I don't think so!

PPI 0.9%, Core 0.2%.

0.9% is being called "Cool" on CNBS?! 8.4% annualized eh? That's "cool"? What's HOT?!

I've been saying for quite a while that I believe real inflation here in the US is running around 10%. That would make sense, by the way - M3 is roughly 13-14% right now; if GDP the last 12 months has been around 2% (including the near-zero last quarter) then 10-11% inflation is about right. (Now do you see why Paulsuck and Bernicker don't think its important to publish M3 any more? Gee, we can't have actual data out there for the markets to look at, can we?)

The bond market seems to have it figured out. 5.251% - heh, where'd that nice cool bond market go? Ain't a thing cool on yields there!

Expect some volatility on the 10 today, and probably a lot of volatility in the markets. The Futures took a crap instantly. The Bund (overseas) started to move down (price) and suddenly we saw the 10 here go.

Now people are trying to figure out what it all means, and they've got an hour to do so.

I find the CNBS cheering to be incredible today. Of course we know where they get most of their money in advertising.... but geez, could you be just a LITTLE less biased?

Oh, and by the way, watch energy prices too. Oil, gas and nat gas are all higher today. To those who say "watch the core" I keep asking - "Do you know anyone who doesn't eat or fill their gas tank?" At least - any who are human.

Amusing..... but validating too.

We're in for an interesting option expiration - that's for sure!

One final thought. Bear Stearns is trying to bail on some bad mortgage bond deals - its a (relatively small) hedgie that they run, but a couple of days ago they locked their customers (no withdrawals) - something hedgies can do but the broader markets can't (see what you get for investing in something that's illiquid?) Is this "the start of a blowup in the credit markets"?

Could be. But I think we need something bigger to really set it off - although these sorts of implosions have a funny way of being somewhat like sitting in a shed full of dynamite and lighting firecrackers, just for grins and giggles. Sooner or later.......

By the way, if you were wondering who was shorting the hell out of the treasuries a few days ago, that might be your answer. What they want, by the way, is counter-intutive. You'd think the answer is "they want prices to fall on treasuries so they can cover the short cheap", but you'd be wrong.

They see TWO wins on this trade. If the bond rates STABILIZE the default pattern on the MBSs will stabilize too and they're ok - the short is clean, the bonds stabilize, and they can make the coupon payment on the shorted Ts with the MBS income. All is good.

If bonds go back UP (rates down) they have a modest cap loss on the short BUT the coupon payment is still good and they can leave the short open until rates rise once their MBSs expire. That means no REAL loss - they succeed in laying off the risk of the extended maturities.

The bad news is if bonds continue to fall. While this would look like a win (cover the short at a lower price = big Cap Gain) it is dwarfed by two other problems - first, the MBS' all default and you're dead there, plus, the worse news is that with the MBS' defaulting you can't make the coupon payments on the short. Basically, you get reamed twice.

* CNBS - You ought to know why the name change.....