Market Blowback – Consumer Prices Disappoint

If I were sitting in the White House, I’d be having a hissy about now:  With all the economic stimulus going about we should be seeing some escalation in prices and that wouldn’t be all bad because a little bit of inflation, especially if it is predictable and reliable, is the greatest economic conveyor belt ever built.  Why?  Well, it allows the common man (or woman, or hybrid, I suppose) to buy a home with a modest down payment and then use the leverage of  inflation to make a few bucks and move up the food chain.

The problem is (in case you’ve gone Rip Van Winkle for the past 20 years) when we get to the Kondratiev low/winter of the economic cycle, inflation disappears and we get deflation instead which I’ve described as “one-over virtuous cycle” or the reciprocal of good times keep getting better.  We’ve living the flip side of that and – as if there was any doubt – here’s the latest from the Bureau of Labor Statistics on Consumer Prices to make the [ugly, don’t stare at it too long] point:

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

Over the last 12 months, the all items index increased 2.0 percent before seasonal adjustment. The rise in the seasonally adjusted all items index was the result of increases in a broad array of indexes including shelter, gasoline, apparel, and food.

Despite the gasoline increase, the energy index rose only 0.2 percent as the natural gas and electricity indexes declined. The increase in the food index was caused by a sharp rise in the fruits and vegetables index; other food indexes were mixed. The index for all items less food and energy rose 0.2 percent in July, the third straight such increase. Along with the advances in the shelter and apparel indexes, the indexes for medical care, tobacco, and new vehicles all rose. In contrast, the indexes for household furnishings and operations, airline fares, and used cars and trucks all declined in July.

The all items index increased 2.0 percent over the last 12 months. The index for all items less food and energy has risen 1.7 percent over the last year; this compares to 1.6 percent for the 12 months ending June. The energy index has risen 4.7 percent over the last 12 months, its largest increase since the 12 months ending February 2012. The food index has risen 1.4 percent, the same figure as in May and June.

So when do we get the next market break?  My consigliere chided me Monday for referring to the bond peak as 1987…it was July of 1981 and it was the market break in 1987.  But that brings us to the ultra-long-term view of bonds which you can find charted out on Yahoo over here.

As you can see, the bond rates are once again rising and the real danger as they do is that they will slide above a magic “line in the sand” which may be approximated as the 2-standard deviation channel from the 1987 (yes, I mean 1987 here to get rid of the spiky part of the chart) and realize when we move through that boundary, mass panic will hit the global financial system as a 32-year no-brainer is dashed on the rocks.

Why, those phat cats will have to come up with a new way of making money about there, but in the meantime, there will be panic aplenty not to mention screams of torment and howls for bailouts as we tolerated (barely) from mid 2008 through 2009.

Policy-wise, we’re screwed. But what’s not quite clear (if I can put this into adult context) is whether this will be a conventional missionary-style, something more canine appearing, or some exotic variant.  That’s what the debate among economists really comes down to – which position will it be?

Except, at the Fed of course.  They are hoping that by throwing enough buckets of cold water (or QE’ing) on the situation, they can prevent the ultimate consummation of this financial act.

I’m just guessing that Ben Bernanke’s retirement from the Fed will be seen in retrospect of pure genius-level timing.

The numbers may look flat, but have you priced beef lately?  And crappy quality for the most part at that…pass me another side of hedonic adjustments, wouldja?

Fearless Leader’s economic approval rating is now 35% says this Gallup report, but still sounds a bit on the optimistic side…

More after this…

Egypt: Ruling Mob

Whether you want to guess there’s a ruling mob in power, or whether the powers are trying their hand at ruling mob gatherings in Egypt doesn’t matter as much as the body count which is closing in on 600 now.  The MuBros are on a roll, and the government is pushing back hard.

Then we have the White House condemning the violence in Egypt, but Mr. Ure’s out of order question du jour here is “Where did the Egyptian military get most of their weapons?”  So we send arms and don’t think they will be used?  WTF kind of la-la thinking is that?

Meantime, we continue to ask “What were we thinking – I mean besides about oil – in Iraq?  33 more killed in a bomb attack there.  Another vacation idea scrubbed.

Bilingual California Coming

Mark my words…I am almost ready to announce my bet that within 5-years California will be putting up signage on state highways in Spanish as Nancy Pelosi et al are pressing to make it harder for the state to deport illegals to their homelands.

Yes, French in Canada is the prototype for here.  Meantime Ure’s truly is thinking about learning Chinese because that may be a safer retirement bet that South America for expats and besides, I hear they have some ghost cities…

Moderators?

Hannity and Limbaugh for GOP presidential debate moderators?  Will the democorps counter with Fearless Leader moderating theirs?  That’d be spiffy.

Crash of the Other Sort

Cargo plane of UPS at Birmingham – A300 with two aboard.

The Doug Told Me So Dept.

Attorney/reader Douglas sent me a note that confirms our deepest fears:

I believe it may be time to use encrypted emails for legal, medical and business communications.  And maybe anything else you want kept private.  They seem to reserve the right to sell your content to the highest bidder.  I hate to say “See, I told you so”.  So I won’t.  And Google is not alone.

Full press release is here:

“Google has finally admitted they don’t respect privacy,” said John M. Simpson, Consumer Watchdog’s Privacy Project director, in a news release. “People should take them at their word; if you care about your email correspondents’ privacy don’t use Gmail.”

Doggone it…next week I’ll be getting with my friend Manfred over at Maxa Research in German (which makes the Maxa Cookie Manager product that works so well) and we’ll get into some depth on this topic in an upcoming Peoplenomics report.

Gun Rights At Work

A woman with a CCW permit and armed broke up a robbery at a Denny’s here in Texas.  But there may be more to this than meets the eye…

Urban Surviving

Eminem’s new song is about what else?  Survival.

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