Monitoring US Economy

[karn]

what does this mean? can someone explain
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As a Kid had heard the story of अंधेर नगरी चौपट राजा, टका सेर भाजी टका सेर खाजा In the Mad Town of Chaupat Raja Dry Fruits and Vegetables are available at the same price. Didn't know this will come true in the US Debt Market

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Bond rates are going up so fast that the cost of debt is the same for 2 year till 30 year maturing bond .. holy shit.
(Looks like people are dumping 2 3 and some 5 year maturing bonds)

 

[cannonfodder]

what does this mean? can someone explain
==========
As a Kid had heard the story of अंधेर नगरी चौपट राजा, टका सेर भाजी टका सेर खाजा In the Mad Town of Chaupat Raja Dry Fruits and Vegetables are available at the same price. Didn't know this will come true in the US Debt Market

View attachment 146904

This is what I think..

The US Fed still believes that the inflation is short term and inflation will resume to 2-2.5% in the long term.
So you are seeing same pricing in 2year rate and 10year rate similar assuming the inflation goes down you are better to invest in bonds long term as short term you are effectively losing more money( If that makes sense) AFAIK I have not seen big delta in short term and long term rates in US even before printing started.

 

[cannonfodder]

@ezsasa

https://www.msn.com/en-us/money/mar...jobs-data-in-focus/ar-AAVC9jx?ocid=uxbndlbing

Some snippets/possibilities:
The yield on the 5-year Treasury note retreated 6 basis points to 2.5% in afternoon trading, while the yield on the 30-year Treasury bond was down about 8 basis points to 2.493%. The yield on the benchmark 10-year Treasury note dropped about 8 basis points to 2.394%. Yields move inversely to prices and 1 basis point is equal to 0.01%.

This inversion of the yield curve has in the past happened prior to recessions, as more purchases of long-dated Treasurys indicate investor concern about the health of the economy.

"We think it's just distorted because the Fed and other central banks have bought so many bonds they have depressed long term yields," said Michael Schumacher, director rates at Wells Fargo. "Ex the Fed, [the spread] would be plus 50 or plus 100. It's not a fair comparison."

 

[cannonfodder]

VERIFY: Will releasing 180 million barrels from the Strategic Petroleum Reserve bring gas prices down?

President Biden announced plans to sell 1 million barrels of crude oil from the country's stockpile per day for six months. That's nearly a third of the stockpile.

www.wusa9.com

VERIFY: Will releasing 180 million barrels from the Strategic Petroleum Reserve bring gas prices down?


Comment: Biden puts break on rising Oil/gas prices by releasing strategic Petroleum reserves to counter inflation. It is also viewed as patch work as it will reduce the oil prices only as temporary relief and move is likely taken in congnizance of upcoming elections six months down the line.

Fed officials plan to shrink the balance sheet by $95 billion a month, meeting minutes indicate

The Federal Reserve on Wednesday released minutes from its March 15-16 policy meeting.

www.cnbc.com

Fed officials plan to shrink the balance sheet by $95 billion a month, meeting minutes indicate

Comment: FED has become hawkish indicating multiple 50 bps interest rate hikes with monetary tightening this year as inflation is holding on to 7% + (manipulated & in reality much more on ground). It is still believed as too late correction and if things keep going out of hand may encourage more aggressive behavior most likely tanking the markets.

MARKETS TODAY:

 

[cannonfodder]

Yes dosto another inflation data drop came in today.

Oil/Crude prices impacted is finally showing up>

https://www.bls.gov/news.release/cpi.nr0.htm

The all items index continued to accelerate, rising 8.5 percent for the 12
months ending March, the largest 12-month increase since the period ending
December 1981. The all items less food and energy index rose 6.5 percent, the
largest 12-month change since the period ending August 1982.

Commentary: New and used vehicle prices going down saved the day. Energy prices and cost has increased significantly and can impact food prices in coming reports as an cascading effect.

Some Electronic supply like GPU's/processor have actually started to become better but never know the impact of recent CCP lockdown. Will cover labor statistics data as well going forward.

 

[cannonfodder]

It looks stupid right now. The 50bps (multiple) increase was already expected but Wall street is freaking out.

https://finance.yahoo.com/news/us-stocks-wall-st-slumps-204655967.html

US STOCKS-Wall St slumps as weak earnings, rate hike clarity spook investors

Jobless claim declining though from Jan 2022 - Apr 2022:

 

[cannonfodder]

S&P 500 about to fall sharply as it teeters on brink of bear market, Morgan Stanley says

The S&P 500 is poised to fall sharply as investors flee risks assets on fears over a recession, aggressive tightening by the Fed and inflation, according to Morgan Stanley analysts.

finance.yahoo.com

S&P 500 about to fall sharply as it teeters on brink of bear market, Morgan Stanley says

In the past month, the benchmark S&P index has dropped about 6.6%. It is down about 11.1% so far this year.

Traders are now pricing in a 100% chance of at least a half-point rate jump when policymakers meet on May 3-4. It would mark the first time since 2000 that the U.S. central bank raised the federal funds rate by 50 basis points.

Some economists believe the Fed waited too long to confront the burst in inflation, while others have expressed concerns that moving too quickly to stabilize prices risks triggering an economic recession. Hiking interest rates tends to create higher rates on consumer and business loans, which slows the economy by forcing employers to cut back on spending.

Powell has pushed back against concern that further tightening by the central bank will trigger a recession and has maintained optimism that the Fed can strike a delicate balance between taming inflation without crushing the economy.

Market deep fear territory due to recession. But Google/Microsoft/Visa earnings were actually good indicating not so much deep recession happenning any time sooner. It seems like wall street is daring powell to do any more 50bps increases post May, 2022.

 

[ezsasa]

A little hard to tell in the absence of data between 2020 and today.

We imported close to $16 billion worth of coal in 2020. Can't find a reliable source for 21-22, the period when coal prices spiked by over 400% hitting a high of as much as 700%.

We imported close to $78 billion in crude and exported over $25 billion of petroleum products.

With Fed taper and a rise in interest rates, commodities prices should correct in a quarter or two but will currencies get stronger against the USD with USD supplies drying up?
I doubt it.

Apologies for posting haram link but ...

Indian coal prices surging due to global rise in fuel prices

Coal buyers are paying 340% premiums to secure the fuel as even with high premiums, locally produced coal remains far cheaper than importing it from Australia or Indonesia.

theprint.in

Fuel subsidies have fallen to negligible levels.

Petroleum subsidy: Allocation to petroleum subsidy decreased at an annual rate of 40% from 2019-20 to 2021-22. The allocation in 2021-22 is 64% lower than the 2020-21 revised estimate at Rs 14,073 crore. Petroleum subsidy consists of subsidy on LPG and kerosene. In 2021-22, the LPG subsidy is estimated to decrease to Rs 14,073 crore (from Rs 36,072 crore in 2020-21) and no allocation has been made for the kerosene subsidy (as compared to Rs 2,982 crore in 2020-21).

Union Budget 2021-22 Analysis

prsindia.org

Fuel and coal price hikes still don't explain a drop of 7% in our forex reserves.

Not current data but...

Ministry of Coal, GOI

This is the official website of Coal Ministry, Government of India. You can find information related Tenders, Notices, latest updates pertaining to Ministry of Coal, Government of India.

coal.gov.in

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This time we will also get to see if keynesian method of using interest rates to control inflation will work long term or not when the inflation is due to global supply chain constraints, for USA. GoI deliberately did not take the keynesian route, and focussed on supply and logistics side measures to control inflation.

 

[cannonfodder]

https://www.cnbc.com/2022/04/28/us-q1-gdp-growth.html

U.S. GDP fell at a 1.4% pace to start the year as pandemic recovery takes a hit

Gross domestic product unexpectedly declined at a 1.4% annualized pace in the first quarter, marking an abrupt reversal for an economy coming off its best performance since 1984, the Commerce Department reported Thursday.

The negative growth rate missed even the subdued Dow Jones estimate of a 1% gain for the quarter, but the initial estimate for Q1 was the worst since the pandemic-induced recession in 2020. GDP measures the output of goods and services in the U.S. for the three-month period.

1st Quarter Big names:
BAD EARNING : Netflix, Amazon, Adobe (Amazon was not that bad but I dont want to discuss it further, it was market overreaction 15% down)
OK Earnings: Meta, Google. (Meta was not great but stock jumped 10-15% due to low expectation and it has already fallen biggly in last month or two).
Great Earnings: Apple, Tesla, Visa ( Visa indicating higher transactions hence not slowing economy)

Though even I am not sure how much aggressive FED can get with increasing interest rate to counter inflation with GDP falling. It looks like double edged sword to me. The earning trends from major companies do not look like recessionary, it was mixed bag of numbers as usual. I hope FED officials are not as bad as I think. Any lurker reading this update may be wondering what up with FED rate discussion: "When FED is behind the economy (stimulating economy.. low interest rate = wall street happy to borrow more cheap money to do grow business but unhealthy debt increase). FED aggressive monetary policy = wall street not happy (lesser risk taking .. lesser jobs but better inflation control)"

//Total Riot today: deep fear every thing hit

 

[cannonfodder]

This time we will also get to see if keynesian method of using interest rates to control inflation will work long term or not when the inflation is due to global supply chain constraints, for USA. GoI deliberately did not take the keynesian route, and focussed on supply and logistics side measures to control inflation.

global supply chain constraint + excessive money printing that put free money into economy.

 

[ezsasa]

global supply chain constraint + excessive money printing that put free money into economy.

with the rising energy prices, free money part will probably be addressed. there will not be short term solutions for supply chain part.

 

[Detective Pennington]

It’s unfortunate, jealous neoliberal blacks want income limits in student loan forgivenss because rich people can’t be victims of the student loan crisis, only they can be. Biden will probably go along with it because printing too much $$ will worsen inflation problems and dems trying not to get wrecked in November

 

[another_armchair]

This time we will also get to see if keynesian method of using interest rates to control inflation will work long term or not when the inflation is due to global supply chain constraints, for USA. GoI deliberately did not take the keynesian route, and focussed on supply and logistics side measures to control inflation.

Textbook Keynesian model has had limited success in controlling inflation and demand by moderating liquidity/cash flow into the markets as is evident from multiple crisis the world has witnessed in the past decades.

Globally, countries that followed textbook Keynesian economics are saddled with heavy public, private and govt debt.

The argument in favor of it though is it helps create assets which in turn leaves wealth in the hands of individuals leading to overall prosperity and better quality of life. The downside of it is higher cost of living which eventually hits bubble territory where companies are forced to shift manufacturing to cheaper destinations, higher taxes to support the welfare system. Overall, not a very bright picture.

You can kick the can only so far down the road.

It may be good in the short term that GoI did not take the interest route path to tame inflation as our inflation is largely because of supply side constraints(import driven, high commodity prices and components inflation) which is beyond our control. Our manufacturers have seldom bothered to invest and own the complete supply chain.

Chinese are a lot smarter here. A tyre manufacturer in China invests in rubber plantations in Africa, processing factories elsewhere thereby insulating himself and the Chinese economy from shocks and also leaving them with plenty of options and maneuvering room.

Low interest rates in India could lead to a housing inflation which will bite us all in the medium term. That is one downside I see of the current low interest policy in India but if it can generate jobs in the 8-16k salary range, it will lift millions out of hopelessness. A family with at least two working kids aged 20-25 each earning about 16-20k a month leaves them with a lot of options and can definitely improve their quality of life.

 

[cannonfodder]

with the rising energy prices, free money part will probably be addressed. there will not be short term solutions for supply chain part.

The only caveat to this is in many of the earnings this one and previous quarter wrt to US. The Executives are saying the following about consumer behavior during earning calls:
--> We passing down the price increase to consumer instead of getting margin hit ourself. No impact on sales, the consumer is happy to spend translate to more inflationary environment. Then you see at the global perspective: The gpu/TV/electronic manufacturer says hey the american consumer is paying 300 for $250 previous price. Take it or leave it --> and saw something similar on of the UK/Europe economic report on this. [Don't remember on top of the head. ]

 

[Two Minutes To Midnight]

What now, bros?

 

[cannonfodder]

View attachment 154330

What now, bros?

You beat me to it

https://www.cnbc.com/2022/05/04/stock-market-futures-open-to-close-news.html

Dow tumbles 1,000 points for the worst day since 2020, Nasdaq drops 5%

FED will again come up to assauge fears on Wallstreet. Still dont know if its engineered flunctuations by big suites, the saving rates overall has been up according to bank reports (meaning dont know where the money bags are getting stacked in economy). FED is having tough time inflation on one hand and economic slowdown on other hand. We are in stagflagtion territory unless something changes. Ukr - Russ war is wrecking European recovery further aggravating fears- Very volatile time.

CPI data and Labor data will be key in coming months. Either it will be great recovery or it can be big downhill.

 

[Two Minutes To Midnight]

You beat me to it

https://www.cnbc.com/2022/05/04/stock-market-futures-open-to-close-news.html

Dow tumbles 1,000 points for the worst day since 2020, Nasdaq drops 5%

FED will again come up to assauge fears on Wallstreet. Still dont know if its engineered flunctuations by big suites, the saving rates overall has been up according to bank reports (meaning dont know where the money bags are getting stacked in economy). FED is having tough time inflation on one hand and economic slowdown on other hand. We are in stagflagtion territory unless something changes. Ukr - Russ war is wrecking European recovery further aggravating fears- Very volatile time.

CPI data and Labor data will be key in coming months. Either it will be great recovery or it can be big downhill.

I think you're right about these being engineered. Typically during a tightening phase the federal reserve simply keeps increasing interest rates until it causes a market crash. It has happened every single time.

The property market was and still is the go to hedge against inflation. This will collapse once interest rates rise to the point where those who over leveraged themselves on debt are forced to liquidate to get themselves out creating a huge glut in the market.

Interest rates will skyrocket, deflation happens, then hyperinflation ramps up, then the dollar economy collapses.

 

[cannonfodder]

Unrelated to US enonomy specifically but affecting global economy indirectly:

https://finance.yahoo.com/news/bank-england-set-4th-straight-230343851.html
BoE flags risk of recession and 10% inflation as it raises rates again

LONDON (Reuters) -The Bank of England sent a stark warning that Britain risks a double-whammy of a recession and inflation above 10% as it raised interest rates on Thursday to their highest since 2009, hiking by quarter of a percentage point to 1%.

The pound fell by more than a cent against the U.S. dollar to hit its lowest level since mid-2020, below $1.24, as the gloominess of the BoE's new forecasts for the world's fifth-largest economy caught investors by surprise.

They also trimmed bets on the central bank hiking rates aggressively this year. Short-dated British government bond yields slid sharply.


The BoE's nine rate-setters voted 6-3 for the rise in Bank Rate from 0.75%, with Catherine Mann, Jonathan Haskel and Michael Saunders calling for a bigger increase to 1.25%.

Economists polled by Reuters had forecast an 8-1 vote to raise benchmark borrowing costs to 1%, with one policymaker opposing a hike.

Central banks are scrambling to cope with a surge in inflation that they described as transitory when it began with the post-pandemic reopening of the global economy, before Russia's invasion of Ukraine sent energy prices spiralling.

The BoE said it was also worried about the impact of renewed COVID-19 lockdowns in China which threaten to hit supply chains again and add to inflation pressures.

 

[charlie]

Brace for impact, recession is inevitable. The worst part is this time fed won’t be there to help like last time with quantitative easing. as they already did it during covid.

 

[Two Minutes To Midnight]

Unrelated to US enonomy specifically but affecting global economy indirectly:

https://finance.yahoo.com/news/bank-england-set-4th-straight-230343851.html
BoE flags risk of recession and 10% inflation as it raises rates again

Record high of 1% lmao. It's going to get much higher. Black Wednesday interest rates were 15%. People were selling their homes because mortgage payments became too expensive.

Just shows that everyone is stuck in this liquidity trap meme economy where they need to print and borrow all the time while their real productivity is outsourced to Chinks.