Friday, June 11, 2021

Morning Note: There Must Be Something Wrong With Me -- And/Or -- Economists Should Read Popper

Doing a little thinking out loud (on my keyboard) this morning as I catch some of the noise around inflation prospects among the pundits.

Not sure if it's always been there and I'm just now noticing it, or if the discourse around general conditions -- even when we're not talking meme stocks, cryptocurrency and bubbles in general -- has grown quite rancorous of late. You'd think we're talking politics (or crypto), as opposed to boring old economics!

Suffice to say, if your assessment says that certain forces are aligning in a manner that history suggests increases the odds that inflation will be higher for longer than we've experienced the past few decades, well... there must be something wrong with you!

Yep, for the moment, and in the opinion of a certain highly-credentialed clique in the punditry, there's definitely something wrong with yours truly. 

And, my, how, given the recent decline in bond yields, and a rolling over of market-based inflation expectations, those pundits are pouncing!

Here are a few tidbits from a popular (in economic circles) pundit (whose work I highly respect, by the way):

"Guess what? The demand boom is over. Charts don’t lie – once supply comes back on stream, the demand downturn will cause inflation to morph into deflation."

"The message from the bond market is that these last two inflation reports were already priced in."

"Stop the presses! Inflation at its highest level since August 2008 when it last gripped a 5-handle. A year later... swung to -1.5%!! Who called for that??"

As for yours truly, if the latest signal from the bond market is correct, then things are running true to the script I've laid out in a video or two lately (watch this one from the 9:00 mark to the 13:00 mark): I.e., that, as inflation dips as bottle necks open up, I-told-you-so commentary like the above will abound. Thereafter, ultimately, I suspect we'll settle into a structurally-rising inflation regime that will likely see the commodities space into what will turn out to be an extended bull market. 

Time will tell...  and we'll stay on our toes...

Asian stocks were mixed overnight, with 7 of the 16 markets we track closing lower.

Europe, on the other hand, is up nearly across the board (though modestly): 17 of the 19 bourses we follow are in the green a bit as I type.

U.S. equities are (save for smallcaps) essentially flat to start the day: Dow down 59 points (0.17%), SP500 down 0.04%, SP500 Equal Weight up 0.02%, Nasdaq 100 down 0.06%, Nasdaq Comp down 0.02%, Russell 2000 up 0.57%.

The VIX (SP500 implied volatility) is down 3.04%. VXN (Nasdaq i.v.) is down 2.25%.

Oil futures are up 0.67%, gold's down 1.05%, silver's up 0.17%, copper futures are up 1.32% and the ag complex is down 1.14%.

The 10-year treasury is down (yield up) and the dollar is up a big 0.49%.

Led by solar stocks, metals miners, uranium miners, oil services stocks and bank stocks -- but dragged by gold miners, ag futures, gold, healthcare stocks and emerging market equities -- our core mix is off 0.16% to start the session.

As Karl Popper pointed out in this oft-quoted (herein) line:

"We can assert the truth, attain the truth, often enough. But we can never attain certainty. For we know – in the sense of conjectural knowledge – that there are people with a delusion that they are Einstein"

Yeah, economists really should read Popper, and understand/respect that, given the nearly-infinite dynamics swirling within the global economy, all related knowledge is conjectural...

Have a great day!

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