This email post is sponsored by my friends at YCharts. Mention Larry Cheung to receive 15% off your subscription when you initially sign up for the service.
Note to Readers from Larry: Tomorrow is the all-important September CPI release date. While we will of course provide an analysis of the official print after it’s released to our Investment Community in our Mid-Month Update, we also want to share our opinion on a PREVIEW into what CPI may look like by diving into the Auto (New/Used) Cars Market (which comprises of 9% weight in the CPI index).
I purposely made my newly released video very short/concise so that you can quickly get all the most valuable data/insights on the Auto Component of CPI. We’ll have follow ups on this topic on Twitter and Instagram.
Some quotes today from Neel Kashkari, the Minneapolis Fed President…
“If the economy entered a steep downturn, we could always stop what we’re doing. We could always -- if we needed to -- reverse what we’re doing, if we thought that inflation was headed back down very, very quickly”
“For me, the bar for such a change is very high because we have not yet seen much evidence that the underlying inflation -- the services inflation, the wage inflation, the labor market -- that is yet softening”
“I think a much more likely scenario is we will raise to some level north of 4% -- maybe 4.5 -- and then pause and sit there for an extended period of time while the tightening we’ve already done works its way through the economy”
Macro Chart In Focus
Analyst Team Note:
Even though loan distress has ticked up, we're still not seeing the distress from 2008, 2020, or even 2016. This could mean that the current environment is not tight enough and that the Fed needs to tighten further.
“Peak bearishness is needed to reach a cathartic moment within any market. In ours, we seem to need more time (and more data) to get there.” - BofA
Headline PPI printed +8.5% YoY (which was hotter than the expected +8.4% YoY) but down from August's 8.7% (jumping 0.4% MoM after 2 straight months lower)...
A major factor in the September increase in prices for final demand goods was a 15.7-percent increase in the index for fresh and dry vegetables.
Food cost inflation is still up a stunning 11.90% YoY...
Chart That Caught Our Eye
Analyst Team Note:
“One fair value calculation for US 10-year bonds 1) adjusts the current yield by trailing 3- year annualized inflation; and 2) factors in the 3-month/10-year treasury curve. These inputs show where bond yields are relative to inflation and the compensation that an investor receives for owning longer-dated government bonds.
Today, this measure sits between -0.5% and -1%, signaling the most expensive bond market in 70 years (Exhibit 21). Historically, the measure has averaged around 2%, and we would wait to enter the market until levels aligned with historical norms.” - BofA
We want to take a moment to thank Interactive Brokers for being one of our Channel’s trusted Partners and to inform my audience of the special features they have given that our online friends here closely follow Chinese Internet stocks (BABA/Tencent).
Much of Larry’s audience is concerned about the US ADR issue of Chinese Stocks being delisted.
