Mar

17

    event      day       830     930 open      close
    cpi         3 16 fr    1397   1406            1399
    ppi        3 15 th    1398   1399            1404
                3 14 we                                 1402

 A seemingly bearish PPI number was greeted with a one half percent gain from open and a seemingly bullish CPI number that was expected at 8:30 to be bearish. It turned out, however, to be very bullish at open turned out to be bearish.

It's only a half percent here and there, and for those that have the luxury of holding on for the 100 to 500-fold gains that 30 year holds can make, they were ripples in the tide. But for those who try to catch the wiggles, there were so many opportunities to go wrong. What seemed bearish was bullish and what seemed bullish was bearish. How typical of the market mistress and other real life counterparts.

Of course, the CPI and PPI numbers are retrospective numbers from one month ago, and markets should be focused on expectations for the future. That's why they are so meaningless. There has been an average of one month of new actual price data to tell us where the market things prices are going to be after the surveys and seasonal adjustments that make up these contrived numbers. That's one of the virtues of speculation. It provides information as to where prices are expected to be and moves quantities over time as describe by Heyne.

Fortunately, for the first time, in Bernanke we have a Chair who focuses on current prices rather than past economic numbers. This has to create an equilibrating force in the market in the sense that he's not always behind the curve the way the previous Chair was. Also to the good is he looks at hundreds of indicators and doesn't focus on one pet new one each quarter the way the past Chair did in an apparent effort to appear Merlin-like.

Good-bye and good riddance to the Phillips curve in this new regime of good economic sense. The old order caused so much mischief in the mistaken belief that past numbers on employment and production, if very good, were bearish for fixed income and stock markets, because it meant that there was more inflation.


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