increase as in January and February. Along with the shelter index, a broad array of indexes rose in March, including medical care, used cars and trucks, apparel, new vehicles, household furnishings and operations, and recreation.

The index for airline fares, in contrast, declined for the fourth time in the last 5 months. The all items index declined 0.1 percent for the 12 months ending March. The energy index declined 18.3 percent over the span, more than offsetting increases in the indexes for food (up 2.3 percent) and all items less food and energy (up 1.8 percent).

See that first line?  Over the past 12 months (before adjustments) the all items index prices have declined?  Friend, we call that deflation.

We have other metrics we look at, too.

One is the Triple A Fuel Gauge Report.  It shows that a year ago, gas was going for $3.657 and this morning nationally gas is down to just $2.429 – almost a buck twenty-three a gallon less.  Just the year for a driving vacation, maybe?

Some numbers:  Let’s say you decide to do a trans-con trip.  6,000 miles.  Maybe west on I-90 (or east) and then back on 80 or 40….  6,000 miles in a 30 MPG car is $200 gallons of gas, and if prices keep sliding, you’d be looking at a gas bill of $485 and change.

If you take time to smell the roses and do 500 miles per day, that would be about 12 nights in motels, so $1,200 worth of motel and no telling how much for food.

Still, not a bad deal, at all.  Provided you a) have a job and b) would still have one when you got back.

The market is whining about consumer prices, though. 

Remember out chat a while back about how the market is operating upside down, lately?  Where good news is bad news and bad news is good?

Well, when consumer prices come in as they did this morning, the LOGICAL thing for the market to do would be rally.  After all, if deflation isn’t really here, then the Fed might be able to actually raise rates.

But that would be bad for markets because the Fed would then be disinclined to keep pumping out nearly free money.  Futures down 130.

Funny Money

The real low-down on today’s pending decline in the market is not due to the Consumer Prices report, but the fact that last night we got the first look at the Fed’s H.6 money stocks measure.  While it’s true that M1 is still going up at a 10.7% rate (three month basis annualized), a glaring change in monetary policy jumps out:  M1 declined from February’s $2.9922 trillion down to $2.988 trillion.

Huh?

Here’s how this rolls, Bucko:  When there is less money, it’s purchasing power goes where?  UP, so it doesn’t take as many dollars to buy things.  But if consumption remains the same, then rates will firm.  And that’s gonna scare the bond market like crazy and while it could lead to an increase in stock prices to new record highs in time, the commercials will drive down prices on any excuse they can find in order to sop up stocks cheap.

Of course, if none of the companies are turning a profit, a different problem, but we will simply watch our Trading Model and see how to play it.  Trying to outthink an insane market is genuinely a waste of time.

I think what the market will go through over the next few weeks might be called (new word) turdbulence.

SOWWDS’s Latest Trip

The high bidder for the next presidency is making headlines again – this time for flying home coach and carrying her own bags.

MSM pointless snews at its finest, if’n you ask.

During all of the hype on this, did the TSA personnel get to grope her?  Or did she go through the trusted travelers line? 

The campaign jet must be in the shop.  It’s OK, our old Beechcrate is in the shop to, hon.  Life’s tough.

Mindless Minions

Looks like the corporate globalist checkbook as been outvoting the people again with the Rubber Stamp Department (congress) about to approve “fast track” trade deals. Both corporate put-up parties have dirt on their hands in this one.  But why not?  Corporations via their donations own both outright.

Which is why we already know SOWWDS (she of whom we don’t speak) will be the next corporate anointed nominal titular yada , yada.

Yessir…just what we need.  More sleights of hand and less review.  Due process just became “do process…and right now.”

Goodbye Oil Resource

imageChina has constructed a 3 km runway on the disputed Spratly Islands in the South China Sea.  Another source.

Possession is 99% of the law in international affairs and now they have built a runway, you don’t suppose they will just hand it over to Vietnam, Taiwan and the Philippines?

Nope.

China is putting down concrete and that means they are taking possession by force and although this will be a big deal in the press, a look at the map shows why China wants the additional territory.

In order of closest to farthest, it’s Philippines (210 miles), Malaysia (255), Vietnam (363), and China (650 miles).  But when you’re looking for Lebensoil…know what I mean?

Comments

Consumer Prices, Vacations, Reflections on Deflation — 2 Comments

  1. Drive around all you want on Unleaded,but Diesel makes this economy happen .Thats why we export so much of it to Europe.

  2. “Over the past 12 months (before adjustments) the all items index prices have declined? Friend, we call that deflation.” Only in the price of gas do I see “deflation”, at least from my wallet – and that is every so quickly inching up here at about 5¢/week. I certainly don’t see the cost of steak going down – or any other groceries for that matter – except for the usual lost leader sales.

    OK – I know you are talking about the stock market gangsters and not the cashier down the street. Most of us would like to see the cost of everything drop by about 50% – certainly would help my fixed income wallet.