Today’s data: Revision to 4Q GDP takes the level lower, not good news for our economy.
The report this morning was the first of what will be two revisions, the initial report came in at +2.6% last month; today that level was dropped to +2.2% and there is a pretty darned good chance that next month the vial revision will be another drop. The guys who forecast this stuff with pretty good accuracy are saying they think the last revision will be to the 2.00% or just under that level. Two things to mention concerning this GDP report; first the forecast was already down to the 2.00% level so the report was actually better than expected. To put our 2.2% report in perspective I will add to the conversation the fact that in the post WW II decades we grew accustomed to seeing ‘normal’ GDP running more along the pace of +3.5% or so. However, it is abundantly clear that over the decades, as our debt load has grown and grown and grown our GDP has fallen and fallen and fallen. This is not coincidence, this is cause and effect and there are too many historical examples and proofs of that fact to dismiss my comments as unfounded opinion. Debt is destructive when used badly and as a nation we use it badly.
The Big Picture: Yesterday was an unexpectedly very interesting day.
The January CPI report came in well into negative territory as expected, but at the same time the ‘core’ reading did not. Instead, the core reading (it removes the highly volatile food and energy measurements) was a bit higher than expected. As the trading session moved from the morning into the afternoon session that little unexpected factoid began to weigh more and more heavily on the minds of the folks active in the bond markets and prices fell into the close of our trading day. Here and there we saw and heard folks asking if in fact the Fed’s might actually be correct with their ‘transitory’ nature of this soft patch of deflation. To me the day was a sign of health in the markets, days like yesterday that shake things up a bit and get the dialogue going are golden days. They often plant seeds that grow with time and they keep the herd mentality from becoming too strong (and potentially blind). For those of us who live in these markets we know the inflation question is far and away the most important question of the moment and it is one that will dominate the conversation for (probably) all of 2015. In closing on this let me add that, a bit to my surprise the markets did not carry this worry over into our session today; our only stat of the day and its sign of softness has bond prices a wee bit higher as we close the week.
Investment Portfolio: Lordy, lordy, lordy!
Enough already! Two days of Yellen testimony is enough Fed speak for one week! Following Janet’s trip to never-never land, we now have other Fedsters who feel compelled to share their wisdom with the mere mortals of the world. Now, that wouldn’t be so bad if they agreed on a few things, but they each seem to need to sow confusion where calm could far more easily reside. Time is a great teacher and time has taught us that the Fed guys and gals opinions are nothing more than one more person’s opinion. We patiently endure their largess, we go about our daily business aware of their conflicting views and we don’t allow them to be any more disruptive than any other soap box expert. The markets however have a very hard time turning a deaf ear to the Fed speakers and so we see more volatility and uncertainty created by each speech. If, if as with the gold of yesterday, we see these speakers being seed planters of another sort and that keeps the herd from too much of one mind, then maybe we are getting a little silver in the lining of the cloud.
Weekly Market Data
Current Market Levels from Bloomberg daily
- Monday: 2/23
Jan. Existing Home Sales expected at 4.95mm >> 4.82mm reported
- Tuesday: 2/24
CS 20 city home sales expected at +4.30% >> +4.46%
- Wednesday: 2/25
Jan. New Home Sales excepted at 0.47mm >>0.48mm
- Thursday: 2/26
Weekly Claims expected at 290k >> 313k Jan. CPI expected at -0.6% >> -0.7% Jan. Durable Goods Orders expected at +1.6% >> +2.8%
- Friday: 2/27
4Q GDP expected at +2.0% >> +2.2%
Data is taken from sources considered to be accurate, most often that of an agent of the US Government; no guarantee of accuracy is suggested.
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