October 13, 2023

US Inflation Rises Fueled by Higher Rent

📰 News Organizations

  • US Inflation Rises More Than Expected Fueled by Higher Rent. The U.S. annual inflation rate was at 3.7% in September. Rising rents accounted for more than half of the monthly CPI increase, indicating that price pressures remain persistent.

  • UAW Strikes at Ford Pickup-Truck Plant in Kentucky. The plant’s 8,700 workers walked off the job marking the largest strike action taken by the UAW at any of the three Detroit automakers since the union declared a strike.

  • Atlassian to Buy Loom for $975 Million in Bet on Remote Work. Loom is used by companies for tasks like onboarding, reviewing code, sharing feedback, explaining documents and all-hands meetings. The deal price will top Atlassian’s 2017 purchase of Trello.

  • Walgreens Profit Outlook Comes Up Short As Demand Declines. Walgreens offered soft profit guidance and reported fiscal fourth-quarter earnings that fell short of expectations, as demand for Covid vaccines and tests sinks in the U.S.

  • Delta Air Lines Profit Jumps Almost 60% After Strong Summer. The profit is the result of strong travel demand continued through the summer, particularly for international trips. Delta said that it expects solid travel demand in the last three months of the year.

🐦 Twitter

  • After notching a new 23-year high Friday, 30-year mortgage rates plummeted by more than a third of a percentage point Tuesday. The substantial drop was the biggest single-day decline for the flagship average since Dec. 1, 2022. Source.

  • Initial jobless claims at 209k vs. 210k est. & 209k in prior week; continuing claims up to 1.702M vs. 1.676M est. & 1.672M in prior week. Source.

  • After a record 25 consecutive months of negative real wage growth, wages have now outpaced inflation on a YoY basis for 5 straight months. This is a great sign for the American worker that hopefully continues. Source.

  • Marketfield’s Shaoul on the Fed “We are not there yet, but you’re going to see some form of yield curve control brought in to stabilize the bond market.” Source.

  • What's missing from the "higher, for longer" interest rate narrative is that it's actually "much higher, forever." The days of ZIRP are over. If they return it will unleash run-a-way inflation, an implosion in the dollar, bonds, and the economy. Source.

The past four decades had an equilibrium of ever-higher U.S. debt but ever-lower interest rates, which meant constrained interest expense. Now that debt is still rising but interest rates have stopped going down, the interest expense becomes more of a recurring theme.

Lyn Alden

📓 Online Publications

  • Demand 'Close To Multi-Decade' Low. Homebuyer demand for mortgages inched up slightly last week, as rates climbed to the highest level in more than 2 decades, according to the Mortgage Bankers Association's weekly survey.

  • AMD and Nvidia Just Made Big AI Moves. On Tuesday, AMD announced it was acquiring open-source AI software start-up Nodi.ai for an undisclosed sum. Meanwhile, Nvidia introduced a new AI inferencing capability called Nvidia NeMo SteerLM.

  • Bitcoin Hits 2-week Low on US Inflation Data. The move followed US inflation data in the form of the PPI, which came in above expectations — 2.2% versus 1.6% year-on-year, adding to concerns about lingering U.S. inflation, with risk assets down.

  • ETH Slumps To 15-Month Low Against BTC. Bitcoin halving and spot BTC ETF speculation captures investors' imaginations while Ethereum has its first inflationary month since transitioning to Proof of Stake. ETH last traded hands for 0.0575 BTC.

  • Mastercard Announces Successful Wrapped CBDC Trial Results. Mastercard said the solution allowed a CBDC owner to purchase a nonfungible token listed on Ethereum in a live environment. This success would potentially enable complex payment arrangements.

🎧 Podcasts

  • Rising Interest Rates Curb Lending Growth for Big US Banks. Big US banks will start reporting earnings on Friday. JPMorgan Chase, Wells Fargo, and Citigroup will all release quarterly reports about lending starting to slow down. Source(1:10)

  • Exxon Became King of US Oil. ExxonMobil acquired Pioneer Natural Resources for nearly $60 billion. This transaction surpasses Exxon's earlier major merger with Mobil and stands as the most significant corporate deal of the year. Source(2:07)

  • Potential for Second Wave Looms. Inflation is currently stabilizing at a high level, with expectations of fluctuation in the near term. The historical pattern suggests a potential second wave of inflation, often driven by unpredictable geopolitical events. Source(1:20)

  • Birkenstock's IPO Bucks Trends. Birkenstock's public debut marked a notable departure from this year's other IPOs, with 24 offerings raising at least $100 million with an average first-day return of 20%. In historical context, Birkenstock's IPO is ranked as the 13th worst. Source(10:21)

  • Yield Steepening Points to Bearish Outlook. The current indications are leaning toward a bearish scenario for yield steepening. Anticipation includes both a retracement and a cautious outlook due to economic factors and potential labor market resilience. Source(27:20)