This is just one trading day, but it’s also a perfect illustration of one of my pet peeves. The financial media are trumpeting big gains for US stocks on the news of a softer than “expected” CPI release, supposedly lifting investor “sentiment”. Never mind that only yesterday the same media were forecasting a softer than expected print … which of course begs the question of … exactly what were the expectations?
So apparently Wall Street economists are onto the same game as corporate analysts … lower the expectations bar so you can announce a “beat”.
And “sentiment”? Is an increase in the price of groceries due to elated shoppers? But we digress…
Here’s a snapshot of the stats as of this intraday writing:
US stocks (VTI): up 0.61%
XS stocks (VXUS): up 1.67%
UST (GOVT): up 0.72%
Oil (USO): up 0.91%
Copper (CPER): up 2.27%
Gold (IAU): up 1.19%
Silver (SLV): up 4.15%
Platinum (PLTM): up 2.46%
What exactly do these data show? Is it really true that US stocks are “up” at all? What exactly do we know for sure?
We know that each of these prices are in US dollars. So we can say with confidence that US stocks are up 0.61% in terms of US dollars. Any such statement without the “in terms of US dollars” part however … is false.
Because in terms of everything else on our list, US stocks are down. They’re down 1.06% in terms of ex-US stocks. Down 0.30% against oil. They’re down 1.66% in terms of copper, 0.58% in terms of gold, 3.54% in terms of silver, and 1.85% in terms of platinum. They’ve even lost 0.11% ground to US Treasuries. The only thing that’s down more than US stocks is US dollars.
The difference between these prices and the CPI? These are all real time data. Changes in the purchasing power of the dollar for the basket of goods and services captured by the CPI take much longer to register. What do all these things have in common that would simultaneously increase their values? Nothing … the only thing they have in common is that we’ve priced them in dollars. Our real time prices – higher across the board – show a loss in purchasing power at the leading edge, as it passes into the pipeline, ultimately to register in the CPI.
So exactly what are the media celebrating on this wonderful up day for stocks? The best I can figure is they’re really feting a decline in the value of the US dollar, a renewed bout of inflation. So we are to celebrate progress on stemming its loss of purchasing power – inflation – with a renewed surge in … inflation.
Any better explanation? Is loss of purchasing power good news for the average American, or is it that Wall Street thrives on easy money and its media outlets work hard to support it?
A rare repeat … this morning on soft PPI US stocks once again underperform most other assets except US dollars. The better the past inflation data get, the worse the future inflation data get.