Durable Goods and Interest Rates
We have been beating the "economic slack" drum on these pages for awhile by noting that inventories have been at a all time low and resource utilization at a high.
Economic reports revised upward include the ISM; last months Durable goods and anecdotal evidence in the Fed Beige Book.
Durable goods production grew at an annual rate in excess of 13% in Q4. Initial Jobless Claims have been sub 300K three out of four weeks averaging 289K over the four weeks, the lowest since July 2000.
On Monday, the National Association of Business Economics quarterly survey showed 44 percent of respondents citing a shortage of skilled labor, up from 30 percent three months earlier.
The Feds focus on inflation from possible energy price pass through now includes the potential for "further increases in resource utilization".
All of these factors continue to indicate an 80% chance of another bump to 4.75% FF in March and possibly 5% after April as gulf rebuilding efforts continue in full stride.
Today, bonds got hammered for the 3rd straight day, the 10 year is now above the magic 4.50 line and we expect it to keep heading higher as the bond market slowly gets tanked along with the Real Estate bubble.
Foreign central banks want a greater return and will recycle into new 30 & 10 year issues when the yield is right for them.
In the meantime, they will be reticent to take on additional risk at lower rates in our bond market. We believe the Fed has already telegraphed them that FF will be at 5% after April.
The resulting liquidity drain in the bond market will cause the PPT (plunge protection team) to be spread too thin to "catch" a falling equities market in the coming weeks.
We believe this Fridays advance Chain Deflator & GDP along with Tues FOMC announcement represents a major inflection point for the bond market, which will also effect the equities market as aforementioned.
Economic reports revised upward include the ISM; last months Durable goods and anecdotal evidence in the Fed Beige Book.
Durable goods production grew at an annual rate in excess of 13% in Q4. Initial Jobless Claims have been sub 300K three out of four weeks averaging 289K over the four weeks, the lowest since July 2000.
On Monday, the National Association of Business Economics quarterly survey showed 44 percent of respondents citing a shortage of skilled labor, up from 30 percent three months earlier.
The Feds focus on inflation from possible energy price pass through now includes the potential for "further increases in resource utilization".
All of these factors continue to indicate an 80% chance of another bump to 4.75% FF in March and possibly 5% after April as gulf rebuilding efforts continue in full stride.
Today, bonds got hammered for the 3rd straight day, the 10 year is now above the magic 4.50 line and we expect it to keep heading higher as the bond market slowly gets tanked along with the Real Estate bubble.
Foreign central banks want a greater return and will recycle into new 30 & 10 year issues when the yield is right for them.
In the meantime, they will be reticent to take on additional risk at lower rates in our bond market. We believe the Fed has already telegraphed them that FF will be at 5% after April.
The resulting liquidity drain in the bond market will cause the PPT (plunge protection team) to be spread too thin to "catch" a falling equities market in the coming weeks.
We believe this Fridays advance Chain Deflator & GDP along with Tues FOMC announcement represents a major inflection point for the bond market, which will also effect the equities market as aforementioned.
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