Top story: The opening of the Jackson Hole shindigand Mr. Warsh’s keynote speech tomorrow

Outlook

The top story is the opening of the Jackson Hole shindig in Wyoming and Mr. Warsh’s keynote speech tomorrow. Tomorrow we will find out what Mr. Warsh has to say about inflation, if anything. It’s practically certain he won’t give any clues as to rate changes. Critics are lining up to lambaste him for failing to give hard answers to hard questions. The key word here is “fail.”

Reading headlines can be a hoot. Yesterday we had inflation “hot,” “making slow progress” and “moderating.” But mostly “hot.” Missing the expected by 0.1% is not exactly Armageddon (3.7% headline instead of 3.6%). Core up by 0.2% instead of the same or down is not, either (to 3.3%, the same as June and April but down from 3.5% in May). The real story is flat consumer spending, but even so, one month is not enough to draw conclusions. We are all clutching at straws.

This reminds us that no matter how much reading we do of news and opinion, we are not getting more than 5% of the story. We keep seeing hints that fall down the rabbit hole and are never heard from again unless they explode. Example--a Reuters story that starts with this: “Chinese state-owned oil and gas major CNOOC sees potential for energy ​cooperation between China and the United States, its ‌CEO said on Thursday, adding that the company would consider investments alongside U.S. partners in the future.” This runs, if sideways, contrary to the official Chinese stance that China rejects any US effort to punish it for dealing with Iran.

Another confusion: Q2 GDP is only 1.5% but for Q3, the Atlanta Fed has GDPNow at 4.6%. Something is amiss.

Forecast

If it’s true that more oil is flowing through the Strait and that is lowering inflation expectations and yields, if not entirely in sync, then the drop in risk aversion and yields is dollar negative. And yet we see the dollar continuing to show some strength or at least resistance to getting tanked.

This is surprising in the face of disapproval of both the TreasSec and his unworkable buyback game and the Fed chief with his “ain’t talking” stance. We can probably credit a deep reluctance to judge two critical institutions as failing.

But “fail” is the right word. Then the question arises whether high yields can offset the failure. As with the nearly totally negative views of the president, this sentiment perhaps goes in the “political” basket and as we know, traders really, really dislike the political.  

We use charts because they show us what traders are doing and not what anyone is saying. The charts speak against the dollar, if with some slippage in some cases.