Wall Street Cluster | Economic prism

While working on this week’s Consumer Price Index (CPI) report, we came across an article from MarketWatch. The author, JEFFRY BARTASH, concluded the remarks by briefly contrasting the CPI and the Fed’s preferred price scale.

According to Bartash, the PCE index gives less weight to housing than the CPI. Housing costs are the most important monthly expense for many people. For any reason, the Ministry of Commerce’s PCE index developers do not think this is an important factor in understanding price changes.

Perhaps this is why the Fed prefers the PCE index over the CPI. Another reason is that the PCE index also takes into account changes in consumer behavior due to rising prices. Detailed by Bartash:

“For example, grocery shoppers might buy ground beef instead of ribeye to save money. Or you can buy cheaper import tools instead of more expensive US tools. ”

These changes in consumer behavior could help the Federal Reserve manipulate the PCE index to its liking. In fact, they are doing wrong assumptions about what consumers actually do.

In the Economy Prism, you can buy a chopped beef when making a hamburger or meat rope, or if you want to easily eat dinner on weekdays by mixing it with a hamburger helper. If you want to eat steak, buy a lip child. If the price of the lip eye is too high, you will get the best sirloin. But it’s not a chopped beef.

Similarly, when purchasing tools, we do not consider whether they are American or foreign. We usually buy a product that will help you complete the work in the shortest time, taking into account both the advantages of quality and price.

Price collusion

Clearly the Department of Commerce’s bean counters are missing something.

The difference between what consumers do and what government number crunchers think they do is enormous. Nevertheless, the aggregated data is collected every month and is compressed into a single number.

The Fed’s central planners use these numbers to intervene in credit markets by fixing interest rate prices. In other words, the central planner fixes the price of money that affects all prices, including goods, services, goods, and assets throughout the economy.

The Fed’s efforts to split interest rates and split up the economy causes endless booming and recession. Moreover, the Fed’s decision on interest rates triggers clustering that is gathering hot expectations in Wall Street.

That’s because a low CPI or PCE number means the Fed will cut interest rates soon. And lower interest rates will free up credit, which will stimulate the economy and boost stock prices. The speculator bets according to a kind of self -realistic behavior.

Another popular speculation of speculators is that bad news about the economy means good news for the stock market. Weak GDP numbers or rising unemployment are seen as signs that the Federal Reserve will soon cut interest rates. Therefore, stock prices must rise.

All acts based on manipulated data are absurd. But this does not mean that it is not real. In fact, it is as realistic as fantasy.

And that contributes to an upside-down reality that cannot be understood by applying ordinary logic.

Deep buyer return

The January PCE index report will be announced on February 29, the leap year. Perhaps it will be better than this week. CPI Report. According to the CPI report released on Tuesday, consumer prices have risen 0.3% in January and 3.1% over the last 12 months.

Professional economists surveyed by the Wall Street Journal predicted that the CPI would increase 0.2% in January, an increase of 2.9% year -on -year. This is expected that the CPI will be less than 3% for the first time in almost three years. Unfortunately, the government’s numeric operators could not completely suppress the reality of inflation.

Especially noteworthy was the core CPI. This figure excludes food and energy costs, and has increased 0.4% in January and 3.9% in the last 12 months. In addition, the shelter increased 0.6% over this month and 6% from a year ago.

Wall Street was initially shaken by the news. The dream of cutting interest rates in March and May was shattered.

Following the Tuesday report, DJIA closed 1.35%, S & P 500 1.37%, and Nasdaq fell 1.8%.

Finance Minister Janet Yellen speaks at the Detroit Economic Club. “A huge mistake.”

By Wednesday, Deep buyers returned to the market and raised the main index back green. The stock price of NVIDIA Corporation soared 17 points as the company ran towards $ 2 trillion.

Wall Street Clusterwhy

Sir John Templeton said: “The general general is born in pessimism, grows in skepticism, mature and happy in optimism.”

If you look at NVIDIA’s stock chart, you do not need much imagination to predict how it will end. The charts of Cisco Systems around 2000 offer possible warnings. The current stock price is still lower than about 24 years ago.

Looking at the three major market indexes in the United States, we see another full -fledged and unfair time of happiness. The stock index is going to the moon and nothing can be prevented.

For index fund investors, it is a perfect time to buy at this high price and sell it later. This is what many people are doing.

John Hussman of Hussman Strategic Advisors has compared the bull market with the past. his Recent research results It is extremely negative.

“Based on dozens of measurements including value evaluation, internal, excess extension syndrome, and numerous technologies, basic and circulation gauge developed over time, the current market situation is now estimated to be ‘cluster’ among the worst 0.1% cases in history. do. It is more similar to the highest market scores of the major market than 99.9%of all the post -war periods and is not similar to the lowest in major markets.

“I call this called a” cluster of bitterness. ” This is because after a small number of similar extreme cases (especially in 1972, 1987, 1998, 2000, 2018, 2020, and 2022), a sudden loss of 10-30%of the market loss was followed. The next 6-10 weeks (average -12.5%), the loss of the smaller end of the range often takes deeper follow -up measures. ”

Yes, it is a cluster. And it is all part of the cycle. you are Prepared What for the next time?

thank you,

Minnesota Gordon
For economic prism

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