Today's Post - https://bahnsen.co/454dv7h

A tad to my surprise CPI came in even lower than expected (+3.2% vs. consensus estimates of +3.3%). The core rate was +4.7% as anticipated. On the month, prices ex-food, ex-energy and ex-the B.S. shelter figure were down -0.1%. Within that +3.2% the shelter component was up +7.8%, as the model shows OER (owner’s equivalent rent) up +7.7% on the year and Rentals of primary residence up +8%. Uh huh.

Core goods prices are up +0.8% on the year. +0.8%. The annualized total CPI from the last three months even with the bad shelter data is +1.9%.

Shelter is overstating headline inflation by 30% and core inflation by 40% (and I actually think it is mor than that). Month-to-month data is moved by base effects of the year prior and energy prices. As for energy prices, it looks like much of the oil and gas surge was late July and not as captured in this month’s data as I would have expected.

Two years ago this exact week the S&P was at 4,450 or so. Fast forward to today, the S&P is at 4,450 or so. But the 10-year yield was 1.32% and is now 4.02%. Would anyone guess that a near tripling of the bond yield would leave the market flat? Now, the Nasdaq is down -8.3% over the last two years, but still, you get the idea. Sometimes facts make no sense unless you have the gift of hindsight. Be careful about applying an investment conclusion to your forward-looking premises. As I always say, it will be hard enough for your premises to come true. It will be even harder for the conclusions that come from your premises to prove accurate.

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