Yellen Speaks Softly - Not Yellin' but Market Dives?

[Terrel L. Shields]

Stock markets fall as tech shares slide; Yellen says ‘very modest’ rates rises may be needed – as it happened

Rolling coverage of the latest economic and financial news

www.theguardian.com

Treasury Sec. Yellen: - I do not believe inflation would be an issue in the US economy - I am not predicting or recommending a rate increase

“London markets might have started the day with an injection of post-bank holiday energy but by the afternoon the hangover had well and truly set in. Not enough chips the central issue today, not the kind that soaks up the alcohol but the kind that keeps supply chains moving. Today’s warning came from German chip maker Infineon which is ramping up supply but estimates the current situation will results in 2.5 million less cars being produced in the first half of 2021 than had been intended.​

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“US markets were dragged down by falling stocks in car makers and big tech – the red splodge covering the Nasdaq heat map prompted calls on social media to close the index. And if that had unsettled investors enough for a dreary Tuesday, Treasury Secretary Janet Yellen’s comments that an interest rate rise would have to happen to stop the US economy from overheating and the selloff intensified.​

OK. Why are people buying everything they can lay their hands on? My take

1. Interest rates are cheap
2. Inflation is anticipated to go sky high meaning your 0.1% CD is going to get seriously eroded by inflation created by government spending. Keynesian spending on steroids cannot end well and remember. Lord Keynes lost 80% of his own wealth eating his own cooking - and that was in the months prior to the collapse of the Market in October of 1929.

If inflation explodes then savings is worthless and you need to spend every dime on tangibles like land, houses, cars, art, beans and ammo, whatever.

 

[Elliott]

I believe we will have four years of statements by this administration and then 'walked back.' It is all about propaganda lying which is supported by the media and woke corporations. Inflation is here and it will become a problem. Businesses which are re-opening can't get employees because they make more from the government by 'sitting on their brains.'

WSJ 5/4/21:

"Yellen Backs Off Comment on Interest Rates, Inflation​

Treasury Secretary Janet Yellen walked back her remarks earlier in the day that rates might need to rise to keep the economy from overheating, adding that she didn’t think there is going to be an inflation problem."

 

[Terrel L. Shields]

One of my favorite local cafes is trying to hire, cannot find anyone and old employees are 'sitting it out' on unemployment. And one more waitress graduates in a couple weeks...she has her degree locked down and is hunting a job. She will be gone soon too.

 

[Fernando]

Restaurants have hard time finding staff workers. Seems like plenty of those lower paying jobs.
However, the recent college grads including last year grads have hard time finding a job.
My nephew graduated last year and still looking. I think he's picky and he doesn't need to pay rent living in his parent's home.
Generally when economy not doing well or hasn't recovered like now, inflation doesn't occur.

 

[Terrel L. Shields]

Generally when economy not doing well or hasn't recovered like now, inflation doesn't occur.

Normally...but the economy is improving rapidly and inflation is insane. I know a fellow who is building a house. The house is about 3000 SF. The bill from the contractor to estimate crown molding and trim was almost $60k. So he eliminated that from the bid. Found the crown molding direct from supplier for only $3,000 and someone to install it was less than 10 grand. ... That is the kind of gouging going on. They thought they'd slip that in to pad the bill to almost $200/SF.

Inflation is building rapidly. Gasoline here is up 80¢ a gallon since October. I buy the same groceries week after week. Lettuce is 20% more, meat is out of sight and pork even is getting more expensive. The soda I buy is routinely $1.89 and was $1.49 only last year. Even my tax preparer charged $250 more than last year, the barber shop is now $5 more...it's all inflation. And how many appraisers are charging far more than pre-Covid ago?

I was looking at a new construction appraisal from 2012, $87/SF. Now it's $150/SF0 it was $115 18 months ago here. Have wages doubled? Only lumber and metal have doubled. And it is unsustainable. Excessive profits breeds ruinous competition and they are cutting any tree they can find and cutting lumber here with Mizer band saws. A closed mill has opened its kiln up to other sawyers in the area and let them create dimension lumber- you see houses now with cherry, oak, and other non-pine logs as dimension lumber. And they are shorting kiln time, shrinkage is awful. A friend had a new wood floor lain and it shrank so bad he threatened the installer and they came back worked out a deal to shim some of it to fill in gaps.

 

[Fernando]

Normally...but the economy is improving rapidly and inflation is insane. I know a fellow who is building a house. The house is about 3000 SF. The bill from the contractor to estimate crown molding and trim was almost $60k. So he eliminated that from the bid. Found the crown molding direct from supplier for only $3,000 and someone to install it was less than 10 grand. ... That is the kind of gouging going on. They thought they'd slip that in to pad the bill to almost $200/SF.

Inflation is building rapidly. Gasoline here is up 80¢ a gallon since October. I buy the same groceries week after week. Lettuce is 20% more, meat is out of sight and pork even is getting more expensive. The soda I buy is routinely $1.89 and was $1.49 only last year. Even my tax preparer charged $250 more than last year, the barber shop is now $5 more...it's all inflation. And how many appraisers are charging far more than pre-Covid ago?

I was looking at a new construction appraisal from 2012, $87/SF. Now it's $150/SF0 it was $115 18 months ago here. Have wages doubled? Only lumber and metal have doubled. And it is unsustainable. Excessive profits breeds ruinous competition and they are cutting any tree they can find and cutting lumber here with Mizer band saws. A closed mill has opened its kiln up to other sawyers in the area and let them create dimension lumber- you see houses now with cherry, oak, and other non-pine logs as dimension lumber. And they are shorting kiln time, shrinkage is awful. A friend had a new wood floor lain and it shrank so bad he threatened the installer and they came back worked out a deal to shim some of it to fill in gaps.

I hope the lumber shortage is a short term problem and prices go back down when market corrects itself.
Gasoline is high but current oil prices historically is not very high.
I shop at Costco for past year and food prices like salmon, sea bass, bread, apples have been about the same (although bananas have gone up to $1.69/bunch). Maybe Costco has long term fixed price contract. I admit I don't really like buying in bulk (had to throw away excess bread and such) and it adds up. Before I knew it, today I spent over $500.

 

[Terrel L. Shields]

Gasoline is high but current oil prices historically is not very high.

Yes, but we were only energy self-sufficient for a single year. Now OPEC and Russia are in the drivers seat and inflation will mean higher crude oil prices. Look for $80 by years end and $100 by 2024. Stock are falling as refineries come back on line for spring conversion to "summer" gas and impact of the Texas ice event. Lack of drilling is seeing our inventory fall and refiners scramble to replace falling supply with foreign oil.

 

[Fernando]

In the past decade, didn't you noticed when oil price gets too high, the economy responds and then prices go back down?
Unless major event occurs, the free market and greed of some rogue OPEC members will keep prices from getting too high.
Watch bond rates which foresee inflation for different time periods.

 

[Elliott]

I seem to remember the day when Opec sheiks would crush the world economy with sky high oil, then they'd have to cut back the number of Roll Royces they could buy a year and then Opec would finally release supply. I like not having our nuts in a vice though some of the new policies are headed that way.

 

[glenn walker]

Poor Old Wobbly Yellan - An-embarrassment to the Treasury and the US- She talks like she has marbles in her mouth and the only person I know who sounds like her is Uncle Billy after his 4th shot of Jack . This administration is like watching people at an-assisted care facility .The world must be laughing