Put Away the Hiking Boots

Here in the real world, we're looking for the Fed (despite the facts) to continue its sissy ways Tuesday.
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Ignoreland

JACKSON HOLE, Wyo. -- Your correspondent expected nothing less.

One economist dismisses the surge in NAPM prices as "nothing more than a reflection of higher oil prices."

We must remind our readers that the rise in NAPM prices is not to be fretted over.

Don't get too worried about an increase in the NAPM price index.

Unbelievable.

It is almost impossible to get worked up about moron thinking like that because the people who produce it are so clearly living in The Laaaand of Chocolate (or some such wonderful place).

Almost impossible.

Not entirely.

Consider two facts.

One is that the NAPM price number routinely rocks Treasuries.

The other is that the NAPM price number serves as a good

Fed

policy guide.

Now ask yourself this.

If the people responsible for the crap thinking cited above aren't paying attention to the impact of new data on the bond market, and if they aren't trying to game the next Fed move, and if they aren't trying to figure the direction of interest rates, then what precisely

are

they trying to do?

In all seriousness: What?

What the hell is it that they so desperately want you to believe?

Kettle Whistle

Anyway.

Come to me.

Go to the light.

Join me over here in the real world.

The world in which the NAPM price

index has tacked on 36.5 points since it bottomed nine months ago.

That isn't by any means a temporary move -- the index has risen during every single month of this year. And it isn't by any means a small move -- never before during this expansion has it risen so much over a nine-month period.

Again: The NAPM price index has tacked on 36.5 points in nine months.

It now stands at 67.6%.

And for reference, note that the Fed hiked the

funds rate

in March 1997. When NAPM prices had risen 11.5 points in seven months to hit 55.6%. And when oil prices were posting year-on-year decreases. And when the core (excluding food and energy)

Consumer Price Index

was decelerating.

And for more reference, note that the Fed hiked the funds rate in February 1994. When NAPM prices had risen 14 points in five months to hit 63%. And when oil prices were posting year-on-year decreases. And when the core CPI was decelerating.

Articles Elsewhere

The August

income and spending

numbers were

released this morning.

Spending rose 5.7% last year.

It posted a 6.6% year-on-year increase during both the first and second quarters of this year, and it is on track to do precisely that again during the third.

Disposable (after-tax) personal income rose 4% last year.

It posted a 4.5% year-on-year increase during the first quarter of this year, a 4.8% increase during the second, and it is on track to post a 5.1% increase during the third.

And that, because Americans sport a marginal propensity to consume that sits just south of 1, means that those three-year-old spending-slowdown forecasts will yet again have to be pushed back at least another quarter.

A Bourgeois Kitten

The strength of domestic demand (as well as that of foreign economies) has intensified since the Fed last

tightened -- anyone claiming otherwise has either not been tracking the numbers or simply prefers to ignore them -- and labor markets are even tighter.

Those things scream h-i-k-e.

And yet if the Feds are leaning heavily on the deceleration that the core CPI

showed between July and August, they will not tighten next week.

The fed funds futures contracts say they won't -- they put the chance of a hike at only 31%.

And they're usually always right.

Your driver will be shocked if this Fed sheds its sissy clothing and tightens on Tuesday.