The Tasgall Group

Titled “Out-of-the-box Thoughts on the Yield Curve”, Steve Saville throws out some very good commentary on the current yield curve inversion. I have to admit that his commentary has defined my own understanding of what yield curve inversion really means and what (if anything) it forecasts. (more…)

When working on my data for analyzing liquidity, I calculated the yield spread as TNX – IRX (10 year minus 3 month), where StockCharts provides an easy way to see TNX / IRX (10 year divided by 3 month)… and this got me thinking about my post a while ago on inflation expectations… it seems as though I may have made a minor mistake in my analysis… which leads to a major mistake in my conclusion. Mea culpa. (more…)

When I read this?AP report, my head spun.? Why?? That’s what happens when the media spins every number coming out of the Fed until you can’t help but get some bodypart caught in the whirlpool.? This is a perfect example of what happens when monthly changes in economic releases are compared instead of looking at year-over-year.? Ahead Of The Curve spends several chapters discussing the flaws of comparing one month to the next instead of looking at annual rates of change.

If you believe this article, we are all doomed.? But a simple glance at y/y charts shows that income has been?accelerating like a shot and that this, in turn, has now caused consumption rates to turn upwards.? So the very numbers that spell doom to this writer, are actually reflective of an improving picture.? Same numbers, completely opposing views.? Here are the y/y charts of my two favorite economic indicators, real hourly income and real PCE (i.e. consumption):

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Someone has been eating?my economy.

I love coming across interesting charts that just make you go, “Hmm…”, like the one I posted about median income.? Here is another “Hmm…” chart that seemed to fit the vibe of recent posts:

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I have to wonder whether the markets will continue to power ahead in the months ahead, or if instead that the steam is actually from a steamroller and we’re trying to pick up nickels (small profits) as it is barreling down.

[Note: the phrase “picking up nickels in front of a steamroller” is typically used to describe fixed income arbitrage, but I think it creates a nice metaphor in my current discussion.]

Let’s start with a little check in on history… (more…)

There are quite a few ways to look at inflation and the general inflation expectation of various markets. Most people think of CPI or Core CPI as “inflation”, or they look at interest rates or the price of gold. Perhaps more important than the official statistics is what inflation expectations are…

There’s an easy way to see what the market expectations currently are for inflation — look at the relative performance of inflation adjusted bonds versus normal bonds. The easiest way to look at this is with a chart of TLT:TIP. (more…)

This chart jumped onto my leg and started to hump?it like a dog wearing plaid.? In other words,?the pattern I saw just couldn’t be ignored.

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Many, many people are talking about the Fed Funds Rate, but I have a feeling most don’t even know that the rate is not set by Bernanke or the FOMC… they set a “target” rate for the Fed’s open market activities.

You can see here that the number in practice does deviate from the target slightly on a day-to-day basis. Even though the target rate is 5.25% there are several days where the average rate was 5.31% or even 5.17%.

There’s nothing sinister or conspiratorial here, it’s just the fact that the Fed is in less control than everyone thinks. They are subject to some variance just like the rest of the markets…

To quote NowAndFutures.com: “The Federal Reserve Bank is a private company, authorized in 1913 by a Congressional Act called the Federal Reserve Act of 1913. In a very real sense, it outsourced the control of U.S. money and banking to bankers themselves.”

I think we’ve mentioned it before in spoken conversations, but here is a definative source. TaxProf Blog: Gas Taxes Exceed Oil Companies’ Profits.

The government collects more in tax revenues applied to gas and oil than oil companies make in profits.

The next time Congress is pandering and trying to buy your vote, ask them to remove some of their legislated taxes instead.

It makes me wonder again why the CPI exclude taxes…