I bought an entire case of grapefruit Spindrift soda today for only $15 (to feed my 3-can-per-day habit).
That is the lowest price I have ever paid, so I thought – “welp, rates are gonna fall…”
And sure enough…
Rates have now fallen back to where they were when they troughed briefly in early December, and where they were in mid-October during their northward climb from September’s lows.
They are 1/2% LOWER than the high we saw in mid-January, but still almost 3/4% HIGHER than the lows we saw in mid-September.
All this can only lead to one conclusion: Holy Volatility, Batman!
It is very rare to see rates move up and down as much as they have since September.
The reason rates have bounced around so much is that nobody knows what to expect in these turbulent, debt-laden, government-dominated, asset-price-driven times.
Some analysts thought the Fed rate cuts would stimulate the economy, while others thought they’d spark inflation.
And many analysts like Ed Dowd, Jim Rickards, Jeff Snider, Lyn Alden, Michael Pento, Steve Hanke, and Danielle DiMartino Booth are predicting a recession this year.
Personal Consumption Expenditure (PCE) Came Out as Expected
The Fed’s favorite measure of inflation (PCE) came out as expected today for January – at 2.5%, down from 2.6% last year.
The bond market breathed a sigh of relief and rates fell again.
This is a reminder that the bond market focuses on two things: (1) economic growth expectations; and (2) inflation expectations.
It does not focus on the supply of bonds coming to market or the Fed Funds Rate – although those factors can influence rates somewhat over short periods.
This is why rates will likely fall per many analysts.
They see storm clouds on the horizon with rising credit card and auto delinquencies, a frozen housing market (pending home sales hit a record low in Jan), and falling consumer sentiment.
The wealthy with assets continue to do well, but everyone else seems to be struggling. Record-high Price-to-Earnings (P/E) ratios in the stock market are a major concern, though, as is the record-high Buffett Ratio.
In addition, inflation will likely continue to come down as the money supply is growing slowly (after falling), and sharply falling rental rates and oil prices will start to influence inflation rates more and more in months to come.
Hopefully, falling Spindrift prices will help too.
And finally, Jeff Snider also thinks overseas economic and banking issues will spill over to America.
So yes, I still will not be surprised to see rates fall another 1% this year.
