A lot happened this week and it was almost all bearish in my opinion. The week started (Monday) and ended (Friday) with concerns about the collapse of behemoth Chinese property conglomerate Evergrande. US markets don’t seem much concerned about it…
I went to one who had the reputation of wisdom, and observed to him – his name I need not mention; he was a politician whom I selected for examination – and the result was as follows: When I began to talk with…
The most important event of the week was the Fed Decision on Wednesday afternoon. While the Fed did not make any policy changes (the Fed Funds Rate continues at 0% as well as $120 Billion/month in asset purchases) they did start to talk about inflation raising the possibility of tapering asset purchases and raising interest rates down the road. That was enough to create a dramatic reaction in financial markets.
There is a debate among economists about whether we are on the verge of one of the greatest economic booms in history or whether the current market rally is the bubble of all bubbles. The consensus view reflected in market prices is the former. The latter is the correct one in my opinion…
I’ll never forget it. It was 11:50am Friday March 26, 2021. I was short stocks, mainly tech stocks, and doing quite well when, all of a sudden and out of nowhere, stocks started to rip higher. From breaking down they went to exploding higher without rhyme or reason. I believe the NASDAQ ripped higher by ~2% in that time period into the close
The catalyst for Wednesday’s selloff was a hotter than expected April CPI Report. Overall inflation came in at +4.2% year over year and +0.8% month over month. Core CPI, which excludes food and energy, was +3.0% year over year and +0.9% month over month.
There is a very interesting dynamic playing out in the economy right now that is almost certain to result in significant inflation. That dynamic consists in the reality of inflation as described by corporate executives, some examples of which you can read above, combined with the Fed’s refusal to admit that it’s anything more than “transitory”.
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