Faber News Flow

Because Orcs "And as if in answer there came from far away another note. Horns, horns, horns, in dark Mindolluin's sides they dimly echoed. Great horns of the north wildly blowing. Rohan had come at last." Today is going to be dominated by the market pricing in US fiscal stimulus for the  n th time , unless we buy the rumor and sell the fact: and it's rumors and facts I want to address. US CPI yesterday saw headline inflation in line with consensus at 0.4% m/m and rising from 1.3% to 1.7% y/y, but core inflation a tick lower at 0.1% m/m and so dipping to 1.3% y/y. On the back of that, and a moderate US 10-year auction, US equities rose (the S&P up 0.6%); US bond yields dipped, (10s down 6bp from their intraday peak to close at 1.52%); and USD wobbled. The CPI release included a footnote stating: "…data collection in February was affected by the temporary closing or limited operations of certain types of establishments. These fa

The "wait and see" economy is about to face its moment of truth, and one truth is the $1.9 trillion being passed out like candy is already spent. The defining phrase of the U.S. economy for the past year is "wait and see":  every enterprise impacted by the pandemic that didn't close immediately has been in "wait and see" mode, clinging on to the hope that once the pandemic ends then everything will roar back to life, bigger and better than before. With the promise of herd immunity fast approaching, the moment of truth for "wait and see" is also fast approaching.  The conventional view is that the trillions of dollars in stimulus kept  business as usual  alive and ready to soar back to the good old days. The almost $2 trillion injection of financial smack currently in progress will ignite the afterburners and the economy will rocket higher than anyone can imagine. The problem with this rosy view is the economy was on fumes before the pandemic

Next to language, money is the most important medium through which modern society communicates. The Federal Reserve is responsible for signaling how fast this money should be created or destroyed via its federal funds interest rate. When demand is high and capacity/supply low, the Fed should ideally make rates low to support growth of loans to boost capacity/supply. When demand is low and capacity/supply high...the opposite. Instead, the Fed is doing the inverse...trying to focus on getting consumers to use more credit/debt (think record low mortgage rates) to create more demand and necessitate higher capacity (think homebuilders). In a ridiculously difficult chart to decipher below (so I'm told), I highlight the year over year change in working age population (yellow shaded area), year over year change in employees among them (grey shaded area), housing permits (blue line), and the 30 year mortgage rate (white line...driven by the Federal Reserve's federal funds rate a