Saturday on the Peoplenomics side of the house we will cover a unique topic: News Trajectories.
But, both for subscribers and the ‘great unwashed’ we can use this morning’s release of the Consumer Price Index data as a dandy example. You see, when a news item like the CPI crosses, it doesn’t just operate in the moment. It has a carryforward value, as well. In fact, right up until a month from now, when the next data set is released, we will all be coming back to today’s press release as the “latest and best” read of price change.
One other oddity about the CPI data, which is important to understand along with the data, is that the Federal Reserve, like us, runs computer models. They do a passable job of managing the nation’s money based on the CPI less food and energy. This is because of their view that this is “core inflation.” So realizing these two key facts, here’s this morning’s data:
From the Labor Department:
“The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in
April on a seasonally adjusted basis after falling 0.1 percent in March, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 2.5 percent before seasonal adjustment.
The indexes for gasoline and shelter were the largest factors in the seasonally adjusted increase in the all items index, although the food index increased as well. The gasoline index increased 3.0 percent, more than offsetting declines in other energy component indexes and led to a 1.4-percent rise in the energy index. The
food index rose 0.3 percent, with the food at home index rising 0.3 percent and the index for food away from home increasing 0.2 percent.
The index for all items less food and energy rose 0.1 percent in April. The shelter index rose 0.3 percent, with other indexes mixed. The indexes for household furnishings and operations, Personal care, tobacco, medical care, and apparel all increased in April, while those for used cars and trucks, new vehicles, recreation, and airline fares all declined.
The all items index rose 2.5 percent for the 12 months ending April; this figure has been mostly trending upward since it was 1.6 percent for the period ending June 2017. The index for all items less food and energy rose 2.1 percent for the 12 months ending April. The food index increased 1.4 percent, and the energy index
rose 7.9 percent.
A table from the press release if your eyes are squinty-good:
Involuntary sex at the gas pump, huh?
Now to a discussion of the “trajectory” of this little news item. It is a fixed trajectory. In other words, it was (like a cannon) fired this morning. It will land (becoming useless as an ‘ideal projectile’ a month from now when another round of data will be fired.
What determines the apogee of the data is its variance from prediction.
In other words, we look at prevailing interest rates – like the 10-year Treasury note that closed Wednesday with an implied interest rate of 3.004 percent. and compare it with the expected data.
We know that last month, the CPI was running 2.4 percent for the 12-month, unadjusted, all-items index. Since the bond was (rounding) 3%, we can infer that a normal relationship is a 4-10th’s percent bond over CPI spread. Just as an idea, you understand.
Now, the neat thing about economics is that we practice extensible thinking all the time. In other words, a question like “What impact is a small change in CPI likely to have?” is easily resolved by going to extremes.
Sad, but true: Some of us “radical economists” talk that extremist talk because it reveals the trend impacts.
Thus, we can bracket expectations as follows:
If the CPI this morning was exactly the same as the previous month, we would expect a similar apogee for the data. Stability should reign.
If, at the extreme low, there had been only a 0.6 percent rise in the all items, that could collapse the bond market yields to the 1.2 % range. and prices of the bonds could double. Gold, oil, housing, and other hard assets, as inflation hedges, would collapse in a heap. There would be talk of negative rates and of the imminent collapse of our current latter day replay of the Roaring Twenties ruining the financial system. At some point, such an event would collapse one of the systemically important financial players, which would lead to another bankster hold-up of the global monetary system. Then, despite likely US and/or G20 bailing, we’d see the gates of Hell open just a few months out. Robert Prechter’s Elliott Wave International forecast of this being The Big One would come to pass. As would our own views that have spawned something of a “hunker in the bunker” mentality.
On the OTHER hand, a different extreme view would be to pencil out what would happen in the annualized inflation rate had come in at 10% or some huge ugly like that?
For one thing, gold, silver, oil, real estate – all the traditional hard assets would go to the moon overnight. Not because of a fundamental change in demand (world still has only so many people renting, right?). Instead it would be an effect of extremely high replacement costs.
In such a world, where the costs go up like mad, people will turn on consumption as a mind-boggling rate because they will consume now to hedge against higher futures prices.
Meanwhile, Prechter would still be semi-right: It would be Depression game-on. Except that it would be the Ure spin on the outcome. This is where a Managed Hyperinflation Protocol (MHP) would be the outcome.
The concept of an MHP is the scaled-up, mega-super-sized version of how you pay your home off. You buy it at one price (like I bought one in 1973) and then could have paid it off many years later with what were by then much cheaper dollars.
In THEORY, we could do the same thing with the US National Debt – which will hit $22-trillion shortly. As the MHP is rolled out, prices will seem to go up – which they wouldn’t in a classical US-style Depression, but which they DID EXACTLY in the German Weimar inflation. Oh, and in the Zimbabwean inflation under Robert Mugabe.
At the end, you end up paying bondholders of the US off with highly depreciated dollars. But, because of how FOREX and other markets work, the US dollar is presently VERY strong.
The point where the MHP will become self-evident (and the dollar will collapse) is after we finish the present (silly) game of creating more money thank increasing GDP justifies, trying to create enough monetary inflation to “print through” the continuing and pernicious deflation which is still out there if you know where to look.
If you haven’t been paying attention, the ONE data number that NO ONE called your attention to was this part of the last Labor Department Employment Situation Report. Look at what I have highlighted:
Tell me you’re not stupid, please!
We added 175,000 people to the population last month but only 3,000 jobs.
Tell me how that kind of economy works?
Sure…noisy data and all that happy-talk. But to borrow a phrase from my eldest daughter, “You oughta be seeing more red flags than a Chinese hillside!.”
Thus, our advice to all: At some point, you have to buy your future.
Big McMansion is the ‘burbs is great as long as all the utilities are on and “normal” reigns supreme. Turn other any of communications, natural gas, gasoline, electricity, food supplies…well, you know that list, yeah?
Smaller towns can devolve to the “ground state” much more gracefully. Most cities under 20,000 have little gang problems, for example. Every city over 1-million does.
Why anyone, in their right mind, would add avoidable risk to their existence like that is just flat-ass startling.
A few of us “get it.” Oilman2, his son, my son (who is looking to downsize his city) and lots of others, especially the brighter of Millennials, such as our Millennial Caller dude. Smaller is better, smaller is robust, smaller is survivable.
But don’t take my word for it.
One of these days, one of the “News Trajectories” will prove me right. When it does, Ure will likely say “told you so.” And, unlike the cities of impact, we’ll be able to. Solar power, independent water sources, a bit of food stores, a lots of seeds, understanding of gardening…fertilizer…source to buy local chickens….well, you got the picture.
Or not. Hell, odds are your jaw has dropped and you’re ready to borrow my ViseGrips to pinch yourself.
“How could I have been so stupid,” you’ll be saying.
The answer is simple: You followed the social herd, not your own clear-headed thinking.
If the market tanks, it might be blamed on this: “Israel hits Iran’s Syria bases with 70 missiles killing ‘at least 23 fighters’ and vowing ‘if it rains in Israel it pours in Iran’”
Speak of “Told You So’s”
About 6-years back, I wrote a book on how the internet would play our in all this. It was Broken Web The Coming Collapse of the Internet/
Since publication, I have lost track of the security breaches and data hacks.
But another prediction building now is the move which will come after the market collapse to licen se content on the internet.
Three stories exactly on point as this news projectile heads towards apogee:
And, as we have been warning, this is all because social media has turned into a #meetoo digital mob. And that, in an economic displacement-causing collapse will spark digital lynch mobs and regulation will be required to put down digital insurrection.
(Cheery today, huh?)
The REAL Story on Cohen
Is arising this morning as forecast: How did Stormy tartlet’s attorney get the SSR’s from Cohen’s bank? These are suspicious activity reports – which were confidential in nature.
Someone leaked this – and we expect the Obama/deep state shadow government’s hand will be found. Plausibly deniable, of course.
Trust you caught the other day how the Obama radical’s opposition government are taking credit for Trump accomplishments? “Credit Obama for Low Unemployment Rate, Former Obama Senior Adviser Valerie Jarrett Says.”
Trump took office nearly a year and a half ago. Yet there’s the radical shadow government claim – and of course it will be swallowed by the calendar-impaired social media manipulators.
Just like Obamanistas meddled in apparent violation of the Logan Act trying to save the crooked Iran deal.
Both parties are crooked, but Obama’s the first of either party to stick around Washington to run the democrat/socialist spin on the French Vichy government.
We note Obama’s predecessor simply went back to his ranch in Texas, lived in his vastly more energy efficient home that Al Gore, for example, and let the following government run the country. Not so, with the radical left.
Sadly, we can’t run an energy impact on “hot air.”
Depression Has Spiked By 33% In the Last Five Years, a New Report Says. Bet me it has been accompanied by the media getting more hysterical and thus media becomes a public health risk…
And is this worthy of the BBC’s attention? ‘I’m sad that I didn’t have sex until I was 37’. GMFB!
Off to see if spatter shield works on the plasma cutter and other adventures. Keep it real…and more on the ‘morrow.