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2022-11-11 07:00 by Karl Denninger
in Macro Factors , 1256 references Ignore this thread
Crrraaaazy Wally (Street, That Is)
[Comments enabled]

We call it.... "crazy Ivan" - Hunt for Red October

Except this is November, and the crazy came out of the CPI report.

The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.4 percent in October on a seasonally adjusted basis, the same increase as in September, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 7.7 percent before seasonal adjustment.

The index for shelter contributed over half of the monthly all items increase, with the indexes for gasoline and food also increasing.

If you were short into this there was no getting away from what went up your backside; a literal 100 handles went into the Spoos within seconds and I'm quite sure if you'd been short you would have been gapped over, so a stop would have gotten you exactly no protection.

The problem in the "better than expected" report is in that bolded line and in fact that's a high going back all the way through April on a seasonally-adjusted basis.  Food away from home also was up at the seasonally-adjusted high, where it has been for the last three months sequentially, so there's no love there either.  Note that the latter is often subject to fairly long supply lines and contracts which delay the impact of movement both ways, and thus that it is lagging is no big shock.  Food at bars and restaurants has been up less than food at home over the last 12 months and thus you can expect it to continue hitting the index for quite some time yet.

The 900lb Gorilla in the room this month is fuel oil, which is, as many people do not know, #2 diesel.  It was up a stunning 19.8% on the month and stands at 68.5% up from last year this time.  Anyone expecting the consumer experience to improve with that record has rocks in their head, never mind those who use it for heating that are about to get a visit from the proctologist this winter.

Incidentally if you are one of them and your supplier is screwing you on price go to a truck stop (or any rural fuel place that sells to farmers for off-road use) and bring jerry cans.  They sell dyed fuel for use in the refer units.  Its the same thing and if its cheaper to buy it there than pay whatever the guy with the truck wants to bring it to the house your decision should be obvious. 

Piped gas relaxed some, which is good news if you use it, but its still up 20% on the year.  A huge percentage of people use that for heat, so there you go.  Oh, and guess what is used to generate electrical power?  Uh huh, which is why electricity is up 14.1% on the year.

If you remember me talking about "Owner's Equivalent Rent" and how it falsely stated that there was no inflation while home prices shot the moon you can see the inverse of that right now in the OER number which is up 6.9% on the year.  That which held down inflation figures for years is now going to prop them up for years, like it or not. There is no evidence that rents, on the other hand, is relaxing at all.  Anyone who thinks The Fed can ignore 32.6% of spending in the economy has rocks in their head; they most-certainly will not, and that's what shelter comprises.  Annualized its up 6.9% so no, we're not "winning" on inflation.

Transportation services (you don't need to get to the store and go to work, right?) were up strongly as well; 15.2% on the year (yikes) with car insurance being up big.  That which you're forced to spend there you won't spend anywhere else.

Interestingly enough  I see some evidence of softening in the hotel pricing market, which is likely due to demand destruction -- after all, their interest picture looks like yours, so absent that they'd be raising prices.  This should be paid attention to, particularly over the "snowbird" season in the next few months as it might be a leading indicator.

Oh, don't worry about health insurance: It's only up 20.6% on the year, and the BLS claims its also less than 1% of spending.  Sure it is.

Who's also having trouble maintaining prices?  Sportball, surprisingly.  Down 17.7% over the last year.  Whadda ya mean those $10 beers and $20 parking fees are too much?

And so, as they say, it goes.

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Comments on Crrraaaazy Wally (Street, That Is)
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Jazen 4k posts, incept 2007-07-17
2022-11-11 07:23:13

There's going to be a lot of days like yesterday in the future with inflation. Ups and downs, raging rallies. The 10 year yield took a shit too.
If I recall correctly, the shelter part of the CPI was re-weighted early this year to have less of a weighting in the CPI.

I hate our Government, but I still love America.
Onelegged 1k posts, incept 2009-11-13
2022-11-11 08:03:42

A cheeseburger with tip $23. The cheapest dozen eggs in the local store with tax $6.40. Gasoline $4.299 A pound of store brand cheese is $7.99 (+ 7.5% tax) on sale.

Welcome to the Roaring 20s.

All The News That Fits, We Print.

New York Times
Jpg 776 posts, incept 2009-03-23
2022-11-11 08:03:54

Incidentally if you are one of them and your supplier is screwing you on price go to a truck stop (or any rural fuel place...

But before you do that, add in the cost of the drive to get the cheap fuel. And the cost of the containers, if you don't already have them.
Tickerguy 190k posts, incept 2007-06-26
2022-11-11 08:04:15

Well, yes @Jpg.... costs are costs, and they're real.

The difference between "kill" and "murder" is that murder, as a subset of kill, is undeserved by the deceased.
Ugrev 1k posts, incept 2010-03-08
2022-11-11 08:32:53

Wife bought a sirloin.. just one.. $24.00
Thankfully, the mild weather resulted in less A/C usage and thus the E bill went down by some 30%. Used that excess to pay for 2 tanks of gas and a steak. lol, but not so lol.

These cunts need to have their necks wrapped with paracord and strung up to a tree limb in the town square like a bunch of political pinata's so we can walk by and beat the ever loving fuck out of them with aluminum bats.

Irregular Warfare is now in play
Hobbled 216 posts, incept 2011-02-09
2022-11-11 08:50:33

Propane too. Price way up almost double last time I bought. Here in central AL. I use propane for stove - because we have propane backup on heat pump I just converted stove. Great for when electrics go out I can still cook. But it is needed for BTU'S on the rare occasion heat pump can't generate enough heat. We only get a month or so of sub freezing nights, So yea pricey but we don't use much. Feel extraordinarily sorry for those of you who need the petroleum by products to create heat in a colder clime. Good luck.
Charliebitme 1 posts, incept 2022-11-11
2022-11-11 08:50:49

Used to post mostly on the old forum and havent since.

So according to the market rally yesterday, were all a bunch of negative Nancies because based on the latest CPI numbers, all of the following headwinds are already priced in:

1) The impacts of >20% actual inflation have been resolved. Never mind that actual supermarket prices and not the hedonistically massaged bits of cow hamburger equivalent that the Fed is using, are up by 30%-60%, or even more.

2) Consumption, given record-breaking inflation levels and mass impoverishment of the population, will not change and earnings growth for EVERYTHING will not be adversely impacted and therefore P/E multiples are cheap and justify a rally.

3) A Fed Funds rate of ~4%, in the face of >20% inflation is sufficient to compensate dollar-holders for the loss of purchasing power over the next couple of years and therefore its reasonable to assume that the Fed hikes should taper from here on.

4) The recession must be over and its time to rally, since the SPY is down by 17% from its ATH from less than a year ago. Also corporate sector leverage and the higher interest expense burden after rerolling said debt will not dent earnings.

5) US has lost its petrodollar backing. Ww3 brewing in Ukraine and Taiwan. Japan, UK and Europe are on the ropes.

Please tell me why my gut feel that this is a fake rally and that the market is artificially propped up with reverse repo conjured out of thin air fractional reserve money, is wrong? This all feels so 2008-ish, right before the big plunge. Im curious to hear your thoughts.

P.S. Is Nothing still on the forum? Back in the day I really enjoyed his/her contributions.

Greenacr 693 posts, incept 2016-03-15
2022-11-11 08:51:29

Unless there is price deflation this CPI report can continue to ease or be more favorable month to month but the damage is done. My sense is that prices for the things that we need/use are at a level that the average family is making difficult choices that are putting them behind. Choices like making a car payment or feeding the family or deferring maintenance on property/vehicles. Just heard on Fox that 69% of car payments are behind.

Now we are just beginning to see the start of layoffs. Once this picks up the acceleration to the downside will begin.
Msbeaty 4 posts, incept 2022-10-01
2022-11-11 08:55:31

Piped gas relaxed some, which is good news if you use it, but its still up 20% on the year. A huge percentage of people use that for heat, so there you go. Oh, and guess what is used to generate electrical power? Uh huh, which is why electricity is up 14.1% on the year.

Many system operators have shut down enough coal assets that as you mention the natural gas price and the electricity price are closely coupled, where coal used to buffer gas and gas would buffer coal.

Another kicker, is that exports of coal from the USA has driven the price up drastically over the past year. Much of this can be attributed to threats of government policy. If you owned a coal mine, would you rather export the coal to a customer who is willing to sign a 5-10 year contract or one domestically who wont sign more than a 1 year contract since the ever wise government is threatening them their plants are going to be shut down? It sucks for us here, but I can not blame them. I have seen some of the coal spot prices go from $40-50 dollars per ton up to $200+ per ton.

Until system operators have some stability about the future, they are going to get killed on contract prices.
Synopsis 76 posts, incept 2010-02-05
2022-11-11 09:02:44

The market says, Inflation is only 7.7% - we are at the top, it is over!!! The Fed is gonna pivot!!! Hurry, bid on everything back up to the top in a matter of two days!!

One month later after the cost of everything is bid back up to the high - ahh shit, inflation is back over 8%!!

It is a damn joke.

Greenacr 693 posts, incept 2016-03-15
2022-11-11 09:02:55

It's not just Big Tech that is laying off.
Andrew 124 posts, incept 2014-09-24
2022-11-11 09:55:50

So the dead cat got another bounce.
The Casino beckons...someone wins, could it be you?
Probably not, but it's got better odds than the Lotto!

I wish sarcasm could translate to the typed word.
I invested in some Bosnian 308, it seems smarter than any Stonks.
Abelardlindsey 1k posts, incept 2021-03-26
2022-11-11 09:56:00

FTX is now in bankrupcy and the same guy who cleaned up Enron following its collapse is now been appointed by the bankruptcy court to oversea FTX and all of its affiliated companies. I think Bitcoin, along with all of the other cryptos, have a long way down to go before any recovery. I'm wondering how long it will take for Tether to go tits up.

Its all in the mitochondria
Dingleberry 566 posts, incept 2011-11-06
2022-11-11 09:56:10

All the fed lies about inflation are coming home to roost.

Seniors and others getting COLA-based raises will get about 9% next month, while the average working stiff will get half of that.

This will continue until the inflation genie is put back in the bottle, even considering the lies about official inflation, which are wildly fraudulent.

Real wages have gone down for like 20 months in a row. And they have much further to fall before the Fed can stop raising. Wage inflation is the only thing the Fed cares about, as everything else they spin, lie about or ignore. And the labor market is still WAY too tight.

Oh well. This is the cost of printing (and borrowing) for socialism, endless wars, free shit for everyone AND open borders, endemic corruption, green bullshit, and so on.

Abelardlindsey 1k posts, incept 2021-03-26
2022-11-11 09:56:21


Interestingly the layoffs appear to be mostly managerial level. I will bet you donuts to dollars no truck drivers or mechanics have been laid off.

This suggests CH Robinson had a lot of management bloat, call it white collar inflation as analog to grade inflation in college, that is now being cleaned out. In turn, this suggests a real corrective recession like the one we had in the early 90's that became known as the "white collar" recession.

I think there is a lot of management bloat in many companies across the board. Bloat that will soon go away. I trust everyone in this board does real work for a living and, thus, will better ride out this recession.

Its all in the mitochondria
Winesorbet 762 posts, incept 2010-08-23
2022-11-11 09:56:29

Would be nice if someone from the fed would actually say something to stop it. The opposite happened yesterday. They poured gasoline onto the rally. I don't know what to believe anymore.
Dingleberry 566 posts, incept 2011-11-06
2022-11-11 10:02:49

@ Abelardlindsey,

You are correct about layoffs. For those of us old enough to remember REAL recessions (not paper ones) the first to go are the white-collar, useless eaters in the cubicles. Real, producing workers stay to the degree possible.

Twatter and Facefux firings being the latest examples. I must admit getting a schaudenboner watching that.

If you have a job where you know deep down it is worthless, just shuffling paper from left to right and back again.....eventually the grim reaper will find you. Sooner than later.
Tonythetiger 754 posts, incept 2019-01-27
2022-11-11 10:05:28

On a lighter note ... looks like more than a few people here could use a bit of motivation.

Things may not be all that bad, comparatively. (/semi-sarc)

The good news is that my next year's health insurance premiums are only 9% higher than last year. I'm looking forward to the really big raise that's going to offset that added expense and maintain my current standard of living. (C'mon, think positive with me guys!)

"War is when the Government tells you who the bad guy is. Revolution is when you decide that for yourself." - Benjamin Franklin
Abelardlindsey 1k posts, incept 2021-03-26
2022-11-11 10:10:23

I was a freshly minted MBA in 1991. I was not able to find an "MBA"-level job at the time. But there were plenty of "real" engineering jobs. That's how I first got into automation (PLC's, SCADA, and the like). Being in automation, I work with people from the shop floor to the offices on the customer side.

Its all in the mitochondria
Indianarube 917 posts, incept 2020-03-22
2022-11-11 10:17:43

we can walk by and beat the ever loving fuck out of them with aluminum bats.
I prefer the sound of screams of pain and hickory, thank you. I don't like the metallic ping of aluminum.

Disgusted 468 posts, incept 2021-07-20
2022-11-11 10:25:56

Abelard, FTX Token is on sale!!! Back up the truck, Bitshit too!!! Everyone can get rich in crypto, so they say. This Ponzi is different. LMFAO. Sucker born every minute.

People are going to learn the hard way again soon what's really important, and what's real. Bring it on.
Mrbobo 61 posts, incept 2021-12-01
2022-11-11 10:47:14

I haven't seen the price hike show up in diabetic supplies (pump, CGM, etc.), I assume there was plenty of wiggle room already built in the pricing. I am not looking forward to shopping and determining at what point on the curve it is cheaper to pay cash prices for all the stuff vs. the copay plus premiums.

"You arrogant ass, you killed us!"
- Also "The Hunt for Red October" (movie)
Abelardlindsey 1k posts, incept 2021-03-26
2022-11-11 10:47:37

I have to say that restaurant prices have gone up 30-40% over the past year or so. Our favorite places that were $60 are now $80 to $90 and where we used to pay $80 has now gone up to $110 to $120. I booked our "traditional" Black Friday diner at a high end steak and prime rib place up on the hill in Portland (Charthouse). It will be interesting to see what it compares to last year. I'm guessing it will be about 50% more.

Its all in the mitochondria
Mrbobo 61 posts, incept 2021-12-01
2022-11-11 10:47:49

@Indianarube cost effectiveness is the reason only professionals use wood. Wood bats break, aluminum lasts all season. I guess it depends what area on the piata you like to target, hard top or soft middle.
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