Bold CPI Prediction: When Bad Means Good in Economics and Energy Markets
Some of us might know that getting older comes with a lot of side effects from going to bed before 10 p.m. to not being up to speed on today’s acronymic vocabulary. Having said that, does anyone remember when you said something was “bad” because you actually meant that it was good…. actually “bad” means even better than good. While it’s commonly used in reference to someone’s appearance, one must now conflate bad and good when it comes to economic news. For example, last week’s jobs report – a lower than expected growth in payrolls – could be perceived as bad. But the market perceived it as good…since it threw some obstacles on the tracks of the Fed interest rate hike express train. It is time for the Fed to focus on leading, rather than lagging, indicators when it comes to its reckless policy that will create a synthetic recession. Here’s a bold prediction from $$$MR. MARKET$$$ himself:
When we receive the next inflation report, we will see a Year on Year increase of something around 3%. Why so low?
- The annual CPI peaked at 9.1% in June 2022, which was the biggest increase since November 1981, so in comparison the June 2023 print will be compared to a much higher basis making its increase appear smallish. Everyone will act surprised, except $$$MR. MARKET$$$.
- Rent comprises 1/3 of all of the inflation component. Rents have cooled off substantially in 2023.
- Energy prices are down significantly Year on Year. Watch what happens when you throw that in the secret sauce.
It’s time for the Fed to put on the brakes. All of the hay is already in the barn. The work is done. The jobs market is still awesome. It’s time to admire the results.
In the energy market, the contango finally relented to the hawkish chatter coming from OPEC+ as prompt spreads moved over to the dark side, reverting to backwardation. Brent futures settled Friday at $78.47 a barrel, while WTI came in at $73.86. The preposterous news that Russia intends to cut back production lended support to the oil bulls, as did some stronger than expected gasoline demand numbers from US drivers “working from home” since the onset of summer. The proof will be in the pudding, and watching inventories will tell us where things are headed. Of course, watching demand for storage is a leading indicator for where inventories are expected to be. If you know what everyone else is thinking, then your poker hand just got a lot better. The Tank Tiger has reams and reams of storage inquiry data to share with you. Just ask us. On that note, keep an eye out for the series of podcasts that The Tank Tiger will be hosting, as we interview renowned industry experts on their visions of sugar plums.
