Inflation Monitor

Inflation Monitor – September 2015

Inflation Monitor / By Kirk Chisholm / 09/15/2015

Inflation Monitor Summary – Composite Ranking

* The Inflation Equilibrium is a quick summary for the whole data series of the inflation monitor. If you don’t like statistics, this is the chart for you.

Inflation Monitor – September 2015 – Introduction

“Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output” – Milton Friedman

This is the 12th issue of the Inflation Monitor. During the entire year that we have published this report, the trend has been deflationary. This is contrary to what many economists and fear mongers are claiming. the US has created an enormous amount of money and this should have caused inflation, yet other than the stock market, this is not the case. There are a number of reasons for this, but one thing is clear, the deflationary forces are strong and persistent.

This past month, The stock market swooned and dropped a bit more than 10% during the month…

Inflation Monitor – August 2015

Inflation Monitor / By Kirk Chisholm / 08/19/2015

Inflation Monitor Summary – Composite Ranking

* The Inflation Equilibrium is a quick summary for the whole data series of the inflation monitor. If you don’t like statistics, this is the chart for you.

Inflation Monitor – August 2015 – Introduction

The lazy days of summer are almost over. As the summer ends, the Wall Street traders and money mangers will also be going back to work. If you looked at a chart of the S&P 500 without the dates, you would not be able to tell which days were summer days and which were not. It looks like the traders have been in vacation for the entire year.

The S&P 500 has been fluctuating around 0% all year long. It is kind of refreshing to know that there is another direction other than straight up. The end of the year has a chance to be very interesting considering the speculation that the Federal Reserve will be raising rates. While I have said many times I think the Fed will lock the floating rate of 0%-.25% at .25% as a starting point, this will amount to nothing. This might even be a catalyst for the market to resume its march higher, if the Fed says that they will stop and assess the markets reaction before raising again.

The US stock market is already very overpriced according to a number of metrics, but until there is a better place for investors to put their money, it may remain expensive. The Chinese stock market has been unraveling in the past few months and this may be a catalyst to move global markets. It is too soon to tell. Keep watching Chinese markets as a sign of trouble ahead.

The rise in interest rates has cast some interesting speculation on the future movements of the stock market. I want to dispel some of the myths about the rise in interest rates. In short, historical data suggests that the stock market rises with the rising rates, but what is not explained is that the rates start rising to stop the excessive rise in the stock markets. In fact in recent history, the Fed has raised interest rates until the stock market slows. Inevitably the Fed overshoots the mark and causes the market to decline. The US has had 0% interest rates since 2009. This is a long time with low rates. I am surprised the market is not higher.

This month’s inflation monitor data once again show the US market is experiencing deflation. I have not heard more than a handful of people discussing this deflationary data. I am wondering when more people are going to recognize this fact. I suppose that will be when the markets turn, then everyone will have seen it.

I hope you enjoy this month’s Inflation Monitor – August 2015.

Kirk Chisholm

Inflation Monitor – July 2015

Inflation Monitor / By Kirk Chisholm / 07/23/2015

Inflation Monitor Summary – Composite Ranking

* The Inflation Equilibrium is a quick summary for the whole data series of the inflation monitor. If you don’t like statistics, this is the chart for you.

Inflation Monitor – July 2015 – Introduction

I hope you enjoyed your Independence Day. While Greece may not have the same appreciation of our holiday, they had one of their own… A Bank holiday. While the Greek Crisis in Europe seems to be solved??? The greater problem persists. The Greek people voted a resounding “NO” on the terms and the Greek PM moved forward with it anyway. Apparently Greece is happy kicking the can down the road, and I can’t blame them. They can never pay back the debt they owe and they are getting additional loans to pay the interest in the loans they already have. Europe seems to want to keep them in the EU for other reasons, but the end result is that they eventually will have to deal with this. I’m sure the politicians would rather this problem breaks loose on someone else’s watch. Everyone wins by prolonging this and everyone loses eventually by letting this happen.

The US Markets continue to be quiet with no additional QE and a prospective tightening in the near future. The economy continues to be strong, but some signs are cropping up in small amounts showing that caution is warranted. I have added a few charts to this issue that I found interesting this month.

I hope you enjoy this month’s Inflation Monitor – July 2015.

Kirk Chisholm

Inflation Monitor – June 2015

Inflation Monitor / By Kirk Chisholm / 06/26/2015

Inflation Monitor Summary – Composite Ranking

* The Inflation Equilibrium is a quick summary for the whole data series of the inflation monitor. If you don’t like statistics, this is the chart for you.

Inflation Monitor – June 2015 – Introduction

It is officially summer and most markets are becoming more quiet. This is of course excluding the ongoing crisis in Greece. They must love the attention because they have been dragging out this “crisis” since 2011. Everyone involved in this mess (on both sides) has a reason to kick the can down the road forever, but forever will not last that long. Greece has call for a referendum vote from the people. We will find out what the people want next week.

While the US markets have been quite, there have been some disturbing signs cropping up in some of the economic indicators that we follow. These are: the velocity of money, PPI, and market cap to GDP. While many of the numbers listed above show deflation, these three are especially concerning. One interesting and potentially inflationary sign is a sharp pickup of the Baltic dry Index.

Enjoy this month’s Inflation Monitor – June 2015.

Kirk Chisholm

Inflation Monitor – May 2015

Inflation Monitor / By Kirk Chisholm / 06/01/2015

Inflation Monitor Summary – Composite Ranking

* The Inflation Equilibrium is a quick summary for the whole data series of the inflation monitor. If you don’t like statistics, this is the chart for you.

Inflation Monitor – May 2015 – Introduction

This month we were a bit slow getting this out due to some website upgrades. We expect that this June version of the Inflation Monitor will be out in 2 weeks so you will get a double dose of information.

May was a month of mixed results. Some data is showing some signs of life with inflation, but others show the decline of inflation continues… albeit slowly. Based on my estimates,2 Q3 and Q4 of this year should start to show some signs of economic slowdown. While we have started to see this in the earnings numbers, due to a lot of the hedging done by large public companies, the earnings may be less impressive when those hedges expire.

The quick rise in the US Dollar and lack of QE in the US may be too much for the US economy to handle. It typically takes a few months before these effects filter down into the economy. But I xpect later this year to see the results of those changes. There are many interesting data points to consider, but the PPI is one of the most interesting this month.

Other issues which are concerning…

The effects of debt have been slowly accumulating in the US over time and have put an increasing amount of weight on the growth of the US economy. It is hard to grow out of a recession when a large amount of your revenues go to paying off interest on your debt. Maybe this can put some perspective on the balance sheet of the US.

According to the GAO, the US has net worth of -17.7T, which is higher than the -16.9T last year. If you include the 42T in unfunded liabilities, this brings the total net worth of the US to -60T. That is not small amount of money to pay back. This is a little over $188,000 per person in liabilities. I think it is unlikely that this will get paid back in anything but inflation. What if the US cannot inflate away their debts like other countries have in the past? That will put the US in an interesting position. The available options are not pretty.

While there is constant discussion about how big of a problem this it… and it is, the reality is that this won’t be a problem until it is. By this I mean that the US, as the world’s reserve currency, has a special position in that they cannot default on their debt unless they choose to. Other countries do not have that luxury.

As long as the US Dollar is desirable to the rest of the world, we can continue to play this charade as long as we want. Then one day that will change and we will be in trouble. Until then, party like its 1999.

Enjoy this month’s Inflation Monitor – May 2015.

Inflation Monitor – April 2015

Inflation Monitor / By Kirk Chisholm / 05/01/2015

Inflation Monitor Summary – Composite Ranking

* The Inflation Equilibrium is a quick summary for the whole data series of the inflation monitor. If you don’t like statistics, this is the chart for you.

Inflation Monitor – April 2015 – Introduction

Spring is finally here and with it comes the warm weather. Unfortunately the warm weather has not been able to thaw out deflation or the wintery economic chill that has gripped certain parts of the US economy and many European nations.

The CPI continues to hit negative territory on an annual basis for the second month in a row. The PPI is well into negative territory as well. This does not bode well for the US economy.

Commodity prices have also continued to show weakness. The bright spot in the US economy is housing which has been climbing for the past few months and started to pick up its pace.

There are many excuses that have been proposed for these numbers: the heavy snowfall in the North East this past winter, the significant drop in oil prices, the rising US Dollar, and more. These are all valid reasons for the drop in the CPI, PPI, and other economic data. However what I find amusing is the commentators who claim the high oil prices were a good thing for the economy, now say that low oil prices are good for the economy… Well which is it?

The stock market is not the economy” – Author Unknown

This axiom is more important than any you will learn about the stock market. What it means is that the economy does not always lead or follow the actions of the stock market. While they are obviously related, they are not the same.

The US stock market is currently holding up well considering the negative economic data. While the two are highly correlated, they do not always act in unison. However I do expect the stock market to follow the economic trends in the second half of this year unless we see a sharp reversal in trend of the US Dollar and Oil.

In this months Inflation Monitor I have some very interested charts to share with you. Enjoy.

As always, please contact me to send your feedback on how I can make this monthly Inflation Monitor a better tool and resource for you. Thank you for reading and I hope you enjoy this month’s issue – Inflation Monitor – April 2015.

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Kirk Chisholm

Inflation Monitor – March 2015

Inflation Monitor / By Kirk Chisholm / 03/23/2015

Inflation Deflation Composite Ranking

* The Inflation Equilibrium is a quick summary for the whole data series of the inflation monitor. If you don’t like statistics, this is the chart for you.

Inflation Monitor – March 2015 – Introduction

It is March and as of today spring is finally here. It doesn’t feel like spring. I only hope that the weather warms up so I don;t have to wear a winter parka in April.

Boston finally broke the record for snowfall this year with 108.6 Inches. The prior record was 107.9 inches in 1872. This broken record was no reason to celebrate since the Governor had to call in the National Guard to help with the snow. Having experienced prior large snow storms in the City of Boston, I can tell you that the situation this year was mismanaged. There was no reason to call in the national guard.

Boston’s lack of preparedness is much like the financial markets with deflation. Deflation has caught a lot of people off guard. A number of European countries currently have negative interest rates, Germany and Switzerland rates are negative out to 6 and 10 years. What the future holds with negative interest rates is anyone’s guess, but the idea of negative interest rates is a dangerous one if the trend continues lower.

Is the US stock market safe from global deflation?

The S&P 500 and US Treasuries are an anomaly in the global equity and bond markets. The US Treasury has the highest interest rate compared to any other developed country. The S&P 500 continues to rise despite the global deflation effecting countries and equity prices around the world.

Inflation Monitor – February 2015

Inflation Monitor / By Kirk Chisholm / 02/14/2015

Inflation Monitor – February 2015 – Introduction

It is now February and it is off to a good start with the New England Patriot winning the Super Bowl… Sorry the big game. Even if you were not a fan, it was a great game to watch up until the last play. The win helped warm the city from the cold chill of deflation setting in around the US. It has been a few months since I have started the Inflation Monitor and each of those months has been marked with deflation. I have been saying for the past few years that deflation is in our future despite all the money printing by the Federal Reserve. It appears as if this is now become apparent to everyone else. Although there are many deflation deniers out there who think it cannot happen and wont happen.

I just got back from the TD Ameritrade conference in San Diego. One of the keynote speakers was Craig Alexander, the Chief Economist at TD Bank. Normally this is one of my favorite speakers at the conference each year, however this time I noticed something different…

Why Does Deflation Scare the Federal Reserve and Economists Alike?

Inflation Monitor / By Kirk Chisholm / 02/10/2015

Nothing to see here.

I just got back from the TD Ameritrade 2015 annual conference in San Diego. They always put on a high qualify event. At this event was a luncheon hosted by TD, where keynote speaker, Craig Alexander, Chief Economist at TD Bank spoke about his view of the world. I make a point to listen to him each year at the conference and I am always impressed. He is a very smart and accomplished economist. However this year was a bit different. I am still trying to make sense of it. The majority of Craig’s speech was about how the US does not have deflation and will not have it in the foreseeable future.

The first thing that popped into my mind was this clip from the movie Naked Gun. There is nothing to see here. Move along.

144 Products Made From Petroleum And 4 That May Shock You

Inflation Monitor / By Kirk Chisholm / 01/27/2015

What products and uses does Petroleum have outside of Gasoline?

an April 2007 nationwide online survey revealed that 72 percent of the American public does not know that conventional plastic is made
from petroleum products, primarily oil. This is not surprising

According to the US Energy Information Administration (EIA), this is a list of petroleum products and their share of total US petroleum consumption in 2013.

Gasoline 46%
Heating Oil / Diesel Fuel 20%
Jet Fuel ( kerosene) 8%
Propane / Propylene 7%
NGL / LRG 6%
Still Gas 4%
Petrochemical Feedstocks 2%
Petroleum Coke 2%

Is It Time to Buy Oil Stocks?

Inflation Monitor / By Kirk Chisholm / 01/20/2015

” The cure for high prices is high prices. The cure for low prices is low prices”

Is it time to buy Oil Stocks?

This is one of the most common questions being circulated in the financial media. You will notice the level of public interest from these charts.

Inflation Monitor – January 2015

Inflation Monitor / By Kirk Chisholm / 01/16/2015

Inflation Monitor January 2015 – Introduction

I hope you had a pleasant holiday season. Now that the eggnog has run out (although probably more likely the rum), your trees and menorahs have been put away until next year, and you are getting back to work in this cold weather (what else is there to do when it is this cold except work). Lets see what the new year has brought for us as a present. In this month’s issue I will mainly be discussing oil prices and the US Dollar. The two areas which are generating the most interest.

To start the year I am going to play around with the format a bit to see what works best for people. In this months issue I am planning on breaking the bottom section of the Inflation Monitor into separate excerpts through out the month based on thoughts or ideas that I have had rather than wait until the end of the month. I will try to spread this out a bit more a see if this is a more desirable setup. While this might be a bit scatterbrained, it might get back to what this section was supposed to be: inflation monitor data, then some ideas, not a lengthy dissertation. This month was difficult to focus on much else since oil has played such a large part of the public’s interest. So we will focus more on oil and the US Dollar.

This is the first issue of the Innovative Advisory Group Inflation Monitor in 2015. We continue to receive a lot of positive feedback on our first few issues of the Inflation Monitor. As you will notice, we have taken some of this feedback and make some minor adjustments to our issues each month. As always, please contact me to send your feedback on how I can make this monthly Inflation Monitor a better tool or resource for you.

Thank you for reading and I hope you enjoy this month’s issue – Inflation Monitor January 2015.

Kirk Chisholm

Where is the Price of Oil Going?

Inflation Monitor / By Kirk Chisholm / 01/10/2015

US Shale vs Saudi Sand?

For Christmas I asked Santa to get me a crystal ball. He rarely disappoints. Hopefully after reading this post you will have some insight into my thoughts and the future direction of oil prices.

Commodity prices in general have been declining for years. According to the Rogers International Commodity Index, the commodity super-cycle peaked in Jun 2008. While it is still possible that we could break those all time highs, it is highly unlikely given the deflationary forces at play in the global markets. If you have been reading the inflation monitor for a number of months you know which side of the inflation-deflation fence I sit on. The future of commodity prices will most likely continue on the path that they are currently on. There does not seem to be inflation on the horizon of commodity prices.

Investing in a commodity is a difficult task since it produces no cash flow. So how do you price a commodity? Many smart investors have raised this point before. You cannot say what is the correct price of a commodity unless you have a free market determining the price based on supply and demand. This is basic Economic 101. While reality should be driven by data and facts, in some cases it isn’t. One of these cases in Oil.

Oil the “Political Commodity”

Oil is what I would call a political commodity. What this means is…

Inflation Monitor December 2014

Inflation Monitor / By Administrator / 12/13/2014

Inflation Monitor December 2014 – Introduction

This is the third issue of the Innovative Advisory Group Inflation Monitor. As you will notice, we have made some additional changes to the inflation monitor based on your feedback. Keep the feedback coming, since this will ultimately benefit you. As always, please contact me to send your feedback on how I can make this monthly Inflation monitor a better tool or resource for you.

This month I have added the following indicators:

US Population

In this month’s issue I will be discussing interest rates, gas prices, Gold and Silver, and more. Given the recent sell off in the price of oil and drop in interest rates, I think it would be a good time to discuss the effects on the US economy.

Thank you for reading and I hope you enjoy this month’s issue of the Inflation Monitor.

Kirk Chisholm

Inflation Monitor November 2014

Inflation Monitor / By Kirk Chisholm / 11/15/2014

Inflation Monitor November 2014 – Introduction

This is the second issue of the Innovative Advisory Group Inflation Monitor. We have received a lot of positive feedback on our first issue of that Inflation Monitor. As you will notice, we have taken some of this feedback and made some minor adjustments to our issue this month. As always, please contact me to send your feedback on how I can make this monthly Inflation monitor a better tool or resource for you.

This month I have added the following indicators:

The Rogers International Commodity Index®,
US 10 year TIPS,
Personal Expenditure Consumption Index,
Real median income to the list for reference.
US Debt as a percentage of GDP

In this month’s issue I will be discussing Japan, Deflation, US Oil production, Gold and Silver. Given the most recent US market sell off, I think it would be a good time to discuss the other side of inflation… Deflation.

Thank you for reading and I hope you enjoy this month’s issue – Inflation Monitor November 2014.

Kirk Chisholm

Inflation Monitor October 2014

Inflation Monitor / By Kirk Chisholm / 10/04/2014

Inflation Monitor October 2014 – Introduction

This is the first issue of the Innovative Advisory Group Inflation Monitor. We created this Inflation Monitor as a part of the research we do internally at Innovative Advisory Group. While we have always done this research, we felt that with the new upgraded website, we would add a few new features. Our plan is to publish one of these each month with the monthly updated inflation data. Each issue will be accompanied with a brief summary of ideas, concept having to do with inflation, and a few notable charts, have I have found interesting either in the past month or in general. Everything will be related to inflation, or rather what I call “flation”. Maybe if I need to spice things up a bit, I’ll add a bit of humor. Please contact me to send your feedback on how I can make this monthly Inflation monitor a better tool or resource for you.

Thank you for reading and I hope you enjoy.

Kirk Chisholm

Inflation Monitor

Inflation Monitor Summary – Composite Ranking

Inflation Monitor – September 2015 – Introduction

Inflation Monitor Summary – Composite Ranking

Inflation Monitor – August 2015 – Introduction

Inflation Monitor Summary – Composite Ranking

Inflation Monitor – July 2015 – Introduction

Inflation Monitor Summary – Composite Ranking

Inflation Monitor – June 2015 – Introduction

Inflation Monitor Summary – Composite Ranking

Inflation Monitor – May 2015 – Introduction

Inflation Monitor Summary – Composite Ranking

Inflation Monitor – April 2015 – Introduction

Inflation Deflation Composite Ranking

Inflation Monitor – March 2015 – Introduction

Is the US stock market safe from global deflation?

Inflation Monitor – February 2015 – Introduction

Nothing to see here.

What products and uses does Petroleum have outside of Gasoline?

Is it time to buy Oil Stocks?

Inflation Monitor January 2015 – Introduction

US Shale vs Saudi Sand?

Oil the “Political Commodity”

Inflation Monitor December 2014 – Introduction

Inflation Monitor November 2014 – Introduction

Inflation Monitor October 2014 – Introduction

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