• The U.S. dollar started out this morning on the defensive
  • Government released CPI numbers generated a sharp reversal across the board
  • Gold sold off, but closed slightly down against the dollar
  • April CPI up just .1% on the month; year over year prices dropped -.2%
  • Lowest CPI since October 2009
  • Core CPI (excludes food & energy) rose .3%
  • Biggest monthly jump since March 2006
  • News sent dollar up on anticipation that rate hike will be more likely
  • Inflation benchmark is just as real as the 6-1/2% unemployment goal
  • Traders still haven’t figured out that if we ever approach the goal, it will be moved
  • Biggest factor within the .3% rise in the Core was +.7% in health care costs
  • Biggest increase since January 2007 – prior to Obamacare
  • Rising costs will slow consumer spending, weakening the economy and undermining employment
  • Yellen in a press conference today did not actually project a rate hike
  • It’s all about extend and pretend; actually postponing the rate hike will buy the Fed some time before launching QE4
  • Increased inflation as the economy cools down means stagflation
  • The media is spinning increased inflation as good news
  • Bad economic news released yesterday:
  • Unemployment numbers came out higher
  • Fewer hires mean fewer fires
  • Chicago Fed National Activities Index came in at -.15
  • Three month moving average down to -.23
  • MAY PMI expected to rise to 54.6 unexpectedly declined to 53.8 – lowest lever in 16 months
  • Bloomberg Consumer Comfort Index continued to slide from 43.5 to 42.4
  • May Philadelphia Fed looked for a bounce back to 8; missed expectations with 6.7
  • Missed expectations 5 out of the last 6 months
  • Existing Home Sales expected improvement over March; dropped to 5.04 million
  • Kansas City Federal Reserve Manufacturing Index missed expectations at -13; dropping for 5 consecutive months
  • Economic data as bad as 2009 and inflation is getting worse
  • Janet Yellen acknowledged underlying issues with unemployment number, mentioned discouraged and part-time workers
  • Labor Force Participation Rate is not improving
  • Low-skilled jobs in jeopardy with minimum wage hikes
  • $15/hr fever will further hurts employment and erodes the tax base
  • Higher minimum wage will transform workforce because employers will hire better workers for the higher wages
  • Movement will substitute technology for labor costs
  • Minimum wage hikes will undermine the economic recovery that Janet Yellen pretends is existing
  • So she can continue to pretend that the Fed’s monetary policy is working
  • And she can pretend that they can actually raise interest rates
  • In the unlikely event Yellen tests a rate hike, they will have to acknowledge that they were wrong
  • The Fed can always blame the data for deciding not to raise rates and therefore save face