{"id":39053,"date":"2018-10-12T09:46:31","date_gmt":"2018-10-12T14:46:31","guid":{"rendered":"http:\/\/olduvai.ca\/?p=39053"},"modified":"2018-10-12T09:46:31","modified_gmt":"2018-10-12T14:46:31","slug":"amid-market-rout-decade-of-financial-repression-ends-capital-preservation-suddenly-is-a-thing","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=39053","title":{"rendered":"Amid Market Rout, Decade of \u201cFinancial Repression\u201d Ends, Capital Preservation Suddenly is a Thing"},"content":{"rendered":"
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Amid Market Rout, Decade of \u201cFinancial Repression\u201d Ends, Capital Preservation Suddenly is a Thing<\/a><\/h3>\n<\/header>\n
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This will dog the stock market going forward.<\/strong><\/p>\n

Fixed-income investors \u2013 a financially conservative bunch buying Treasury securities, FDIC-insured CDs, and similar products that largely eliminate risk \u2013 have been getting crushed for a decade: Except for brief periods when inflation dipped to near zero or below zero, their minuscule returns have been eaten up by inflation, or worse, they lost money after inflation, as was the case with shorter-term Treasuries and just about all savings products. But it has ended.<\/p>\n

The Consumer Price Index (CPI) rose 2.3% in September (2.27%), compared to September a year ago, the Bureau of Labor Statistics reported this morning. This was down from the 2.9% increase in July. These numbers are volatile, but the trend is pretty clear: Outside of the Oil Bust and a few quarters during the Financial Crisis, inflation is a fixture in the US economy:<\/p>\n

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The CPI without food and energy \u2013 \u201ccore CPI\u201d \u2013 rose 2.2% in September. Cost of shelter rose 3.3%. Cost of transportation services rose 4.0%. So prices are going up as measured by CPI.<\/p>\n

What has changed is that interest rates and yields are also going up, and they\u2019re now higher than inflation as measured by CPI across nearly the entire spectrum of US Treasury securities \u2013 and if you shop around, across many CDs too.<\/p>\n

This ends a decade of \u201cfinancial repression\u201d \u2014 a condition when the Fed repressed interest rates below the rate of inflation.<\/p>\n

The chart below shows the US Treasury yield curve across the maturity spectrum, from 1-month to 30 years, at the close yesterday. The 1-month yield, at 2.18%, was the only yield still below the rate of inflation. The 3-month yield at 2.27% is right on top of CPI (green line). Every Treasury security with a maturity longer than three months is beating inflation.<\/p>\n

\u2026click on the above link to read the rest of the article\u2026<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Amid Market Rout, Decade of \u201cFinancial Repression\u201d Ends, Capital Preservation Suddenly is a Thing This will dog the stock market going forward. Fixed-income investors \u2013 a financially conservative bunch buying Treasury securities, FDIC-insured CDs, and similar products that largely eliminate risk \u2013 have been getting crushed for a decade: Except for brief periods when inflation […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[926,3279,8954,1055,172,315,2443,2721,4254,4255],"class_list":["post-39053","post","type-post","status-publish","format-standard","hentry","category-economics","tag-bls","tag-bureau-of-labor-statistics","tag-capital-preservation","tag-consumer-price-index","tag-cpi","tag-financial-repression","tag-stock-markets","tag-us-treasuries","tag-wolf-richter","tag-wolfstreet"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/39053","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=39053"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/39053\/revisions"}],"predecessor-version":[{"id":39054,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/39053\/revisions\/39054"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=39053"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=39053"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=39053"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}