More Great Inflation News; Rates FALL 12% This Week; Fed Victory Dance

Another inflation indicator came into today below expectations – and rates fell even further.

They have now fallen almost 1/2% this week!  In contrast last, I just blogged last week about rates RISING almost 1/2%.  Holy volatility, Batman! 

HERE IS WHAT IS REALLY INTERESTING. Contracts have been gushing in our office at a pace we have not seen for over a year.  So, once again, it seems like purchase transactions respond to rates dropping in real-time.  And – I am not sure how or why that happens when I doubt buyers track the market that closely when making offers.

The inflation reading that was released today is the Producer Price Index – or PPI.  The PPI largely reflects wholesale prices (as opposed to the CPI’s retail prices), and it has been falling sharply for months – coming in at 0.1% month over month (nearly flat, meaning inflation is nearly dead). 

Jeff Snider has been harping about falling PPI for months now, pointing out how it presages a falling CPI.   (So yes, we can expect much lower CPI numbers at some point too)

Snider has also been telling us inflation was a COVID-related issue resulting from supply chain disruptions – and to definitely expect these drops in inflation, irrespective of what the Fed does.

In light of Snider’s comments and those of many other “Fed-disdainers,” it fascinates me to see the “Twitterati” congratulate the Fed.

Billionaire Chamath Palihapitiya (VC and “All-In Podcast” host) was one of the celebrants with this tweet.

Fox Business host Charles Payne (hardly a “Fed-lover”)  also wondered on Twitter if it was not time for Jay Powell and the Fed “to do a victory dance.”

In response to Mr. Palihapitiya and Mr. Payne, I suspect the likes of George Gammon, Stephanie Pomboy, Jeff Snider, Hugh Hendry, Jim Rickards, and Barry Habib would say:  “Are You Serious?”

They would all either claim that inflation would have fallen anyway and/or (AND THIS IS THEIR MAIN POINT) that the Fed has ridiculously over-tightened – making a bad recession all but certain now. 

And – some Fed members are STILL calling for more rate cuts – seeming to not realize that it takes 12 to 18 months to feel the full effects of previous rate cuts.   Oy vey…

Jay Voorhees
Founder | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167

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