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Inflation Psychology Begins to Change

Daily Rap 07-03-2014

Today's data point du jour, that being the nonfarm payroll number, was higher than predicted at 288,000, versus expectations of 215,000, while the unemployment rate dropped to 6.1%. Neither of those two numbers are quite as strong as they look on the surface, but that is rather immaterial at this moment in time because it just means that the Fed will continue tapering. That was not in doubt, of course, since Yellen et al. will stay on that path until the stock market cracks.

As for the stock market's response, it rallied during the entire holiday-shortened session, gaining 0.5% or so. Away from stocks, green paper was firmer and fixed income declined. Ten-year rates climbed to around 2.67% and look to be headed higher. The metals...more

Last year's posts for Ask Fleck

Q: As a follow up, check out this inflation calculator from the BLS. Even with all the flaws in the CPi that undercount inflation, it would take $1.76 in 2012 to equal $1 in 1990. So, the price level went up 76% (at least) since 1990, yet median household income went nowhere. And, the Fed thinks the solution is more inflation. Seems criminal to me.

Fleck: It is criminal. Why do you think I have so much contempt for the fools at the Fed?
(posted: 7/3/2014)

Q: Bill
What am I missing?Today Silver and Gold are both up.Miners are up.But CEF is down.

Fleck: Noise . You are making too much of one day and gold is only up 25 bps. It's just noise, as is often the case.
(posted: 7/3/2014)

Q: Bill,

If the metals turn positive today, might it be time to aggressively buy the miners? Gold/silver appear to be sniffing out the BS in the economic reports. Despite the good headline jobs number, looking underneath the hood shows the continued hollowing out of the middle class, as full-time jobs disappear and are replaced with one or two part-time jobs. Additionally, stagnant wages in the face of higher prices equals a lower standard of living for many. I believe the term stagflation will start to be used very frequently in the near future, unless "they" can come up with a prettier term. Additional or even continued easing as a response to continued economic weakness could really tip us over the edge if commodity prices explode and even more pain is brought upon the average American. What's happening to this country is absolutely disgusting. This central planning politburo needs to be dethroned ASAP. Time is running out.

Fleck: I think the market has demonstrated that much lower (i.e., sub 1275$) prices are not in the cards. Thus, you can get aggressive whenever you feel you should (but you still need to manage your risk). If gold goes green on July 3rd, that would be impressive given the data, but I wouldn't say it is THE reason to be more aggressive.
(posted: 7/3/2014)

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