Money Sense

[DKG]

More than one quarter of new jobs created last month in the US(60,000) were civil service postions suggesting job creation is slowing. We shall see in the next three months if it becomes a downward trend.

[DKG]

Canada's economy added far more jobs than expected in June, data showed on Friday, a result analysts said probably seals the deal for another Bank of Canada (BoC) interest rate hike next week.



Jobs increased by a net 59,900 in June, the most since January and higher than a forecast gain of 20,000, while the jobless rate rose to 5.4% from 5.2% as more people searched for work, Statistics Canada data showed on Friday.



The unemployment rate in June increased for the second consecutive month and is now at its highest level since February 2022, though still below a pre-pandemic 12-month average, Statscan said.



The June jobs report is the last major economic figure to be released before the BoC's rate announcement on Wednesday.

[DKG]

Consumer prices rose 3% last month compared to a year ago, marking a significant slowdown and raising hopes that a prolonged bout of heightened inflation is nearing its end.



All the major indices were up yesterday on the news of slowing inflation.

[Oerdin]

The economy is so bad they have deflation in Communist China.

[DKG]

The economy is so bad they have deflation in Communist China.

If that is true, it is very bad for global growth.

[DKG]

The Fed is expected to the prime rate one quarter of a percentage point next. The markets have had an excellent week, but are rather flat today. They have baked in the expected increase.

[DKG]

The US Fed printed so much money for COVID that now, despite tight monetary policies, prices are still coasting at near-record highs for vital goods. The only effects of the tightening monetary policies are restricting credit and pushing us into a recession. In other words, we are trapped in a vicious cycle of stagflation in which the debt will continue to keep commodity prices higher, which will induce monetary tightening that dampens the economy without fundamentally lowering prices.

When June's CPI numbers were published, one would think we killed inflation. The headlines everywhere proclaimed the end of inflation. The reality is that most prices remain at extremely elevated levels; it's just that they are not growing as quickly as during the extreme shock period of the initial Russian invasion and corresponding policy responses. However, we have not reversed those trends at all: 4.8% core inflation built on top of the past two years is actually reflective of astoundingly stubborn prices.

Taken as a whole, the cost of living is still much higher than pre-COVID levels. Here are the CPI numbers as of June relative to three years ago:

Apparel: +13.6%
Shelter: +16.7%
Food at home: +18.5%
Home prices: +38.6%
Rent:+24%
Food away from home: +20.8%
New Cars: +22.1%
Used Cars: +46.9%
Electricity: +24.5%
Gas Utilities: +30.3%
Transportation: +30.3%
Gasoline: +70.2%
Of course, the rate of increase is not going to continue to be as acute in perpetuity, but why are we not going back to some semblance of pre-COVID or pre-Russian war levels of pricing as we did on just a few items, such as eggs?


In fact, commodity prices are actually now accelerating again in July since the last CPI report. When analyzing the cost of living, one of the best indicators is the Commodity Research Bureau Index, which measures the aggregated price direction of 19 critical commodity sectors and is widely viewed as an accurate reflection of where prices are headed in the coming weeks. As you can see, it is now headed up again, gaining more than 2%, after leveling off the past year. The index is over 50% higher than pre-COVID levels.

Wheat is trading roughly 50% higher than during pre-COVID levels, rising precipitously from the levels in May when the federal government announced inflation was slowing.

We are seeing the same trend with corn, which is about 60% higher than pre-COVID levels and has gone up 15% in the past few weeks.

Many other vital commodities that skyrocketed either after COVID or the Ukraine war only receded partially from record levels and are now headed back up. Rice is on its way up and is trading 32% higher than when Biden took office. Coffee is up 60% from the pre-COVID baseline.

As for the price of oil, after stabilizing this spring, it is now headed up again.

So, after Biden tapped out our Strategic Petroleum Reserve, we have nothing to show for it but gasoline prices still elevated at $3.60. Now it will be off to the races. Moreover, now we will have to refill the SPR at higher prices. The White House promised to refill it when the price was closer to $70. Instead, the administration continued raiding the supplies throughout May and June, taking our inventory down below 350 million barrels for the first time since the early 1980s, when our country was much smaller.

The fact that these commodities are still rising – even with a sluggish economy, reduced consumer spending, and locked-up credit markets – suggests that we are now headed into an era of "sticky" resilient inflation that persists in a slow economy. In another sign of a weakening economy, the S&P Global U.S. Flash Composite PMI fell 1.2 points to 52 in July. Chris Williamson, chief business economist at S&P Global Market Intelligence, warned that this is a sign of stubborn inflation persisting alongside (and inducing) a slow economy:

[DKG]

The Federal Reserve resumed lifting interest rates Wednesday with a quarter-percentage-point increase that will bring them to a 22-year high.

Fed Chair Jerome Powell said it was too soon to tell whether the hike would conclude a series of increases aimed at cooling the economy and bringing down inflation. The central bank would decide whether to keep lifting rates based on how the economy fares in the months ahead, "with a particular focus on making progress on inflation," he said at a news conference.

Markets were mixed after the Fed decision. The S&P 500 finished about flat Wednesday, while the tech-heavy Nasdaq moved slightly lower. The benchmark 10-year Treasury yield fell to 3.850% after climbing Tuesday to 3.911%.

[JOE]

The US Fed printed so much money for COVID that now, despite tight monetary policies, prices are still coasting at near-record highs for vital goods. The only effects of the tightening monetary policies are restricting credit and pushing us into a recession. In other words, we are trapped in a vicious cycle of stagflation in which the debt will continue to keep commodity prices higher, which will induce monetary tightening that dampens the economy without fundamentally lowering prices.

When June's CPI numbers were published, one would think we killed inflation. The headlines everywhere proclaimed the end of inflation. The reality is that most prices remain at extremely elevated levels; it's just that they are not growing as quickly as during the extreme shock period of the initial Russian invasion and corresponding policy responses. However, we have not reversed those trends at all: 4.8% core inflation built on top of the past two years is actually reflective of astoundingly stubborn prices.

Taken as a whole, the cost of living is still much higher than pre-COVID levels. Here are the CPI numbers as of June relative to three years ago:

Apparel: +13.6%
Shelter: +16.7%
Food at home: +18.5%
Home prices: +38.6%
Rent:+24%
Food away from home: +20.8%
New Cars: +22.1%
Used Cars: +46.9%
Electricity: +24.5%
Gas Utilities: +30.3%
Transportation: +30.3%
Gasoline: +70.2%
Of course, the rate of increase is not going to continue to be as acute in perpetuity, but why are we not going back to some semblance of pre-COVID or pre-Russian war levels of pricing as we did on just a few items, such as eggs?


In fact, commodity prices are actually now accelerating again in July since the last CPI report. When analyzing the cost of living, one of the best indicators is the Commodity Research Bureau Index, which measures the aggregated price direction of 19 critical commodity sectors and is widely viewed as an accurate reflection of where prices are headed in the coming weeks. As you can see, it is now headed up again, gaining more than 2%, after leveling off the past year. The index is over 50% higher than pre-COVID levels.

Wheat is trading roughly 50% higher than during pre-COVID levels, rising precipitously from the levels in May when the federal government announced inflation was slowing.

We are seeing the same trend with corn, which is about 60% higher than pre-COVID levels and has gone up 15% in the past few weeks.

Many other vital commodities that skyrocketed either after COVID or the Ukraine war only receded partially from record levels and are now headed back up. Rice is on its way up and is trading 32% higher than when Biden took office. Coffee is up 60% from the pre-COVID baseline.

As for the price of oil, after stabilizing this spring, it is now headed up again.

So, after Biden tapped out our Strategic Petroleum Reserve, we have nothing to show for it but gasoline prices still elevated at $3.60. Now it will be off to the races. Moreover, now we will have to refill the SPR at higher prices. The White House promised to refill it when the price was closer to $70. Instead, the administration continued raiding the supplies throughout May and June, taking our inventory down below 350 million barrels for the first time since the early 1980s, when our country was much smaller.

The fact that these commodities are still rising – even with a sluggish economy, reduced consumer spending, and locked-up credit markets – suggests that we are now headed into an era of "sticky" resilient inflation that persists in a slow economy. In another sign of a weakening economy, the S&P Global U.S. Flash Composite PMI fell 1.2 points to 52 in July. Chris Williamson, chief business economist at S&P Global Market Intelligence, warned that this is a sign of stubborn inflation persisting alongside (and inducing) a slow economy:

....interesting

How long do you think this inflationary cycle will last?

Last time this happened inbthe 1970s commodities also shot up in value and the inflation ended with a terrible recession in the early 80s. But I think commodities also crashed too. And nations whose economies were dependent upon them went through difficult times including Brazil, Canada & Mexico.

And the inflation rate reached double digits towards the end of the 1970s.

[JOE]

This analysis cites the Inversion of the Yield curve as an indicator of a coming recession:

[JOE]

This 40 year Market Veteran predicts Leaner times & a Lower Stock Market:

He cites factors such as the slowing economy, business data and the commercial real estate situation in the United States.

[DKG]

The amount of sovereign debt in default rose by 35 per cent in 2022 as interest rates climbed , reaching US$558 billion and representing 0.6 per cent of public debt worldwide, according to data gathered by the Bank of Canada and Bank of England.

Tighter financing conditions hit hardest in emerging markets and heavily indebted poor countries, as defined by the central banks.

The amount of debt in default grew even though the number of sovereigns in default shrunk to 84 from 99.

"Debt in default jumped 52 per cent for HIPCs (heavily-indebted poor countries) and 49 per cent for emerging/frontier market sovereigns, but by just two per cent for advanced-economy sovereigns," the Bank of Canada said in a July 31 report.

[DKG]

US markets fell in Wednesday trading following the downgrade of US debt from the highest AAA rating to AA+ by rating company Fitch.

Fitch cited "a steady deterioration in standards of governance" as a major reason behind its decision on Tuesday evening.

A major sell-off, led by the technology sector, followed.

The Dow closed 348 points, or 1%, lower in Wednesday trading. The S&P 500 fell 1.4% and the Nasdaq dropped 2.2%, marking its worst performance since February.

The 10-year Treasury yield hit its highest level since November. Bond prices and yields move in opposite directions, so falling Treasuries boost yields.

Tech megacap stocks like Amazon, Meta, Microsoft, Tesla, Nvidia and Apple led market declines. Because the tech sector is so forward-facing, it's particularly sensitive to interest rate changes.

Earnings season, meanwhile, is more than halfway through. About 82% of S&P 500 companies have beaten expectations, according to FactSet data.

[DKG]

Stocks closed lower following mixed reports about the U.S. job market and profits at two of Wall Street's most influential stocks.

The S&P 500 fell 0.5% Friday, its fourth straight loss. The Dow Jones Industrial Average lost 150 points, or 0.4%, and the Nasdaq composite fell 0.4%. Treasury yields sank after the government said hiring was a touch weaker last month than expected. That could help keep pressure off high inflation.

Amazon jumped after reporting a much bigger profit than expected. Apple slumped after reporting revenue that just barely topped forecasts.

On Friday:

The S&P 500 fell 23.86 points, or 0.5%, to 4,478.03

The Dow Jones Industrial Average fell 150.27 points, or 0.4%, to 35,065.62.

The Nasdaq composite fell 50.48 points, or 0.4%, to 13,909.24.

The Russell 2000 index of smaller companies fell 3.94 points, or 0.2%, to 1,957.64.

For the week:

The S&P 500 is down 104.20 points, or 2.3%.

The Dow is down 393.67 points, or 1.1%.

The Nasdaq is down 407.42 points, or 2.8%.

The Russell 2000 is down 24.07 points, or 1.2%.

For the year:

The S&P 500 is up 638.53 points, or 16.6%.

The Dow is up 1,918.37 points, or 5.8%.

The Nasdaq is up 3,442.76 points, or 32.9%.

The Russell 2000 is up 196.22 points, or 11.1%.

[DKG]

Americans inch closer to debt level breaking point as household borrowing tops $17 trillion