The Mess That Greenspan Made - Part 20

Rosenberg on Inflation and the Fed

Gluskin Sheff chief economist David Rosenberg talks about such things as wage inflation where it matters and nascent rising prices with a ditzy Trish Regan who seems intent on extrapolating from a single month of data (last week’s negative PPI print for May).

Rosenberg has been warning about higher inflation for some time now and it’s worth pointing out that his track record on this sort of thing is pretty good.

I’ll never forget a few years back when he was predicting 10-year yields of 1.5 percent and everyone, including myself, thought he was kind of nuts.

Monday Morning Links

MUST READS
Iraq: We Broke It, but We Can’t Fix It – Fiscal Times
Iraq, oil markets, and the U.S. economy – Econbrowser
Iraq Army Tries to Roll Back Sunni Militants’ Advance – Bloomberg
Pope Francis Warns The Global Economy Is Near Collapse – Huffington Post
Russia cuts off natural gas supplies to Ukraine – CNN/Money
Europe faces gas shortage as Russia cuts Ukraine supply – Telegraph
We Are So Not Prepared For Another Oil Shock – Dollar Collapse
As Fed meeting nears, thoughts turn to rates – USA Today
Blast From the Past: Could Stocks Melt Up? – WSJ
Bailout Economics 2014: Predators Prosper, Prey Perish – TSF
Few-strings-attached loans at record levels – CNBC
A Bazillionaire’s Guide to Stress Relief – Lewis, Bloomberg
Formula for Market Extremes – Hussman Funds

MARKETS/INVESTING
Futures drop as Iraq turmoil continues – Reuters
Have Investors Grown Complacent? – WSJ
Don’t Worry, Be Bullish – Alhambra Partners
Stocks and Bonds Are Sending Mixed Economic Signals – RCM
How The Unemployment Rate Affects Stock Market Performance – AWOCS
Draghi Stock Rally Runs to Record Price-Earnings Ratio – Bloomberg
“Cluster Of Central Banks” Secretly Invested $29T In The Market – Zero Hedge
Treasuries Rise Before Fed as Iraq Drives Haven Demand – Bloomberg
Gold hits 3-week high on Iraq turmoil; platinum rebounds – Reuters
Technical Trading: Gold Bulls Seize Control Of Short Term Trend – Kitco
Weekly Chinese Gold Demand Down, Silver Premiums Down – In Gold We Trust

ECONOMY/WORLD/HOUSING/BANKING
Rich Bernstein: Here’s where the inflation is – Reformed Broker
Rosenberg: Accelerating US bank lending wlll drive up inflation – Arabian Money
Euro zone price inflation hits trough in May – Reuters
ECB Seen Buying Assets Within a Year as Draghi Rate Cuts End – Bloomberg
Is Carney about to surprise the markets with a 2014 rate hike? – Sober Look
Sex, Drugs and Dodgy Accounting: Spain’s Growth Strategy – Testosterone Pit
Housing market slowdown hits the regions – Telegraph
In search of house-price bubbles – voxeu
Property weakness overhangs recovery – China Daily
3 reasons not to buy a home now – USA Today
Federal Reserve and ECB Balance Sheets – Marc to Market
FOMC Preview – Economist’s View

 

The latest issue of the Iacono Research Weekend Update has been posted to the website and is now available for subscribers here. There will be no changes to the model portfolio or the buy ratings this week, but a few little noticed developments from last week are covered along with the ongoing covered call sales in the following discussion topics:

The executive summary is as follows:

After new record highs for U.S. stocks early in the week, a subdued outlook for global growth from the World Bank and violence in Iraq that led to surging oil prices tempered stock investors’ enthusiasm leading to modest declines for U.S. equity markets. Fresh stimulus in China pushed stock prices higher there and developments in Iraq led to renewed safe haven demand for Treasuries and gold.

The price of both agricultural goods and base metals saw sharp declines, but the energy market surged along with precious metals as shares of oil producers and mining companies saw big gains, the latter reestablishing itself as one of the best performing asset classes so far this year. For the week, the model portfolio jumped 1.9 percent and is now up 6.0 percent for the year.

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CNBC cheerleader Bob Pisani is clearly a bit concerned that the stock market rally is being threatened by developments in Iraq and Art Cashin does little to improve Bob’s mood by pointing out a number of foreboding signs, most of which are just Wall Street folklore.

What is decidedly not folklore is the rise in oil prices and the possible impact this could have on equity markets, though the ^VIX volatility index currently shows little concern.

As noted in the interview above, what has been remarkable about the recent advance of ISIS (the Islamic State of Iraq and Syriain) insurgents is that the people of Iraq appear to be welcoming them with open arms as the military just “melts away”.

Of course, this is in Sunni areas (where there is little oil) and things will get much more difficult should ISIS attempt to take control of Shia areas in Baghdad and to the south.

 
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