Thursday, July 14, 2016

Yawn, Beige Book Saying No Inflation And Slow Jobs... What!?

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*No inflation in the beige book.
*Beige book said slow jobs market.
*Welcome to the Elazar Inflation and Jobs Reality Show.
*We may also briefly diatribe about the current process of Fed communication.
*You didn't know economics could be so much fun.
(Now class we're all going to read together out loud from the Beige Book. "AWWE, BORING." No it's fun with prizes. "YEEEAH." Full Disclosure: My apologies in advance: I've had two coffees and one chocolate bar trying to make it through this thing and my writing my reflect some coffee-shakes, so please turn down the volume when reading this.)
We were surprised to see there was not much inflation in the US and a slow jobs picture according to the monthly Beige Book. Public inflation numbers have been ramping higher. Friday's jobs number told a different story than our Beige Book reading. Let's review together.
(We are going to duck after we say this... but we dare say that maybe, just maybe, the Friday jobs number was not as strong as it appeared?)
"Slight" Inflation??
Here's what the Beige Book said about inflation:
"Price pressures remain slight, with contacts generally reporting no movement in selling prices and increases in input prices and housing prices." (PDF page 5, Beige book page ii)
Our inflation numbers show something else.
CPI reports Friday so we'll have an update but here's what we see.
CPI
NovDecJanFebMarAprMay2 mo avgAnnualized
Topline0.1-0.10-0.20.10.40.20.33.6
Core0.20.20.30.30.10.20.20.22.4

This gets the "nothing to see here, please keep it moving" rating.
Wait a minute, inflation IS picking up. If you look at the last three months (one whole quarter) topline CPI is above the Fed's mandate of 2%. If you look at core it has been at Fed mandate for quite some time.
But never mind CPI because the Fed really looks at PCE.
Here's PCE.
PCEDecJanFebMarAprMay2 Mo Avg2 Mo Annualized
Current Dollars0.10.10.20.01.00.40.78.4
Chained Dollars0.20.00.3-0.10.60.30.55.4

PCE's worse.
This also gets the famous Elazar rating "nothing to see here, please keep it moving" rating.
This IS the Fed's key measure of inflation (See here for proof). This one JUMPED in the last two months.
We Elazared the numbers of course to accentuate the two-month average. The two-month average of the Fed's key inflation measure is up 8.4% annualized.


Chaim Siegel has been working with hedge funds and mutual funds as an analyst and PM his entire career. Chaim specializes in earnings and predicts, analyzes and reacts to earnings and earnings events as well as developing current company stories with a hedge fund perspective. If you want his analysis real time sign up to the right for real time email alerts. #in, $spy, $qqq, $iwm, $vxx, $ycs, $fxe, $EUO, $YCS, ^GSPC, INDEXSP:.INX, #elazaradvisorsllc, CME Globex: ES Disclosure: These trades can lose you money and principal especially when using leverage BY USING THIS SITE YOU AGREE TO TAKE ALL RESPONSIBILITY FOR YOUR OUTCOMES AND LOSSES AND HOLD BESTIDEAS, ITS CONTRIBUTORS AND ELAZAR ADVISORS, LLC HARMLESS

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