Tama-gotcha!

Dammit Janet!

This Tamagotchi has gone too far. When we first introduced Tamagotchi Yellen in the seminal piece “Wealth-flation vs Pleb-flation”, we said that, the Reaction Function of the Tamagotchi allows her to do as she pleases as long as Pleb-flation stays contained below 6%. But if Plebflation rises >6%:

…then Tamagotchi Yellen has a problem. She gets angry and has a tantrum. She really wants to keep the Fiscal taps running and she probably still does. But with all her unholy powers she knows she can’t also get the Fed to keep monetary policy loose, otherwise the pitchforks are coming. So she and / or the Fed have to take action. And this is where volatility is introduced in “Wealth-flation” which can result in steep corrections.

Well, this Tamagotchi went a bit too far. The Core CPI (ex food and Energy) came in at +0.4% mom, which annualizes at 4.8% . It doesn’t take a degree in Mafs to know that it’s quite above the 2% target level.

What’s more striking though is that Core Services inflated by +0.8% mom and that one annualizes to >10% yoy

See the chart below from Bloomberg. When did we have such an acceleration in services? April 2022… and we know what happened next.

I’m getting 2022 vibes here in so many ways it’s not funny. What’s funny though is that the market today marked the Nasdaq down only 1% and the Russell -4%, as if the monkeys are telling us:

“We will let those Banks burn with 6% rates, but we’ll give you our beloved AI Ponzis only when you pry them from our cold, dead hands”

Well dear monkeys, a Margin Call may solve your problem so be careful what you ask for!

In all fairness, Miss Market will do her best to ridicule everyone by constantly shifting the Playbook. To me, this would be the most ridiculous Playbook for 2024:

Imagine if we get a 2022 inflationary playbook, but instead of Energy leading, it will be AI Ponzi. That would just be hilarious. Oh wait, that’s what we’ve had all year!

Anyway, now back to Janet. Dammit Janet!

You had it so good. Healthy job growth, Healthy economic growth, low unemployment, CPI trending down, market trending up.

BUT NO! YOU WANTED MORE! You greedy Tamagotchi you.

Now we are back to Square One. And that’s assuming the Plebs don’t come after you.

Disclaimer:

This isn’t financial advice.

This is the trading blog of a shrub.

Don’t be Stupid.