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MARKET ROUNDUP
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 Dow:The Fed keeps saying there’s no inflation …
The Fed keeps telling us prices will stay subdued for several quarters …
The Fed keeps promising to keep interest rates pegged to the ground for years …
But those Fed Fantasy-Land forecasts are crumbling before their very eyes.
Look, anyone with half a brain knows inflation is far worse than the half-baked numbers the government spits out. But now even the official figures are going ballistic. Just look at the details of this morning’s Consumer Price Index report …
 Food prices alone jumped 0.5 percent, the most in 34 months! Eggs are up by more than 10 percent … bacon will cost you 15.3 percent more than last year … and oranges and tangerines? They’ve jumped more than 17 percent in price. Hope you’re not at risk of scurvy!
Airfares are up a staggering 5.8 percent from April, the biggest monthly jump since July 1999.
Core inflation is now running as hot now as the Fed originally forecast it to be in 2016. Just like they’ve gotten everything from the housing bubble to the Internet boom wrong, it looks like they’re whiffing badly on yet another forecast here.
Personally, I’m sick and tired of the apologists out there who defend the Fed’s ridiculously easy policies. They are not helping the real economy; that’s slowly improving on its own.
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“I predict the Fed will actually start raising short-term interest rates as soon as early 2015 … and maybe even by the end of this year.” |
But they are inflating massive asset bubbles in things like ultra high-risk bonds and risky stocks.
They are fueling the biggest bubble in investor complacency since 2006-2007, right before the last market crash.
And they are completely out of step with the world we live in now, versus the crisis-era environment in 2008-09.
So you want an audacious forecast? You want to know what all my years of following the Fed tell me will happen next?
I believe the Fed could easily ramp up the pace of QE tapering to $15 billion a month from $10 billion at the conclusion of tomorrow’s meeting. They have more than enough justification to do so. If not, they’ll likely strongly hint at such a move at the next meeting set for July 29-30.
But I’ll go a step further. Last summer and fall, I predicted that the Fed would start tapering QE before the end of the year — at a time when most of Wall Street didn’t expect the first move until well into 2014. Sure enough, they started tapering in December.
Now, I predict the Fed will actually start raising short-term interest rates as soon as early 2015 … and maybe even by the end of this year. They’ll be forced to do that to combat excessive complacency, and the emerging inflation threat.
That should be bad for bond prices, but good for the dollar, particularly against the euro. That’s because our central bank is clearly ahead of the European Central Bank in the monetary policy and economic cycle, just like the Bank of England.
At the very least, hotter inflation figures could prove to be the spark that ignites a new volatility fire. So I’m looking to dial down on risk, raise some more cash, and tighten up stops here.
What about you? Is inflation an emerging threat — or one you’ve been dealing with for a long time? How do you think rising prices will impact Fed policy or stock and bond prices? Are there certain sectors that you think will benefit from higher inflation? Which ones will get hurt? Please do share your experiences and insight here.
| OUR READERS SPEAK |
The unsettled situation in Iraq persists, with pitched battles between ISIS militants, Shiite militiamen and Iraqi government forces continuing to rage to the north of Baghdad. Opinion over what we should or shouldn’t do also remains divided among Money and Markets readers.
Reader George S. said the invasion was “One of our greatest blunders ever” and added that “After we trashed Iraq and got rid of Saddam, two of the most likely outcomes were an ongoing civil war in Iraq and/or Iraq becoming an ally or a puppet of our great enemy, Iran.”
Meanwhile, Reader Tom said: “As long as America has a weak novice for president we will be challenged in every corner of the globe. The United States did not ask to inherit the role as the leader of the free world from the British at the end of WWII. It just happened. We cannot abrogate our responsibilities but those responsibilities do not necessarily include military intervention in every conflict. A solid believable American foreign policy is crucial to world stability.”
But Reader Elizabeth M. said some form of limited intervention may be necessary at this point: “It was obvious to me that we should never have taken out our complete military after making so much progress in Iraq. Our policy has always been to leave soldiers there to keep the peace even as we draw down. Why can’t those terrorists be dealt with from the air as they move along prior to their entry into Baghdad?”
Again, this is a fluid situation with constantly shifting front lines. So please continue to share your thoughts on the latest developments right here.
| OTHER DEVELOPMENTS OF THE DAY |
 At least one question came in about the Medtronic-Covidien merger, and how tax implications factor into the decision by Medtronic to launch its $43 billion bid. This story provides a bit more background that should prove helpful.
Reminder: You can let me know what you think by putting your comments here.
Until next time,
Mike Larson
Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.
{ 36 comments }
the quagmire if iran will be never ending due to the waring factions that have engaged in centuries of hate..religiously. we should have learned from the great carter accomplishment when those who sign peace papers are executed as a result. the news letter, written by richard maybury, warned of ever getting involved in the middle east over 20 years ago. he referred to the entire area as CHAOSTAN. this is certainly an accurate and prophetic description of the middle east region. now after many years of death and destruction, iran seems to be in worse condition than when we started.
You guys at Money and Markets may as well be the Tea Party and Fox News combined. I have a membership and stick with you as long as you at least appear to maintain your integtrity but if start lying like the bunch of professional liars at Fox News I will have to cut you loose.
I get it that you and your readers hate Obama…but you have to admit that no President has EVER faced the level of crisis, bigotry and hatred he has and he still has done pretty well despite it. If there were not so much of that and the right gave him the SAME courtesy that the Left gave ALL republican presidents we would be just fine by now.
You poor sop! The left is not Republican and the right is not Democratic. You fail to understand the dialectic ruse, as Mr. Renfrow so eloquently states in his book, “World Problems, Solutions, and a Plan” (http://nmt-psp.com).
I quote – “In the USA we have Republican and Democratic parties, both of which are described by people on the street as – “one and the sameâ€. Why won’t they recognize any other parties? It is, essentially, a trick – a fraud. It is a strategy of ideological divide-and conquer. The dialectic ruse dissipates the energy and coherency of its targets – unless you recognize the ruse as such.”
He also has a list of over 20 logical and legal reasons why your Prez., by law, should be IMPEACHED, plus proof via his Kenya B.C. that he was born in Africa. The truth is out there!
Just what are they lying about? Professional liars? Please give me an example because if i am being lied too I want to know it! Now there have been ball faced lies on other stations that I know about esp NBC< MSNBC and CNN. Their reporters were caught and some were fired and some stations just didn't care about the lies. If Fox is doing the same thing then please let me know and I will stop all support of their channel.
WAR WHAT IS IT GOOD FOR? you all know the answer!! The right questions STILL need to be asked! WHY did we want to go to war in the first place……and why return? 4500 Americans and 200,0000 others(but whose counting) as well as 40,000 disabled vet 1/2 who will never return to their previous jobs. oh yes and 2 trillion dollars.
Why did we destroy Libya and kill our former ally when he had 81% approval rating shortly before we bombed the place to oblivion?
These are the questions that need to be asked. Check Mish Shedlock’s blog for more “great” decisions being made right now in the Ukraine.
Regards, TE
Bernie Madoff could learn a lot from the Fed. Because of operation twist, the Fed has 3 Trillion dollars in long term debt on the books. The are only losing about 200 billion dollars now from their purchase prices. However, when interest rates rise that loss will rise to more than a trillion and we the people will have to wait almost 30 years to break even. Its absurd to think anyone wants to loan our Govt money for 30 years at just over 3%. Pity the fool that does. the Fed should quickly wind down the taper and reverse their balance sheet to shorter term maturities.
Inflation is of course starting to be a problem. But the folks that ‘calculate’ the numbers will start switching components to appease the Fed. Eggs too expensive? we can switch to tree bark. Oranges burning a hole in your pocket? switch to Tang powder. Airfare sky high? Hitch a ride on a cargo boat, who cares if it takes 3 weeks to cross the Atlantic. China is not the only one that can play with the numbers, Our govt at least is transparent about the manipulation, at least for now…
Everyone who has been to a supermarket recently knows that everything has increased in price quite substantially. The only ones who don’t know this are the bean counters in D.C.
Even IMF says raise min wage to counter this trend. Also an increase for senior citizens would not go amiss!
Re Iraq – yes – was obvious from the get go. But, if we go in again – let’s not make a half hearted effort. Go full bore – annihilate Al Quaida and their ilk, root and branch.
Drones should be usable with ease as the terrain, unlike Afghanistan, is not as mountainous. A few tank squadrons should take care of them quick time backed up by air bombardment and strafing.
And stop giving US arms to groups who are likely to turn them against us sooner or later. in fact I would equip every tank, airplane, and other heavy equipment with a fail safe device so that we could destroy the item remotely, if turned against us.
Mike ,
What does this mean for gold , supposedly inflation sensitive ?
Best,
JH.
In my war, WW2, guys were sent into battle after 8 weeks of basic training.When we stupidly invaded Iraq, we trained their army for 8 years, and they still folded, deserted, and turned weapons we supplied the on our trainers and fighters. There is unending generational bad tribal blood between the Sunnis and the Shiites, and President Obama, God bless him, is standing up to the war mongers in Congress, who encouraged him to delay by years his promise to get us out of Iraq. Goofball Petraeus introduced a new method to execute war, make friends with the enemy, and don’t shoot them until they shoot at you. Soldiers who survived that are now mentally and emotionally damaged. If President Obama is unsuccessful in keeping us out of all the scary civil unrest in the mid-east, where we will once again get bogged down, look for the newly-made friends, Russia and China to jump at the opportunity to move against their neighbors.
Only an insane person can say the situation in Iraq has improved. Probably the killing of 1.5 million people in that country and the seize of the hidrocarbons in Iraq are the arguments to say the situation in Iraq has improved. I can believe it.
Food is the only inflation that we see, hidden inflation has been going on for the most part unabated for decades.
Thus the average person is poorer, and will continue to get poorer, the scary part for Government is that this person, can see this type of inflation,
Many young, no longer care, an example from a financial point of view:- I know a person who knows another, who has many speeding tickets, so much so, that with interest he owes $4000.00. If they garnish his wages, he will quit and go on welfare or another jurisdiction Thus he just tears up the notice, He owns nothing of value. He has no real tomorrow.
Another, I had to park in a particular area, it was difficult as the Parking Meters were plugged, so that you could put in a coin, and not be able to retrieve it without a strong pair of tweezers. One day I arrived and watched a teen collect money from the meters he had plugged, some weeks later he was gone, he was caught, jailed for 30 days and placed in care, and taught a trade, They could not afford his potential.
Another case, a tenants kid was caught stealing from another tenants residence. The RCMP arrested him and placed him in a home and taught him a trade, again they could not afford his potential costs to society.
No matter how hard Gov’t tries to control food prices, they have been unable to do so. They could kill individual farmers, but that would be too prejudice, and citizens would rebel. To make matters worse, Citizens may demand GE Labeling. This would cause huge obvious inflation.
Even allowing hidden GE products, are causing social anger, because non GE foods are very expensive, more than most can afford. This has a Social Cost, knowing they can only afford contaminated food. This impress upon the poor, how really poor they are indeed.
The Rich and those who will do whatever it takes to try to join them, continue to profit from hidden Financial Paper Inflation.
let facttions fight it out. thr british,after ww1,drew the country lines,and disregarded the diferences involed. we made a holible mistake,invvading Iraq.
Mike,
I’m a novice when it comes to the market. I’m learning to take care of my portfolio only because I’m out of work and I need something meaningful to do, plus my broker was a jerk, while I was taken great care of other people’s money he was squandering mine. I’ve been analyzing about five or six analysis comparing their positions. It’s very confusing within your group one will say buy and hold no stop loss and your saying sell and be cautious. I can understand why but maybe it might be too soon, because no one really wants to raise rates. All my value stocks were up today and I have no protection and I was told not to sell by someone within your group. Also when stocks and bonds are going down and everyone is selling shouldn’t we be buying? Should I buy bonds when they hit bottom because the only other alternative is up eventually. Only one analysis addresses the bond market as a buy when it hits bottom. Will you ever recommend bonds again? Do you consider Gold as a hedge instead of the inverse position, because within your group it’s also being suggested as now is the time to buy?
It should be obvious to even the casual overly wealthy shopper that prices have risen in every part of the shopping world. The lack of interest income has been a double whammy to those of us partially depending on that source for discretionary purchases. The Fed is and has always been unable to solve any major problem and we are at the tipping point of going from bad to hurt. The big problem for the immediate future is lack of income to match daily price increases. Every sector is facing increasing pressure to raise prices for their goods or services. The likely outcome is stagflation and not rising tide that lifts all boats. It is likely that when the restraints break that the surge that follows will be devastating to the lower 95%.
You can cherry pick certain areas where prices are indeed going up. And I know that OUR government numbers are hard to trust. But if you look at the worldwide numbers, you see that the YOY Inflation Rates for the Eurozone, the US and China are declining. This is a worldwide phenomena. From March 2011 to Feb 2014: China CPI went from approx 5.4% to 2%, the Eurozone HICP went from approx 2.8% to 0.8% and the U.S. went from approx 2.8% to approx 1%. I believe we are in deflation. There are some items that are bucking the trend……and at some point this all could turn to inflation or even hyperinflation…..but the overall world economy says deflation for now.
Inflation is not bad as long as you don’t drive, eat or live under a roof.
It is a mistery to me what makes these people think that we have a “responsibility” to regulate the conduct of sovereign nations, whether backwards or advanced, and the privilege to decide how they should or should not behave both domestically or in their foreign policies…. what arrogance makes them think and express such a conviction that we have the authority to determine to intervene in any form, specially militarily…Who are we to assume the role of world bully controller of others. Irak, LIKE ANY AND MANY OTHER NATIONS, if they do not threaten us with physical aggression, should be respected in their sovereignity and left alone. If we continue on this already long path of of word bully imposing our will by force, the day will come when we will pay dearly for our arrogance and superiority complex.and the day may not be long in coming since many already hate us and there other strong powers getting ready to challenge and stop us….We must stop the bullying !!!
Well. What is a person to do. I can tell u what I’m doing loading up on silver and ergs for interest rates like TBf and Tbt right now not doing much but will be by the end of the year…. With Obama in office everything is coming apart at the seams overseas the Mexican border the economy lord help us all
Either the Feds are trying to pull the wool over our eyes, or they have their heads so far up their derrieres that they will never again see the light of day, Everything is higher in price because retailers have down-sized everything. A pound is now 14 oz,, toilet paper rolls and paper towels have less on the rolls, I could go on listing MANY products that have been down-sized. Therefore, we are paying the same price in “some” cases on the sticker/bar code, but we are receiving LESS, therefore we have a not so hidden cost of living INCREASE! Do they REALLY think that we are that stupid not to notice these things? Would I like to have 15 minutes at a Fed meeting with no interruptions !!!
Hi Mike, Always enjoy your articles!
Why don’t we stop the fed in their tracks by suggesting they are printing money through the Corporation of the UNITED STATES OF AMERICA, and no the Government of the United States of America.
have you ever stopped to question why certain names are always in ALL UPPER CASE letters, this is NO accident, it is done intenionally to create a different legal entity.
Look up the blacks law dictionary for capitus diminutu maxima (This is the law dictionary definition for all uppper case letter) and you will notice the definition is slave of the state all human rights lost.
I am NOT a crack pot Mike these are facts, and I got this education years ago takeing a human rights and freedoms course. Haven’t you had enough of the war machine killing oithers and now killign our own country.
Look in your wallet, ALL your id is UPPER CASE letters, ignore this and you might as well throw what few freeoms you have away.
Cheers
Alan Gough
760-898-5110
As for the Iraq present crisis, does anyone ever learn ANYTHING from history? Ever since Mohammad died in the 7th century (I believe),the Shiites and the Sunnis have been at each others throats. The Sunnis believe that any good Muslim can be the leader of Islam, while the Shiites believe that the leader must come from Mohammad’s blood line.
Now I ask you intelligent people reading this,do you REALLY think that the United States or any other nation can solve this religious issue in the short term? NO WAY, it is a fool’s errand.
We are headed for an Inflationary Depression that will make the 30s look like prosperous times. It is starting with inflation in essential things like food, energy, housing, etc. that will cause people to economize elsewhere where possible. A new and more expensive car, home, boat, media system, suit, etc. isn’t usually an absolute need, and people will put off those purchases for a time, especially if they have trouble with debt and higher interest rates. Makers and sellers of these things will find their markets reduced and profits falling and will need to lay off staff, so already high unemployment will begin to rise again, especially with politicians trying to buy votes via higher minimum wage laws that will add costs and lock in inflation and unemployment .They never worry about making others pay to increase their own power and wealth. It is starting slowly, but like a carnival ride will soon pick up speed. I was a kid during the 30s, and my dad was luckily able to stay employed, but even at 85, I fear I’m going to experience my second Depression, and with little resources to handle the inflation part.
Addendum: Like in the 30s, this Depression will end with a great war. If the US survives it will be changed in ways that I doubt anyone really wants to see.
Respected Canadian Prof Michel Chossudovsky had this to say about the situation in Iraq:
“US-NATO is involved in the recruitment, training and financing of ISIS death squads operating in both Iraq and Syria. The scenario is to arm and equip them on both sides, finance them with advanced weapons systems and then “let them fightâ€
http://www.informationclearinghouse.info/article38812.htm
Hi from the UK,
how do the Canadian $ and the American $ stand with regard to (say) USA’s demise?
What would happen to stock prices in Canada?
As short a question as possible.
Kind Regards
John S.Butler
I just laugh at each and every statement about “no inflation”. What planet do these pinheads live on? I rehab and flip property for a living. I can tell you that all materials are way up. Fuel to transport those materials is up. Even printer ink, to print the advertising, is up. And the same can be said for work clothes. Even cheap Chinese made tools are way up. I am totally convinced that it is a conspiracy of top government officials to state that there is no inflation, and they do so in an attempt to drain the workers of their resources to force them to pay for the mistakes of the big banks, big government, and Wall Street.
Hey,Mike:
How about educating us in regard to buying Treasury Bond ETFs and when to buy them?
How do you track indicators for this? Which ETF’s do you favor?
Thanks.
Isn’t this ISIS group, that we are now calling terrorist, the same group that we called “Freedom Fighters” when they were fighting against Assad in Syria??!! And back when they were in Syria we had political hacks from both sides of the aisle demanding that we send them weapons! What a mess! Stay the heck out of it!
Blood and treasure from America have no lasting meaning to Suni or Sheite.
What they do respect is a dedicatid force that fights to win in the shortest time as passible.
To nice a treatment is preceived as a weekness. I do not mean take no prisonors.
Treating them as the way they are treated at Gitmo is the sorriest excuse of POW’s treating them like royalty. They should be working there asses off for there food and lodging as humanlly as possible
American CIA imposed Sadam Hussein in Iraq. America set Sadam up when he wanted to attack Kuwait. America made war upon Sadam with it’s propaganda about WMD’s. The problem is American politics and meddling in international affairs that don’t need meddling by US. Now that the situation is in a crisis mode (of American making) we need to stop and think if we should be there at all. The same goes for Libya and Syria. George Washington cautioned US to not meddle in Europe’s affairs. Why not listen to him and start behaving like a mature nation and quit pushing our weight around everywhere in the world like a teenager on steroids. Keep out of the Middle East – it’s a huge hole to throw money and lives into for nothing. It’s a no win situation.
This country has gone to the crapper since Obama has been in office. There are only so many times the President can blame the whole country’s situation on Bush. What has he done since he’s been in office. There has been a Benghazi cover-up, Bergdahl story and bypassing Congress, the mistreatment of veterans, and even the IRS has lost email correspondence (Poof!) vital to providing proof of misconduct and all under the leadership of the current President. Remind me if Watergate had this much bad press. Where is a candidate that has the same qualities as Reagan? This has been the worst President I have seen in my lifetime.
how is all this going to affect adjustable rate mortgages? how long before the super low interest rates end ahd send millions of folks with adjustables into foreclosure?
Not pertaining to the Mortgage info above.. I was little set back to get an email 906 this am to sell JNUG after I renew my membership and just bought JNUG sure mad a little. I think after the $5 run the day before should had been when the sell order should of went out not after the stock dropped $1.35 in opening today if you say you can get it right well yeah I could of got that one after $3.40 drop today>>>o you say sell so most do, so of course stock drops just from that..I dont know.. maybe I am missing something here. Like I said anybody can say sell because you think it’s going to drop and it does as our members sell. a little late
When there is Inflation, things are not on Theory-wise. Theory is of and you get that of and there is nothing to work than that and worked. So what do you talk; it is only when things are not on Theory you get Inflation. You work to calculate or Analyze what is of before civilization idea[that is civilization you talk] or before Development or before Improvement. Your Idea of work is what you calculate is in Analysis of what laborers can in Industry and not of Education or Discovery. You do discovery but it is used to work in Analysis of what you can employ laborers for and manage them to do with their non-educative idea. That is why there is inflation as you are not on Theory or of it to check. It does not mean you use machine or Idea of Discovery to do but how things were before discovery you were working. Analysis of stupid is to get stupid function in definition and its result is how stupid it is. When you analyze poison to take that does not mean it does not affect you. The Chemistry works or is the same to work. So there is no Development or Improvement or so. So we are in the same idea of improvement and gain of idea as in PRIMITIVE TIMES. So you are like World countries. in gain and are. Deflation does not come but it is of old idea as in Primitive Time or Days to work of Old People to try and work and are firm of as of try to gain and correct of as they are and work that of. That is Idea before civilization firm.
MIKE LARSEN, I have been hearing about Fed Interest rate hikes for 3 years. Charles Goyette is a big fan of interest rate hikes. YET IT CONTINUES TO GO DOWN, OR STAY FLAT. Almost ZERO. 2011 was the year 2012 would crash and burn. 2012 was the year the junk bond would crash, sending shock waves thru the financial community. 2013 was the year that 2014 would see massive collapse in the dollar, the economy, and life as we know it. Here it is and now you push it to 2015. MAYBE AFTER BEING WRONG SO MANY TIME, AND SO OFTEN AND STEERING PEOPLE INTO LOSING SOOOOOOO MUCH MONEY, you hone up and just say………I don’t know any more. Better than playin with other people’s money at no cost to you. care to share Mike Larsen?