Credit Bubble Bulletin

Credit Bubble Bulletin2020-05-20T17:01:05-06:00

Presented by Doug Noland

Daily Commentary

Wednesday, December 1, 2021

[Yahoo/Bloomberg] U.S. Stocks Gain; Bond Yields Rise: Markets Wrap

[Reuters] Dollar steadies, risk currencies recover from Omicron-driven drop

[Reuters] Oil prices rally ahead of OPEC meeting despite Omicron concerns

[Reuters] Turkish lira seesaws as cenbank intervenes, Erdogan speaks

[CNBC] Private payrolls post better-than-expected growth of 534,000 in November, ADP says

[CNBC] Mortgage refinance demand plunged 15% last week, but could now reverse

[Yahoo/Bloomberg] Jerome Powell Ditches ‘Transitory’ Tag, Paves Way for Rate Hike

[Reuters] U.S. tightens COVID-19 travel rules as countries race to quell Omicron threat

[Yahoo/Bloomberg] Broken Supply Chains Threaten Ruin at a Growing Number of Small Firms

[Yahoo/Bloomberg] Omicron Reaches Nations From U.K. to Brazil in Widening Spread

[Reuters] Factories facing supply headaches as Omicron risks emerge

[Yahoo/Bloomberg] High-Yield Bonds Fall as Home Sales Slump: Evergrande Update

[Reuters] China’s Nov factory activity slips back into contraction – Caixin PMI

[Reuters] China’s property woes worsen as home prices slip in November-survey

[Yahoo/Bloomberg] Lira Crash Spurs First Central Bank Intervention Since 2014

[Yahoo/Bloomberg] A New Commodity Squeeze Could Soon Rival Lumber’s Recent Historic Shortage

[Reuters] Ukraine urges NATO to be ready with sanctions in case of Russian invasion

[Reuters] Former PM Abe says Japan, U.S. could not stand by if China attacked Taiwan

[Bloomberg] Dudley: The Federal Reserve Needs to Act on Powell’s Words

[Bloomberg] Omicron Spread Widens; Germany, Poland Cases Climb: Virus Update

[Bloomberg] Could Taiwan Be the Next Crisis That Delays Your Retirement?

[Bloomberg] Abe Warns China a Taiwan Invasion Would Be ‘Economic Suicide’

[WSJ] Global Inflation Set to Be Higher for Longer, Says OECD

[WSJ] Omicron Variant Sends Policy Makers Scrambling as Science Lags Behind

[FT] US junk bonds hit by sharpest sell-off in over a year

[FT] Omicron threatens to intensify supply shortages and inflation, OECD warns

[FT] Japan’s former PM warns China invading Taiwan would be an ‘emergency’ for Tokyo

Weekly Commentary

November 12, 2021: Accident-Prone End-Game Dynamic

Bloomberg Television’s Jonathan Ferro (November 12, 2021): “You wrote a scathing piece in the Financial Times this week. I want to start with a quote from it: ‘Failure to act promptly would turn the Fed’s increasingly discredited ‘transitory’ characterization from one of the worst inflation calls in decades to also a big policy mistake with widespread and unnecessary damage.’ Mohamed, I want to start with that single piece there: ‘One of the worst inflation calls in decades.’ Why do you think it’s this bad?”

Mohamed El-Erian: “Because they didn’t show humility at the beginning of the process… There are lots of structural changes going on in the post-pandemic economy… post immediate shock. You can’t simply dismiss them as transitory. You’ve got to respect the fact that behaviors change. And they just didn’t have the open mindset enough to see that. So, they got stuck in this narrative and they held on to it for too long, and the result of which is they’re looking at inflation that is much higher than they ever expected; they’re looking at inflation that is much broader than they expected; and they’re looking at inflation that is going to last even longer than they expect even now. So, it’s going to go down in history as one of the worst inflation calls by the Federal Reserve.”

The Consumer Price Index (CPI) was reported up a stronger-than-expected 0.9% for the month of October, pushing the year-over-year increase to a distressing 6.2% – the strongest gain since November 1990. Up 0.4% for the month, Core CPI rose 4.6% y-o-y (high since July 1991). It’s worth noting that heightened inflationary pressures in 1990 were fueled by a fleeting spike in crude prices ahead of the first Persian Gulf War. Crude prices spiked from $16.50 in early-July to above $40 by November, only to trade back below $20 by February 1991. CPI jumped from July’s 4.8% y-o-y to 6.3% in November. Saddam’s military promptly crumbled, with the crude oil and inflationary spikes proving transitory. CPI was below 3.0% y-o-y within a year.

The New York Fed’s November survey of one-year Household Inflation Expectations jumped 0.4% for the month to 5.7%. Ignoring the summer of 2008’s ($140 crude-induced) spike to 5.1%, this month’s 4.9% reading of University of Michigan Consumer One-Year Inflation Expectations was the highest since 1981. Weighed down by inflation concerns, Consumer Expectations sank five points (21 points in 5 months!) to 62.8, the low since 2011. Producer Prices (PPI) gained 0.6% during October, with PPI up 8.6% y-o-y. (more…)

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