JACKSON HOLE, Wyo. -- There's something strange going on tonight.
There's something going on that's not quite right.
All 17 of the economist types surveyed by
expect the January
number to be
released tomorrow to show a decrease. From a half-point fall from
to 3-point declines from both
, every seer in the bunch is looking for a drop.
That means one of two things.
(a) This call is a way easy no-brainer.
(b) There is no way durables will show a decrease tomorrow.
We are inclined to just... (b) (we love Calvin). We like the fact that the
new orders index rose almost a full point in January. We like the fact that industrial production also roared. We like the fact that our spreadsheet spits out a solid (1%) ex-transport gain. We like the fact that the forecasters at
Salomon Smith Barney
are looking for a big (3%) overall increase (and an even bigger one for nondefense capital goods ex-airplanes). We even like the stupid fact that orders for industrial machinery, which account for roughly 18% of all durables orders, rarely fall three months in a row (they dropped in both November and December).
There are two questions we need to consider here.
(a) Will durables print big?
(b) Will they knock the bond if they do?
Any sign that the economy refuses to slow is one of two things that will particularly piss central bankers from here on out (any sign of notable nominal wage acceleration is the other). We are therefore more confident that a large number would knock the bond than we are that the number will print big.
A forecast (especially on a volatile monthly number like this) is, as always, a gamble. You should treat it as such. We ain't about to bet the farm on this one, but we do have a compelling case; in
language this is a standard single-unit play.
We're happy when we're lucky enough to be able to do 60% on calls like this.
And yup. That means roughly four in 10 prove dead wrong.
To date, the main impact of Treasury operations and debt management prospects has been on longer-term Treasury rates, with only a small spillover effect on the financial variables that affect private spending decisions -- short- and longer-term private interest rates, equity prices, and exchange rates.
Translation? The financial conditions that matter are still plenty accommodative.
And hey. I encourage you to begin reading
now if you aren't already. He serves
up some fantastic commentary. His Feb. 16 letter to
is especially good.
And hey. You can find a little background on
here and you can always find all kinds of great money-type charts in two places: The Monetary Policy section of the
here and the
Will you get a tax refund?