Bear With Me

Yesterday's "the Fed is getting on top of inflation" was today's "the Fed is struggling to get on top of inflation." That's if you need a narrative to explain inexplicable price action. Don't get me wrong. There's always an explanation. If you were omnipotent, you could map every transaction, determine the impact of each one and come away with the full story. But even the "best" AI isn't capable of such feats (yet), so we're left with stories. Sometimes they make a lot of sense. Sometimes not s

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6 thoughts on “Bear With Me

  1. Let face it, interest rates are, at the best of times, a blunt tool that likely is most effective as a preemptive strike against inflation. The Fed has basically admitted it is several months behind the curve and will do whatever it takes!
    If there was any doubt about an upcoming recession, the Fed’s action in June and their intent regarding additional interest rate hikes in July have most likely sealed the deal.
    As BTO, A Canadian rock band would say ( Yes I am from Canada!), You Ain’t Seen Nothing Yet!

    1. Another Canuck sub here; I suspect Heis has a lot of us and we were impressed at how well he understood the recent kerkuffle regarding the Governor of the Bank of Canada and our hapless Trump wannabee, Pierre Polievre.

      But something else caught my eye in the doom and gloom. Today the S&P closed at 3,666.77. On March 9, 2009, when the S&P bottomed in the Great Recession, the intra-day low was 666.79 Someone was probably displaying a macabre sense of humour when, recognizing the Biblical mark of the beast, they dusted off and pressed the buy button on their Bloomberg terminal. As we know history loves to rhyme, if not repeat. So we either contemplate that we are still 3K higher in 13 years and be happy or contemplate how much lower we still have to go to get a real bad sell off.

  2. If Biden Admin restricts/bans exports of gasoline and diesel then those prices will come down some and market will say we have seen peak inflation so Fed doesn’t have to increase unemployment and create a recession.

    1. Not sure that is really an option, US oil companies are not nationalized so that would have to come first I think. And even if we could do that to private companies in the US, it wouldn’t solve the issue so much as concentrate it outside the US (which would impact any shipment we receive from anywhere else, ultimately, cause boats and planes would need to fill up somewhere, right?).

    2. The natural gas/oil industries (excuse the pun) are both well oiled machines. If oil is being imported into the US, it is because the cost to purchase and bring it to its delivery point is less than local sources (which may or may not even be available). The heavy oil coming into US from Canada is a good example.
      Can you imagine the havoc if an US export ban on oil causes oil imports to these US refineries to stop?
      And stopping US exports? What are the oil companies supposed to do if local markets are fully supplied, most likely at lower prices? Can you imagine the reaction of US gas companies now shipping LNG to Europe being told you can not export?

      Governments reactions to crisis are often short-sighted and not well thought out. As an example, the US government’s attempt to control oil prices by releasing strategic reserves. How is that working out?

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