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 Semi-Conductors are the investment for the next 10 years

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Higher interest rates not lowering interest rates

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  As I dug into the data this morning, I found a few things that were interesting. First, January’s 0.5% acceleration in the CPI was the  most since October 2022  (also 0.5%) and you have to go back to June 2022 for a higher monthly acceleration. The general consensus is that higher rates should lead to lower inflation. This means the 2-year inflation expectations in the market should be declining as the Fed gets more aggressive, but as Lisa Abramowicz pointed out this morning, inflation expectations in the market have actually been increasing over the last 6 months. Lisa Abramowicz @lisaabramowicz1 U.S. 2-year inflation expectations have surged over the past six months, despite tighter Fed policy. 1:16 PM ∙ Mar 2, 2023 86 Likes 35 Retweets Inflation expectations are not the only place where the market is being distorted by this central bank intervention though.  Charlie Bilello points out  that US Treasury yields have gone from historic lows to 16-year highs in...
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Fed will not bring down inflation

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  Why does anyone believe the Fed can control inflation via changes in the Fed Funds “policy rate,” the overnight lending rate that the Fed can control the most. If this constantly repeated claim were true, it would show up in the data in the form of a close correlation between inflation and the Fed Funds rate. Look at the first graph below. Graph 1: Low correlation between Fed Funds Rate and CPI since 1983 We do see some co-movement from 1975 until about 1983, and then it stops. It is very difficult to detect even a correlation, never mind causation for the next 40 years. Inflation stays in a range first from roughly 1-5%, then well below 5% all the way from 1990 to 2021, spanning 31 years. Meanwhile the Fed Funds rate hopped up and down with no discernible impact on inflation. Amazingly, from 2009 through most of 2017, the Fed rate was below 1% and for much of the time near 0%. There was virtually no inflation. Graph 2 paints an even more dramatic picture, albeit using an inflati...
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Global Sea to SK

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  Shipping companies appear to be attractively priced right now. The U.S. Global Sea to Sky Cargo Index (SEAX) currently has a price-to-earnings ratio (P/E) of just over 2.0, which is significantly lower than stocks in related sectors and industries (transportation and industrials), as well as the S&P 500 and tech-heavy Nasdaq-100. The U.S. Global Sea to Sky ETF (NYSE: SEA) seeks to track the performance, before fees and expenses, of SEAX, a 29-stock index that provides diversified access to the global sea shipping and air freight industries. The index uses various fundamental screens to determine the most efficient sea shipping, air freight and port companies in the world.
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