Morning Report: Putting the current inflation numbers into perspective.

Vital Statistics:

S&P futures4,17422.8
Oil (WTI)71.82-0.34
10 year government bond yield 1.47%
30 year fixed rate mortgage 3.22%

Stocks are higher this morning on no real news. Bonds and MBS are up.

The 10-year traded as low as 1.36% in the overnight session. Not sure what was driving that, but after the FOMC increase in rates last week based on the updated dot plot, the 10 year has done nothing but fall in yield. Like usual, mortgage backed securities (which determine mortgage rates) have been lagging the move.

We will have a decent amount of economic data this week with existing home sales, new home sales, personal incomes and spending, and GDP. The GDP number is the third estimate for the first quarter. We will also have a lot of Fed-Speak.

The economy picked up in May, according to the Chicago Fed National Activity Index. That said, the number came in way below expectations. The CFNAI is sort of a meta-index of 85 different economic indictors. The COVID lockdowns of a year ago are introducing all sorts of noise into just about every economic statistic. The punch line is that economic growth has probably peaked for the year.

Invitation Homes CEO Dallas Tanner is sanguine about the housing market: “I would expect that home prices stay relatively stable, if not continue to grow in value for the homeowners in the country, but we’ll find our ways to pick our spots whether through our partnerships with builders or our ability to buy one-off,” Tanner said. “We view the housing environment overall as extremely healthy.”

With the big increases in housing prices this year, the media types are asking questions about whether we have another housing bubble, similar to 2006. The United States does not. Other countries do. Housing bubbles are quite rare, and only come around once or twice a century. A lot of pieces need to be in place to create one, and the biggest one is a belief amongst buyers, sellers, lenders, and regulators that an asset is “special” and cannot fall in price. Anyone who is old enough to sign a mortgage doc knows that isn’t the case.

Buyers are beginning to balk at higher home prices, according to a report from Redfin. Its Homebuyer demand index peaked about 9 weeks ago, and is down 14% since. “Offers no longer pour in the day a home hits the market,” said Phoenix Redfin real estate agent John Biddle. “It has become more common for offers to come in at least a few days after a home is listed for sale. If this were three years ago, we’d marvel at how fast the market was, but it’s a clear slowdown from a few weeks ago. Now that things are opening up again and the summer is almost here, people have other priorities, like going on vacation. Plus, many homebuyers are frustrated and tired of competing, so they’ve stepped back—for now at least.”

With inflation rising, it is helpful to put the numbers in perspective. Inflation is going to be high for the rest of the year as shortages and COVID noise drive up the numbers. The Fed predicts that the Personal Consumption Index will rise 3.5% this year. Take a look at the chart below and see what that looks like historically.

Not too dramatic, is it? Certainly not like the 1970s, which were driven mainly by oil prices. If anything we are headed back to historical norms after a bout of exceptionally low inflation. The question the Fed is grappling with is how much of the current inflation is due to COVID and how much is not. That will depend largely on wage growth, and given the seemingly ubiquitous “help wanted” signs these days these price increases may turn out to be more permanent.

7 Responses

  1. I found this interesting.

    Jon Stewart kind of looks like what the non-lunatic members of NeverTrump do, only from the left. He’s a kind of a “not Glen Greenwald, but come on–this is crazy”.

    There he issued what amounted to a new Papal encyclical. In that signature weary, deadpan delivery everyone knows and loves, he averred that the “lab leak” theory of COVID origins — previously a contemptible heresy — should not just be seriously considered as plausible, but had in fact become trivially obvious. So obvious that you’re now the dummy if you don’t think so. Watch as Colbert awkwardly wrestles with the implications of what his longtime hero Jon Stewart is saying; he looks almost pained. Six months ago, anyone who broached this topic on Colbert’s show would’ve been assumed to be some sort of QAnon crank. But here’s Jon Stewart, repeating Steve Bannon talking points. Colbert, understandably, appears quite disoriented.


    • As one of the commenters pointed out, one of the most important weapons the left wields is the immunity to charges of hypocrisy.

      One side has rules, the other does not.


      • I feel like that’s more about the public narrative and institutional control. Each side calls out hypocrisy on the other side. Each side has folks who call out the hypocrisy of others but provides only apologetics when their own side does the same thing.

        If the right controlled the government, the schools, academia, the news media, and the public square the way the left does I wouldn’t be surprised if the same argument could be made. The side in power kind of makes the rules.

        The issue is ultimately the dominance of one ideological side of academia, the news media, science (especially public-facing, such as approved “experts” and scientific journals), the bureaucratic state, the foundations and most of the think-tanks, the polling organizations, the entertainment industry . . .

        There are different rules for one side in the present era because one side has all the power and controls the narrative. Or, let’s say, controls enough that their hypocrisy doesn’t matter and they generally seem all-powerful

        We still have the Glenn Greenwalds and Matt Taibbis and Michael Tracys, et al. There are expert who don’t just exist in a right-wing bubbles, even if the overall attention and mindshare they get is very low. I guess what I’m saying it could be worse.

        … There’s so rule-enforcement body. There used to be some role of “rule enforcement”, some kind of refereeing, from the media and entertainment–comedians especially. Talk-show hosts, even. The ACLU. But now all the former referees are victims of a kind of “regulatory capture”, where all the people who should be getting called out for the fouls are now also the referees.


        • KW:

          If the right controlled the government, the schools, academia, the news media, and the public square the way the left does I wouldn’t be surprised if the same argument could be made.

          To be sure, hypocrisy is to some extent endemic to politicians as a class, and so of course people on the right are capable of being hypocrites. And perhaps if the right controlled more cultural institutions, it might exhibit even more hypocrisy. But I don’t think that is really what Brent (or the commentor he mentions) is talking about when they talk about one side having rules and the other not.

          A really good example of what I see as the left’s ideological immunity from charges of hypocrisy and absence of rules in a way that simply doesn’t apply to the right (regardless of the degree of power it wields) is SCOTUS. On SCOTUS, “conservative” judges have objectively defined and knowable approaches to Constitutional law (textualism, originalism), and this very fact makes them subject to charges of hypocrisy in a way that is not applicable to the progressives on the court. We can look at their many opinions and call out instances in which they appear not to have followed their own stated rules. But progressives on the court have developed an approach to interpreting the Constitution, the so-called living constitution, which essentially has no objective rules. Virtually any ruling they make can be justified under this approach, which renders them immune to charges of hypocrisy. (I wrote about this ideological advantage that the left has on the Court here at ATIM many years ago.)

          And I think a similar thing manifests itself in the political world more generally, in which the right is focused on process while the left is focused on outcomes. The right itself provides objective standards to which the right can easily be held by the left, while the opposite is not equally true.

          This is why I have described leftist ideology as an ends-justifies-the-means ideology., and is what I take Brent to be referring to when he says (as he has in the past) that good faith should never be attributed to arguments made by the left. Their conclusions are not the product of arguments. Their arguments are the product of their conclusions, and so could easily change if the desired conclusion changes, a fact about which they are generally unbothered and do not feel it necessary to defend. So when Tracey asks:

          This volatility within liberalism is often fodder for mockery. It can make adherents look and sound incoherent. But malleability is part of liberalism’s strength; after all, conservatives are always complaining that liberals control most every institution. To what do they attribute this…?

          …I think that is what he is talking about.


        • A really good example of what I see as the left’s ideological immunity from charges of hypocrisy and absence of rules in a way that simply doesn’t apply to the right (regardless of the degree of power it wields) is SCOTUS. On SCOTUS, “conservative” judges have objectively defined and knowable approaches to Constitutional law (textualism, originalism), and this very fact makes them subject to charges of hypocrisy in a way that is not applicable to the progressives on the court

          An excellent point. On the left I tend to see their are rules–so many rules–but they are utterly malleable. So you may call them a hypocrite–or they might do something that is clearly hypocritical, based on their recent behavior–but a new exception is immediately manufactured that grants them immunity. If they are ever engaged in a dialog that can’t just be magically waved away as “whataboutism”, then there is always a reason why it doesn’t apply or isn’t important in this particular case. And the reason can literally be anything.

          So I concede the point. My issue I think that’s always been the case and always will be the case–thus why the ultimate problem is (and the only potential avenue for redress is, if it is even possible) that the left holds such huge institutional power. In some cases absolute power corrupts absolutely, no matter who has it. And anyone can claim to be “of the right” or “of the left” but it’s my belief that power is often attractive to a certain personality type more than ideology–so you’re always going to get creeps in the machine no matter the ostensible ruling ideology. This also explains the utter transformation of certain people amongst the NeverTrump crowd, who clearly aren’t just “NeverTrump” but are now practically raving authoritarian leftists.

          But ideally a more even balance of ideological power would be preferable. But we don’t have it and I’m not sure we are ever going to have it. The institutional bureaucracy is dominated by the left. Foundations are dominated by the left. The media is dominated by the left. Many of the richest corporations are dominated by the left. While it would be preferable that the left played by a consistent set of agreed upon rules–it would be more preferably to me that they did not hold such broad institutional power.


  2. Barr continues to impress:


    • Indeed. I’d also note he make a good point about the Judeo-Christian values embodies in public schools up until (and often into) the 1970s: the values embodied, the religionism on display, was generally acceptable. The vast majority of the populations served didn’t have a problem with the level of religiosity in public schools. They may not have been Christians or Jews but there was no sense that schools were telling them they shouldn’t learn science because God made everything so shut up.

      The secular-progressive values that are not percolating up through public education is indeed a religion as Barr correctly identifies, but I think it’s worth noting that much of what it is pushing is far less generally acceptable than the Judeo-Christian values it is replacing. Contemporary progressive-secularism is to traditional left-liberal values what the David Koresh cult was to Christianity.

      If what’s currently dominating in a number of educational institutions was the Christian version of their flavor of the secular-progressive religion, it would be recognizably undesirable to almost everybody, consisting of cult-like behavior and constantly-shifting definitions of sin and the use of spectral evidence for the prosecution of crimes (there seems little difference between accusations of sexism or racism in the public school than in accusations of witchcraft in Salem) and a lot of preaching and hellfire and brimstone and a low emphasis on traditional curriculums of literacy and arithmetic ability.


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