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Small caps continue to struggle. History suggests small caps tend to do well when the Fed starts to cut rates. Let’s see how it will play out this time.

A new "inflationary shock" was predicted for the Russian economy

Having experienced the strongest devaluation of the ruble in eight years and a sharp acceleration of inflation, the Russian economy may face a new shock next year, warns Alfa Bank.

According to his forecast, by the end of the year, the dollar rate will again rise to the 100 ruble mark, which it broke through last summer. "The key factor for the ruble exchange rate should be the search for new sales markets" for Russian goods, Alfa Bank explains: if this can be done, the inflow of foreign exchange earnings will increase.

But there are still problems with it: according to the results of last year, export revenues of the Russian economy fell by almost 30%, to $422.7 billion, the lowest level since the 2020 pandemic. This promises "risks of weakening of the ruble", which, in turn, "create the threat of new inflationary shocks", write analysts of Alfa Bank.

https://t.me/moscowtimes_ru/18973

https://x.com/thinkappraiser/status/1756794715251560583?s=46&t=5lEEPaezr6Ic-W4Z6huZ5Q

https://amp.cnn.com/cnn/2024/02/06/business/mcdonalds-prices/index.html

$3 for a single McDonald’s hash brown? Customers are fed up and pushing back

zzyzzx says

https://amp.cnn.com/cnn/2024/02/06/business/mcdonalds-prices/index.html

$3 for a single McDonald’s hash brown? Customers are fed up and pushing back

McDonald's net income $5.92 billion in 2018, and only $6.18 billion in 2022

They should at least slightly streamline and cut operating costs while keeping prices the same or increase them at 1/2 the rate of annual inflation

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Actual CPI for January 2024 was 0.3% monthly increase and 3.1% annual increase.

Economists surveyed by Dow Jones had been looking for a monthly increase of 0.2% and an annual gain of 2.9%.

I see the Federal Reserve likely will not start to decrease the Federal Funds rate until the 4 month average for annual inflation is at least below 2.6%.

That is why we may not see a reduction in the Fed Funds rate until this October or November.
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AD says

That is why we may not see a reduction in the Fed Funds rate until this October or November.

Still too early.

https://x.com/charliebilello/status/1757453832324341971?s=46&t=5lEEPaezr6Ic-W4Z6huZ5Q

HeadSet says

AD says

That is why we may not see a reduction in the Fed Funds rate until this October or November.

Still too early.

Democrats within the federal bureaucracy will cook or massage the numbers to get it to their desired range for inflation.

This will then have Senator Pocahontas to put pressure on Powell to lower the Fed Funds rate at least 4 months before the upcoming Presidential election.

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Eman says

https://x.com/charliebilello/status/1757453832324341971?s=46&t=5lEEPaezr6Ic-W4Z6huZ5Q

yeah Mister Eman, from what I've read, the Fed Funds rate is usually set about 1.5% above annual inflation, when inflation steadies out ... I read that gives the Fed enough margin above annual inflation to ensure inflation does not steadily increase

10 Year Treasury should be about 1.5% above annual inflation and the 30 Yr mortgage rate about 1.5% above the 10 Yr Treasury

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AD says

This will then have Senator Pocahontas to put pressure on Powell to lower the Fed Funds rate at least 4 months before the upcoming Presidential election.

If the Fed Funds rate is lowered then inflation will jump up. May not be the best move for Pocahontas.

The Fed is getting caught between a rock and a hard place.

1) They get pressured to lower rates due to high debt service for the new issued bonds.

2) They get pressured to lower rates due to the amount of losses and stress they put on the bank and their balance sheets.

3) They get pressured to lower rates because this is the election year.

Everything is not rosy as it looks on the surface

Eman says

1) They get pressured to lower rates due to high debt service for the new issued bonds.

Yeah Mister Eman, that is why the federal budget should increase no more than at a rate equal to annual inflation. And they need to cut spending slightly to use the savings to pay down the debt.

They can do this as painless as possible for a 5 to 7 year duration in order to reduce the debt to GDP ratio as well as interest payment to GDP ratio.

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Why in the world would the Fed lower interest rates at all this year? Wages are outpacing CPI by about 1.4% on an annual basis. The effects of an increase in minimum wages for 25 states that implemented them still have not fully percolated through the system, and the unemployment rate is at 3.7%. Additionally, it looks like every month there is a couple hundred thousand additional Americans that think they can get ahead by taking a 2nd part time gig.

On the fiscal side, the federal government is forecasted to spend an extra $2 trillion more than it is bringing in. This is before the more free money programs that are currently in the works. We've got an enhanced Child credit coming for about $90 billion extra (we can argue whether it is good policy or not, but it is inflationary). Then there are the extra free money initiatives for aid to the Ukraine and Israel.

We already have deflation in goods. It is services that show the inflation. We would have even more price reductions in goods, but the Biden administration WANTS higher prices. Tariffs on Chinese made crap (especially keeping their electric cars outta America) inflated the price of goods.

With unemployment at 3.7%, let's just say that employers have to hire the less than best. Productivity growth...well that can be something hoped for.

As far as the other pieces of "free money": rents, equities and real estate, those seem to be at all time highs. (Ok, office buildings are in a bit of a dumper, but all other classes are at all time highs). The banks are just now getting around to advertising for people to pull money out of their home equity via HELOCs.

Additionally, corporations are continuing their debt binge by issuing a record amount of bonds.

So, the higher interest rates haven't slowed the overall economy at all.

Misc says

Why in the world would the Fed lower interest rates at all this year?

Because the fed mostly does the wrong things.

Misc says

Why in the world would the Fed lower interest rates at all this year?

Politics.

Inflation has already entrenched in our lives. 2% YoY inflation on top of 309.7 (red line) basis is not the same as 2% above 280.4 (blue line) basis.



https://x.com/charliebilello/status/1757886237220708802?s=46&t=5lEEPaezr6Ic-W4Z6huZ5Q

In a system of pure capitalism productivity would always be improving (how could it be otherwise?) and you would never experience inflation - it would only be deflation.

The fact that we have ANY inflation represents how far we are from capitalism.

In a system of pure capitalism there would be no profits.

The fact that there are profits shows how far we are from capitalism.

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Yes, the Federal Reserve may lower rates no later than 4 months before the upcoming November election because of political pressure from the likes of Senator Pocahontas.

Real median household income (adjusted for inflation) was the same from 1998 to 2014, whereas CAGR for S&P 500 was 5.04% during same period (reference: MoneyChimp.com). That 17 year period was an economically lost period.

Real median household income steadily increased from 1982 to 1997. This was a golden economic period.
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And if you see the above chart, about from 2007 to 2015 there were no real gains in household income. More specifically, income was not keeping up with inflation, even with government inflation being reported as low.

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Misc says

In a system of pure capitalism there would be no profits.

Only in commodities.

only $4.44 for Walmart Great Value brand pizza ... supreme pizza, rising crust, 1 pound 13 ounces ...

Walmart on 23rd street in Panama City Florida

AD says

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And if you see the above chart, about from 2007 to 2015 there were no real gains in household income. More specifically, income was not keeping up with inflation, even with government inflation being reported as low.

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The same could be said about 1989 to 1995?

IIRC, Fed Daly is the SF Fed president. It will be interesting to watch what the Fed will do in the coming months.



https://x.com/financialjuice/status/1758560951786143892?s=46&t=5lEEPaezr6Ic-W4Z6huZ5Q

Eman says

IIRC, Fed Daly is the SF Fed president. It will be interesting to watch what the Fed will do in the coming months.

She's a Democrat hack. She considers Janet Yellen as her mentor. No surprise she wants to lower rates to help Biden in an election year.

https://en.wikipedia.org/wiki/Mary_C._Daly

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Al_Sharpton_for_President says

Yup, don’t just look at YoY. Look at the last 3 years since Covid and zero interest Fed fund rate. Inflation has entrenched in our daily life. The economy has to experience deflation for several years to get us back to the Fed’s 2% historical trend line. Scary to think of this scenario

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Ultimately it is based on median real income for households. Is income keeping up with living expenses ?

Also how accurate does the government account for inflation (especially during an election year with a Democrat in the White House) ?

https://fred.stlouisfed.org/series/MEHOINUSA672N

2019: $78,250

2022: $74,580

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Another shrinkflation pic:

zzyzzx says

Another shrinkflation pic:

I can't imagine any woman being happy with opening that box.

Patrick says

I can't imagine any woman being happy with opening that box.

Yes, and you give this, you won't be opening her box.

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No more all-you-can-eat at Red Lobster: https://www.the-sun.com/money/10460920/red-lobster-makes-change-deal-customers-losses/

With inflation such as wage increases and food, its hard for a restaurant deal like this to be sustainable.

Florida has been increasing the minimum wage for tipped employees by $1 each year. Its now $8.98 and increases by a dollar for each year until September 2026. In 2027, the state of Florida will revert back to using inflation rates to adjust its minimum wage rates.

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