Inconceivable!
Every time we heard Jay Powell utter the word “transitory” with respect to inflation over these past 8 months we thought of “The Princess Bride”, Inigo Montoya, and Vizzini.
Because, just like Vizzini, Powell kept using the word and we wanted Inigo to show up and say, “You keep using that word. I do not think it means what you think it means.” It might just be that the whole “transitory” bologna…we mean, narrative met its demise yesterday with the CPI YOY print of 6.2%, its highest since October 1990. Just in case you’re wondering, the CPI YOY was 1.4% in December 2020. And the day prior, the PPI YOY was 12 ½%, its highest reading since October 1980 (not a typo). Non-transitorily, the PPI YOY figures for the last three months have been 10 ½%, 11.8%, and 12 ½%. Many years ago, we kept a list of failed Wall Street “mantras.” Though “transitory” came from the Fed, and not the Street, it will be added ignominiously.
Our disdain for the word was the impetus for our non-indicator below. Over the last 70+ years there have only been four prior periods where inflation ran hotter and longer than the current period. In three of those periods the S&P suffered (please see “Bread and Circuses” Nov 10 for details). We should be comforted, however, to know that it only took 8 months for the Fed, the Whitehouse, and the general media to notice (it made the DailyMail yesterday).
The great Milton Friedman once observed, “Inflation is made in one place and one place only – Washington, DC. The chief source of it is the Federal Reserve Board and a major accomplice sits in the halls of Congress.” We could use a man like Milton Friedman, again.
Let’s play market Jeopardy. Here goes –
“Alex, we’ll take Economic Indicators for $600?”
“ The number of times over the last 52 years when CPI YOY has been at 6.2% with the Fed Funds Rate at 0.”
“What is zero times, Alex”
We went through a boatload of charts yesterday and have a list of more than 60 stocks – presented below – that are weakening or weak based on our Technical Scoring System. We went through each of these stocks (daily, weekly, and monthly) and are comfortable presenting them with a negative bias.
In addition to the above equity review, we also went over our currency pairs and we believe the US$ will work better against DKK, EUR, GBP, JPY, MXN, SEK, and ZAR. Charts follow below.
US $ Index Spot – Refresh
USDDKK
EURUSD
GBPUSD
USDJPY
USDMXN
USDSEK
USDZAR
