Everything Lags…Making The Media & The Fed Wrong (AGAIN)
In 1992, the rock band R.E.M. released the annoying song, Everybody Hurts.
And, sensitive Gen Xers everywhere played it loudly and proudly on their Sony Walkmans and boomboxes to prove just how sensitive they really were (and they were sensitive!).
But, fortunately for us, Michael Stipe retired from R.E.M. so he could watch macro videos on YouTube, and, I am delighted to announce that he is releasing an updated version of the song called “Everything Lags.” (and it could not come too soon!)
I am announcing this great news in the wake of this WSJ headline today: Mortgage Rates Are Highest Since 2007. And…oooh… they are a bit late… again.
This is exactly what I addressed in Wednesday’s blog: Are Rates Really Over 7%?
The media rely heavily on Freddie Mac’s survey for their interest rate information, and the survey data always lags the actual market by several days.
Hence, in volatile markets when rates are moving quickly, the rate info from Freddie Mac is often very misleading.
And sure enough, rates dropped today again – right when the WSJ headline surfaced.
The Fed Lags Too
This is the point Barry Habib and numerous macro pundits make all the time: The Fed is always looking in the rearview mirror – so their data lags reality.
For example, Personal Consumption Expenditures (a measure of inflation) came out hotter than expected, but rates went down (instead of UP like we would expect with a hot inflation reading).
This is partially because the markets look forward (instead of backward), and they see things the Fed does not when it comes to inflation – such as building inventory, slowing purchasing orders, plummeting commodity and shipping costs, credit creation/lending, and future layoff plans.
It is the same with the labor markets that the Fed focuses so heavily on. Their data is always based on what happened weeks or even months ago, and it always lags reality.
This is why the Fed always seems to act too late, as was the case when inflation was surging too (they should have started their rate increases much sooner, but because their data was lagging, they acted too late, as per usual).
So- for the correct information, follow the macro people who have skin in the game and the actual markets.
AND – the next time you’re feeling depressed and very down … because of all the bad data you’re being fed, you might listen to Michael Stipe’s updated version of his song – and know that you’re not alone.
And – most of those sources are saying that inflation will likely wane in the near future and that the economy is weaker and more precarious than the Fed and media are letting on.
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