Wednesday, April 13, 2022

Morning Note: One Wonders...

Per yesterday's note, considering some evidence of supply chains easing, rising inventories, base effects and so on, inflation, on a rate of change basis, should slow a bit over the coming months. 

That said -- and it'll happen on the producer end as well -- this morning's PPI (Producer Price Index) release... well, we'll let the graph speak for itself:

The question being, will producers be able to pass along those spiraling costs to their end customer. Well, the short answer is yes... for the time being...

That said, per the below from Bespoke Investment Group's morning note, one wonders to what degree (read profit margin risk), and for how long:
"Consumer balance sheets remain strong coming out of COVID (for now) due to increased savings and a flood of stimulus payments but faced with higher costs and geopolitical uncertainty, there is a major disconnect between how consumers feel and the current health of their checking accounts."

Remember, the cure for higher prices is higher prices...

Asian equities did okay overnight, with 10 of the 16 markets we track closing higher.

Europe's struggling this morning, with 12 of the 19 bourses we follow in the red, as I type.

US stocks are green to start the session: Dow up 38 points (0.11%), SP500 up 0.18%, SP500 Equal Weight up 0.31%, Nasdaq 100 up 0.82%, Nasdaq Comp up 0.87%, Russell 2000 up 0.83%.

The VIX sits at 23.44, down 3.38%.

Oil futures are up 1.36%, gold's up 0.44%, silver's up 1.11%, copper futures are down 0.34% and the ag complex (DBA) is down 0.64%.

The 10-year treasury is up (yield down) and the dollar is up 0.03%.

Among our 39 core positions (excluding cash and short-term bond ETF), 28 -- led by uranium miners, MP Materials, AMD, Albemarle and South Korean equities -- are in the green so far this morning. The losers are AT&T, carbon credits, financial stocks, ag futures and utilities stocks.

"Over the last few decades, central bankers have been the best friends of Ministers of Finance, while central bankers themselves have achieved rock star status. As the Ministers of Finance have presided over continuing deficits and rising debt ratios, the interest burden has been held down by simultaneous falls in interest rates. Central Bank policy has eased the path for politicians."

--Goodhart, C. A. E.. The Great Demographic Reversal 

Now, with politicians' path being obstructed by inflation, they're of course looking to central banks to clear the way. Thing is, battling inflation is likely to have an impact on the kind of inflation that politicians have reveled in these past many years; that would be asset price inflation... Hmm...

Have a great day!

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