CPI, Confidence Collapse, Unaffordable Auto Insurance, & Your Mental Immune System

• Consumer Price Index (CPIAUCSL): +0.3% m/m (+0.1% m/m prior);
• Producer Price Index (PPIACO): -1.3% m/m, -3.3% y/y.  New 2-year low.
• 30 Year Mortgage Rate (MORTGAGE30US): 6.66% (+4 bp w/w).
• 10 Year Treasury (DGS10): 3.97% (-8 bp w/w).
• Fed Balance Sheet (WALCL): +5.7B
• Total Bank Credit (TOTBKCR): -21B (-0.12% w/w); heading lower after 6 weeks of expansion.
• Strategic Petroleum Reserve (WCSSTUS1): 355k +606 (+0.17% w/w), slight refill.

The CPI release on Thursday (0830 Eastern) caused some volatility – metals jumped higher, then sold off hard.  Treasurys sold off hard too, but eventually bounced back.  Mostly.  Given that energy prices haven’t risen – why is the CPI moving higher?  WolfStreet has the details:

Beneath the Skin of CPI Inflation, December: Not in the Mood to Just Go Away (Source – wolfstreet)

Long story short: “services inflation”, a.k.a. “core services less energy service” = 0.44% m/m (annualized: 5.28%).  Cherry-picked, some of the largest components include:

• medical care services & insurance +0.7% m/m
• motor vehicle insurance +1.5% m/m (+20% y/y!)
• movies, concerts, sports events +1.6% m/m
• airline fares +1.0% m/m
• pet services +0.8% m/m

It still appears to be a tale of vaxxidents and healthy, in-person worker shortages.  Mainstream, as always, remains baffled.  Something mandated certainly was “Safe” & Effective at causing seemingly unstoppable “services” inflation.

Odds of a rate cut at the next meeting?  5% at the next (Jan 31) meeting, and 81% by March 20, according to CME Fedwatch Tool.  Will things play out this way if services inflation continues to rage?  “They” had better keep a lid on commodity prices.  It is their only hope.  Nobody likes the Biden-Handler policy – the open borders, the endless money for foreign wars, so – short-term – cheap commodities are their only hope.  I suspect the Bankster Cartel (a branch of “them”) is doing the heavy lifting.

Gold was mostly flat this week, rising 1.80 (0.09%) to 2051.60.  Gold fell for most of the week, recovering all of its losses on Friday.