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The Labor Department’s latest summary of the Consumer Price Index, released on Friday, shows that price increases accelerated again during May, with the “all items index” increasing 8.6% from one year ago, and a 1% increase month-over-month. That follows a one-month reprieve in April, when the CPI numbers were up 8.3%, giving some people hope that inflation had peaked. NB: Look carefully at the chart of the 12 month percentage change below. That little hook at the end could be worth millions to us. It is my belief inflation has peeked.. And its not just the chart

 

The 8.6% increase is the highest since 1981, and was higher than expected. The “core CPI,” which excludes food and energy prices, increased 6%, which was also more than expected, and many of the broader price increases were due to the continuous upward march of food, gas, and shelter costs. Shelter costs, for instance, are up 5.5% year-over-year, gasoline costs (of all types) are up 48.7% year-over-year, and food prices increased 10.1% since last May—and were up 1.2% since April. Other notable price increases from the latest CPI Index include an increase of 12.6% for airline fares, and a 2.9% increase in dairy products year-over-year.

Most of what the FED measures  in terms of inflation are survey-based, observable inflation measures. The bond market presents an alternative gauges of inflation in what are known as market-based inflation measures.  Real rates are a better approximation for financial conditions, and they allow for easier historical comparisons across time periods

Look at the chart above. It shows inflation starting to peek at the begining of the month. The numbers have donw nothing but improve since then. This is a reliable to use the bond markets as a inflation indicator. As you can see rated that were negative have now turned positive. And if we add the fact that after this chart was generated the 10 year yield soared above 3%. We can look directly at the US Treasury for nominal interest rates, ten year US Treasury filtered for inflation. Provide us  a  “insiders” view into how economic expectations are filtering through into bond markets. This chart is at the end of May. As we speak the 30 year long bond  is trading over 3.25 %. As you can see  interest rates are already pricing in the 3 or 4 more FED coming 50 bases point increases. The market and the FED always get it wrong  inflation is peeking. This is further indicated by by the supply chain tracker chart below. Please note they will over tighten….. This is not your typical inflation inflation.  That is why the algoes AI assholes and doctoral pompous pricks and the clueless FED are having so much trouble figuring it out. The Russian invasion and stupid sanctions on Russian oil and gas created artificial shortages….. Easy to back away from. Supply chain disruptions caused prices to soar. And now the supply chains is OVERSUPPLYED. Want proof just go to the big box stores and see the deflationary in nature massive discounts.

Today’s inflation — which is running at the fastest pace since 1982 — boils down to a simple supply chain mismatch. Economic reopening saw Americans rush back to their normal spending habits armed with pent-up demand and stimulus dollars. But while shoppers’ demand rebounded almost immediately, companies were caught somewhat flat-footed. Product shortages quickly emerged and the imbalance between supply and demand contributed to historically elevated inflation. The supply side of the equation now seems to be steadily healing. Various indicators of supply-chain strain eased further in May after seemingly peaking in March, according to a new index created by Oxford Economics.See chart below. Logistics stress is now the lowest its been since the start of the year, and the trend suggests improvement is accelerating as the broader economy nears a full recovery. Lower stress means more supplies and in fact distribution channels are becoming over supply. Supply above demand means prices will now come down. It will take a few months for the traditional gauges to pick this up.

Oxford Economics

The number of cargo ships waiting to unload in the ports of Los Angeles and Long Beach, California fell for a fourth straight month in May. Inventories rose, helping close the supply-demand gap as Americans’ spending held strong. Prices for goods and services continued to climb, but at a slower pace than the month prior.  The Freights Baltic Index, which tracks rates for 40-foot shipping containers, fell to $7,370 for the week that ended June 3. That’s the lowest reading since July 2021 and down from the September high of $11,100. Another driver of inflation that is abating. See chart below

The steady decline in shipping rates offers an even rosier picture of the supply chain’s recovery. The latest declines are among the largest since rates peaked in the fall of 2022. Lower shipping rates help ease inflationary pressures throughout the economy, as elevated prices in the logistics sector lead to higher input costs for all kinds of manufacturers and services. In conclusion: I expect downward pressure on the stock market to continue. I am looking for a further velocity breakdown to the down side. It could come any time as the market believes inflation will run out of control and throw in the towel. This is close most all analysts are extremely negative.That is a wrong assessment. Inflation is peeking and soon will be seen the the CPI and PPI topping. These are lagging indicators. When we see capitulation we will buy back our shorts and add to the long side looking for a relief rally. If we get it right we will sell out long positions. Its going to be a rough and dangerous ride. And i can be full of shit and we we will lose our collective asses…..

 

 

 

 

 

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NEW YORK, June 10 (Reuters) – The dollar climbed to a near four-week high against a basket of currencies on Friday, after data showed U.S. consumer prices accelerated in May, strengthening expectations the Federal Reserve may have to continue with interest rate hikes through September to combat inflation. In the 12 months through May, the CPI increased 8.6% after rising 8.3% in April. Economists had hoped that the annual CPI rate peaked in April.  The inflation report was published ahead of an anticipated second 50 basis points rate hike from the Fed next Wednesday. The U.S. central bank is expected to raise its policy interest rate by an additional half a percentage point in July. It has hiked the overnight rate by 75 basis points since March. “Inflation is now at a 40-year high with little evidence that it has peaked,” said John Doyle, vice president of dealing and trading at Monex USA. “Stocks are extending losses on the expectation the Fed could find the scope to speed up rate hikes. The greenback is gaining on policy divergence and risk-off trading,” Doyle said. The U.S. Dollar Currency Index , which tracks the greenback against six other major currencies, was 0.8% higher at 104.16, its highest since May 17, and within sight of 105.01, the two-decade high touched in mid-May. For the week, the index was up nearly 2%, its best weekly performance in 6 weeks. The dollar was up 0.79% against the Swiss franc at 0.9881 francs after the U.S. Treasury Department on Friday said Switzerland continued to exceed its thresholds for possible currency manipulation under a 2015 U.S. trade law, but refrained from branding it a currency manipulator. With the U.S. inflation data knocking investors’ risk appetite, the risk-sensitive Australian dollar reversed direction to trade down 0.58% on the day. Sterling fell 1.5% to $1.2315 and was set for a second consecutive week of declines as Britain’s gloomy economic outlook left investors on edge. NN: We bought more Pounds and Euro’s on Fridays close. The US is seeing higher inflation and the Fed is moving faster at raising rates then the EU or England. We believe Pounds and Euro’s at these levels are a great bargain. I am  prepared to look stupid on this trade for a year. By that time oil disruptions will ease (prices will peek) as the world will stop pounding its dick in the sand. They will find some excuse to left sanctions on Russia and the Ukraine will resort back to its historic servitude to the Kremlin. Supply lines will be restored and demand destruction and central banks interest rates will catch up with inflation. And that means these currency valuations visa vi the dollar will return to historic levels.

 

U.S. stock-index futures extended a fall Friday after an eagerly awaited inflation reading came in much hotter than expected, indicating the Federal Reserve will need to keep pressing hard on the brakes to get surging price pressures under control.

• S&P 500 futures ES00, -1.65% fell 1.5% to 3,957.
• Dow Jones Industrial Average futures YM00, -1.45% dropped 409 points, or 1.3%, to 31,827.
• Nasdaq-100 futures ES00, -1.65% were down 1.7% at 12.096.75. All three indexes booked their worst daily percentage drops since May 18, according to FactSet data.

Wall Street is looking for a sign, any sign, that U.S. inflation is coming off a rapid boil. But they are unlikely to find much cooling off in May’s report on consumer prices. The consumer price index is expected to show a large 0.7% increase when the report is released Friday morning — more than double the gain in the prior month. And the number could be even higher after another spike in the cost of gasoline as well as steadily rising rents and food prices. The increase inflation over the past year, meanwhile, is forecast to stay near a 40-year high of 8.4%. In April, the yearly rate fell for the first time in eight months to 8.3%. The prior 8.5% reading in March was the biggest since December of 1981. The big worry on Wall Street DJIA, -1.94% SPX, -2.38% is that inflation is shifting to services from goods. That’s because rising prices in services — think rent, hotel rates and plane tickets — tend to be harder to reverse and are often a sign inflation is becoming embedded in the economy. Until very recently, most of the inflation in the U.S. was concentrated in goods such as new and used vehicles, gasoline, food and other consumer goods. Goods inflation has been driven by a combination of high demand and ongoing shortages of key materials such as computer chips in the wake of the pandemic. While the supply shortages appear to be starting to ease, the higher cost of gas, grains and other crucial materials has added to the cost of services. Restaurants are paying higher prices for foodstuffs, for example, and home builders are still hampered by high costs of supplies and labor. Last month, services accounted for about 40% of inflation —and the number is rising. The yearly rate of service inflation has almost doubled to 4.9% in April from last summer. “Recently the drivers of inflation have been evolving towards services,” said U.S. economist Alex Pelle of Mizuho Securities. By far the biggest contributor to service inflation has been escalating rents and home prices. Shelter is the single biggest component of the consumer price index, making up one-third of the overall price gauge. Rents have climbed 4.8% in the past year — the fastest gain since 1987. Owing to higher rents, the so-called core rate of inflation is forecast to rise a sharp 0.5% in May. That would put the yearly rate at a steep 5.9% vs. 6.2% in March. The core rate omits food and energy and is seen as a more reliable predictor of future inflation trends. Food and gas price often undergo large swings and seldom remain high for more than a few years at a time. The Federal Reserve, the nation’s inflation guardian, can’t ignore higher food and gas prices, however. They are household staples and are generating much of the public and political outcry about high inflation. The central bank is on track to raise interest rates sharply over the next year and eventually that should slow the economy enough to start to corral inflation. The 30-year fixed mortgage rate, for example, has doubled to nearly 5.5% from 2.7.5% last fall. Higher rates should dampen demand for housing and partly rein in housing costs, but it won’t happen overnight. What does that mean for the Fed? The central bank is going to have to keep raising interest rates rapidly to show it means business — or risk higher inflation in the long run. “Any thought of a ‘pause’ in Fed rate hikes in September, as Atlanta Fed President [Raphael] Bostic mused about, seems highly improbable,” said Stephen Stanley, chief economist at Amherst Pierpont Securities. NN: This is one of these deals where i may be outsmarting myself….. My sniff is today’s much anticipated CPI report will show  “transitory” inflation is indeed embedded and growing like metastasized skin cancer in a sun tanning pallor. AND is i can guess lucky it will drive the stock market down. I expect a est of the lows and then a dead cat bounce. Honestly that is a lot of complicated  things to get right to make money in this trade.

Major stock markets in the United States closed lower on Thursday, following the latest European Central Bank’s monetary policy statement. In addition, International Monetary Fund revealed they may cut down the global growth forecast for the third time this year. Furthermore, the figures of the initial jobless claim report in the United States increased by 27,000 to 229,000 in the week ending June 4. The Dow Jones Industrial Average index closed with a 1.94% or a 639-point loss, with the Boeing Company being its worst performer at 4.23%. Nasdaq 100 decreased 2.74% and the S&P 500 was 2.38% lower at the end of trading, both pulled down by Moderna Inc’s 9.76% loss. Rate-sensitive growth stocks are under pressure as the benchmark U.S. 10-year Treasury yield climbed to as much as 3.07%, its highest level since May 11. Inflation worries came to the fore ahead of the U.S. consumer price index (CPI) report on Friday as Brent crude prices rose above $123 a barrel. “There is a straight line read from higher prices at the pump for the U.S. consumer to higher U.S. inflation,” said Huw Roberts, head of analytics at Quant Insight.

 

 

“The hope was that Friday’s CPI report would be ammunition for the peak inflation argument and the crude oil move is upsetting that.” Consumer prices are expected to have risen 0.7% in May, while the core consumer price index, which excludes the volatile food and energy sectors, rose 0.5% in the month. Investors fear a hot reading on inflation could keep the U.S. Federal Reserve on its path to raise interest rates aggressively against the backdrop of a volatile stock market, strong consumer spending and tight labor conditions. “Right now, we are at the confluence of four headwinds – a slowdown in economic growth rate in the United States, Fed tightening monetary policy, a rise in interest rates and a red hot inflation,” said David Sekera, chief U.S. market strategist, at Morningstar. NN: Tomorrows CPI report has become larger then life. I have a strategy to complicated for individuals. I do not want to tip me hand… That is why the 2 weeks of silence. After the report all will be revealed to you.

Three of the key supply-side factors driving today’s global inflation levels have already turned around, meaning relief could be on the horizon for shoppers worldwide.

Price Relief

Three big inputs to global inflation are seen easing from recent peaks

Sources: InSpectrum Tech Inc., Drewry Shipping Consultants, Green Markets

Notes: InSpectrum contract prices reported monthly. Drewry (price per 40-foot container) and Green Market (per short ton) indexes are weekly; last figure for month shown here

• Bellwether semiconductor price — a barometer of costs of finished electronics products as diverse as laptops, dishwashers, LED bulbs, and medical devices delivered worldwide — is now half its July 2018 peak and down 14% from the middle of last year. 
• Spot rate for shipping containers — which tells us more about expenses we can expect later in the pipeline for apparel in Chicago, luxury items in Singapore or home furnishings in Europe — has declined 26% since its September 2021 all-time high. 
• North America’s fertilizer prices — an indicator of where global food inflation is going, including bills for tomatoes in London or onions for sale in a Johannesburg market — is 24% below its record high in March.    

With inflation now exceeding 8% in the euro area, expected to stay above that level in the US when May data comes out on Friday and on the march in Asia too, central bankers around the world are scrambling to contain it.

Hawkish Stance

More than 60 central banks have hiked rates this year

Source: Bloomberg

Note: Mapped data show change in interest rates in basis points for distinct central banks since the start of 2022.

Even as central bankers raise rates, more economists are coalescing around the idea that peak inflation is behind us — though there will be a lag before the lower costs of raw materials filter through to the prices shoppers see.  Though few forecasters are predicting a return to pre-pandemic prices in the short run, global retail giants like Walmart Inc. are now struggling to unload bloated inventory to a less enthusiastic shopper. So a moderation in those supply-side pressures could eventually allow central bankers to slow their tightening cycles.  “While inflation in some parts of the world are yet to peak, there are at least some signs emerging that we may not be too far off in terms of a turning point at which we start to see the annual inflation rate start to head lower,” said Khoon Goh, Singapore-based head of Asia research at Australia & New Zealand Banking Group. China’s producer prices peaked in late 2021 and are beginning to moderate. Economists are forecasting a 6.5% rise in factory prices in May from a year earlier, down from 8% in April.  That’s a promising development for relief in imported-goods inflation worldwide, said Goh. In addition, lower container freight rates and improving supplier delivery times in purchasing managers indexes point to easing bottlenecks that should curb price pressures later this year, he said. NN: We are experiencing 3 types of inflation:

1. Supply chain
2. Commodities shortages
3. Energy supply

The supply chain is now overfilled. China is back. And the smartie pants like Wall Mart hired their own ships and filled up their warehouses. They are sitting on billions in overstock that will be liquidated at steep discounts… Just the opposite of consumer goods  Inflation

Commodity shortages in food are 1 season away from being resoled. Sky high price for food goods have seen farmers and producers over plant. Wheat peeked at $13.00 a bushel. Now its at $10.00. Corn touched $10.00 now its now approaching $7.00. Already grain prices are plunging and its not even harvest time which will be a record. As far as minerals and metal shortages alternative suppliers have cranked up operations. Platinum hit $1,200 a ounce now its trading at $1,000. Palladium hit $3000 a ounce now at $2000. You can see this in cooper and steel prices which are plunging. Lumber hit $1,400 now trading at $600.

The last monster on the supply side is energy. Prices are so high that we are starting to see demand destruction and oil looks to me like its topping.

Wage push inflation. With the slaves sitting fat and sassy with happy checks and a 35,000 Dow. It was why worry be happy and thanks to Robin Hood all they had to do was check the follow me off the cliff trade system to se how much they made. Well that fantasy is over as the masses are racking up hugh stock market losses. And the happy check money is running out. The work force is expanding and wage growth has stopped as the masses compete once again with each other for jobs.

The inflation rate still high has peeked. The worst is over. That does not mean the Fed does not have to raise rates. But it does mean  that prices will moderate and drop. The perfect ingredients are in place for a BIG bear market rally.

We are now in a bull spread and all i can say is GOD please have mercy on me.