MAD Macro - How Is the Economy? Depends Who You Ask
Inflation Is Falling, the Deficit Is Ok, the Economy Is Great
Soft Landing, Maybe Not, Inflation Is Sticky. I Scream Fiscal Crisis
I missed an obvious typo yesterday, apologizes. Somehow I wrote Columbus University instead of Columbia University. I guess that’s proof my SAT scores were too low for an Ivy League school. Maybe Columbia would have excepted me now that SAT testing is optional. In the 1970s, you needed high SAT scores. Not so much in the 2020s. Maybe that’s why all of these campus demonstrators are so confused about who the bad guys are.
Jay Powell thinks inflation will continue falling to his 2% target. He thinks they will be able to lower interest rates this year. Janet Yellen thinks there is no problem with fiscal policy. She does not think deficits will hurt the economy or cause inflation. My favorite lefty economist Paul Krugman thinks Bidenomics is fantastic. He thinks the economy is great. He thinks America is crazy for not thinking the economy is great. He wonders what’s wrong with everyone, especially the MAGA Republicans. Jamie Dimon thinks the economy feels like 1972. He thinks a soft landing is not a sure thing. He thinks the economy is strong mostly because of government spending. Larry Summers thinks inflation is sticky and the Fed may need to raise interest rates. The famous “Scream” painting is worried about a fiscal crisis.
There is so much debate and uncertainty about the economy. Consumer sentiment has improved slightly this year but it continues to be very weak compared to the economic reports. Yesterday we got some bad economic news. Q1 GDP growth came in weaker than expected and inflation higher than expected. Q1 GDP growth missed by a wide margin, but some of that was related to trade. Today we get the Fed’s favorite inflation report, the PCE Deflator. PCE is expected to be 2.6% year-over-year up from 2.5% last month. Core PCE is expected to be 2.7% year-over-year down from 2.8% last month. There is an essay about GDP in the WSJ today, linked here. It’s titled, “Do the GDP and DOW Reflect American Well-Being”. When I saw the title I thought maybe this will explain what’s going on in the economy. I will save you the time, it does not. There is a better WSJ article today by Greg Ip, linked here. This one is worth reading. It’s titled, “America’s Economy Is No. 1. That Means Trouble.” Greg points out that U.S. growth is beating everyone but that it’s because of government spending. I included a chart from the article below. It feels great at the moment but it will cause bigger problems in the future. I guess the question is, when is the future? I think the consumer is in a bad mood for two reasons. First, they realize the deficit is a problem and a fiscal crisis is a real risk. Second, everyone hates the Tin Man and the Orange Mad King I. Democrats will vote for the Tin Man but will not be happy about it. Republicans will vote for the Orange Mad King I but they won’t be happy either. I think deficits are a real problem and both the Orange Mad King I and the Tin Man have no plans to address them. In fact, today the WSJ is reporting that the Orange Mad King I wants to control monetary policy. That is a terrible idea. Buy gold. As William Devane says in his Rosland gold ad, “Did you know that there has only been two times in American history, two, when the national debt was larger than GDP? During WWII and right now. That’s why I buy gold.”
Markets are a little higher this morning on the better than expected earnings from Google and Microsoft. We get the PCE number at 8:30 am, which could change things. Commodities are higher today, copper is making new highs. Maybe that’s because the Orange Mad King I wants to take over the Fed.
I updated the U.S. Dollar Index, Japanese yen, U.S. 10yr yield. U.S. 10yr-2yr yield spread, WTI crude oil, copper, VanEck CMCI Commodity Strategy Index, spot gold, bitcoin, S&P futures and NASDAQ 100 futures charts below.
The dollar and interest rates are close to unchanged. Interest rates across the curve made new highs for the year yesterday. The Japanese yen is very weak, dollar yen made new highs last night.
Crude oil, copper and gold are all higher this morning. The VanEck CMCI Commodity Strategy Index is making new two year highs. It is outperforming it’s BCOM benchmark because of it’s higher exposure to copper. Bitcoin is a little lower.
Both the S&P and NASDAQ 100 futures are higher on the Google earnings.
I missed an obvious typo yesterday, apologizes. Somehow I wrote Columbus University instead of Columbia University. I guess that’s proof my SAT scores were too low for an Ivy League school. Maybe Columbia would have excepted me now that SAT testing is optional. In the 1970s, you needed high SAT scores. Not so much in the 2020s. Maybe that’s why all of these campus demonstrators are so confused about who the bad guys are.
Jay Powell thinks inflation will continue falling to his 2% target. He thinks they will be able to lower interest rates this year. Janet Yellen thinks there is no problem with fiscal policy. She does not think deficits will hurt the economy or cause inflation. My favorite lefty economist Paul Krugman thinks Bideomics is fantastic. He thinks the economy is great. He thinks America is crazy for not thinking the economy is great. He wonders what’s wrong with everyone, especially the MAGA Republicans. Jamie Dimon thinks the economy feels like 1972. He thinks a soft landing is not a sure thing. He thinks the economy is strong mostly because of government spending. Larry Summers thinks inflation is sticky and the Fed may need to raise interest rates. The famous Scream painting is worried about a fiscal crisis.
There is so much debate and uncertainty about the economy. Consumer sentiment has improved slightly this year but it continues to be very weak compared to the economic reports. Yesterday we got some bad economic news. Q1 GDP growth came in weaker than expected and inflation higher than expected. Q1 GDP growth missed by a wide margin, but some of that was related to trade. Today we get the Fed’s favorite inflation report, the PCE Deflator. PCE is expected to be 2.6% year-over-year up from 2.5% last month. Core PCE is expected to be 2.7% year-over-year down from 2.8% last month. There is an essay about GDP in the WSJ today, linked here. It’s titled, “Do the GDP and DOW Reflect American Well-Being”. When I saw the title I thought maybe this will explain what’s going on in the economy. I will save you the time, it does not. There is a better WSJ article today by Greg Ip, linked here. This one is worth reading. It’s titled, “America’s Economy Is No. 1. That Means Trouble.” Greg points out that U.S. growth is beating everyone but that it’s because of government spending. I included a chart from the article below. It feels great at the moment but it will cause bigger problems in the future. I guess the question is when is the future? I think the consumer is in a bad mood for two reasons. First, they realize the deficit is a problem and a fiscal crisis is real risk. Second, everyone hates the Tin Man and the Orange Mad King I. Democrats will vote for the Tin Man but will not be happy about it. Republicans will vote for the Orange Mad King I but they won’t be happy either. I think deficits are a real problem and both the Orange Mad King I and the Tin Man have no plans to address them. In fact, today the WSJ is reporting that the Orange Mad King I wants to control monetary policy. That is a terrible idea. Buy gold. As William Devane says in his Rosland gold ad, “Did you know that there has only been two times in American history, two, when the national debt was larger than GDP? During WWII and right now. That’s why I buy gold.”
Markets are a little higher this morning on the better than expected earnings from Google and Microsoft. We get the PCE number at 8:30 am, which could change things. Commodities are higher today, copper is making new highs. Maybe that’s because the Orange Mad King I wants to take over the Fed.
I updated the U.S. Dollar Index, Japanese yen, U.S. 10yr yield. U.S. 10yr-2yr yield spread, WTI crude oil, copper, VanEck CMCI commodity index, spot gold, bitcoin, S&P futures and NASDAQ 100 futures charts below.
The dollar and interest rates are close to unchanged. Interest rates across the curve made new highs for the year yesterday. The Japanese yen is very weak, dollar yen made new highs last night.
Crude oil, copper and gold are all higher this morning. The VanEck CMCI Commodity Strategy Index is making new two year highs. It is outperforming it’s BCOM benchmark because of it’s higher exposure to copper. Bitcoin is a little lower.
Both the S&P and NASDAQ 100 futures are higher on the Google earnings.