Why Janet Yellen Is About To Hate Bacon

For 99.9999% (our estimate) of Americans, there is great news on the way - retail bacon prices are about to plummet. However, with food accounting for 14% of CPI, we suspect the pork-price-pounding is about to become Janet Yellen"s new "transitory" problem.

In the first half of the year, the best performing commodity in the tradable universe was the USDA Boxed Pork Belly Cut 200lb, which had risen 87% year-to-date, with the media reassuring that the demand was not just seasonal.

For months, many market participants talked of a new paradigm for US pork prices, suggesting that in the future, (like avocado toast) bacon would be added to everything and the public"s appetite for it was insatiable (which makes perfect sense).

However, in the last few weeks, the bacon price has plunged 30%...

Which implies the price of a "rasher" at your local convenience store is about to tumble!!

And as the bacon price collapses, food in general is way down. The CRB FOOD index (US spot foodstuffs) has collapsed (dropping for 8 straight weeks)

(The index consists of: butter, cocoa, corn, hogs, lard, soybean oil, steers, sugar and Minny and KC wheat.)

More good news for Americans with stagnant wages!!

But, given that Janet Yellen and her merry band of piss-poor-prognisticators are desperate for transitory lowflation to pick up (remember they blamed the current downturn on unlimited phone plans), she may have a problem. With food accounting for 14% of the US CPI basket, it is not completely devastating, but does not help Yellen"s cause.

It's 1937 All Over Again: Weak GDP, Soaring Inflation, and the Fed Hiking

The US economy continues to implode as inflation ignites.

GDP Now has collapsed from 3.4% in early February to 1.3% today. It will be revised even lower based on the awful deficit numbers (the US trade deficit hit a five year high in January).

Meanwhile, inflation is soaring.

The Fed tracks FOUR inflation metrics. They are Core CPI, Core PCE, Trimmed Mean CPI and Cleveland Median CPI.

Roughly all four are now at or above the Fed’s so-called “target” of 2%.

·      Core CPI is growing at an annualized rate of 2.1%.

·      Cleveland Median CPI is growing at an annualized rate of 2.2%.

·      Trimmed Mean CPI is growing at an annualized rate of 2.1%

·      Only Core PCE is just below the Fed’s target rate at 1.9%.

Weak economic growth and soaring inflation… there’s a word for that… it’s called STAG-flation.

The Fed is going to repeat its 1937 mistake of hiking rates into a weak economy. Now, like then. CPI is soaring while GDP growth flatlined.

Inflation soaring.

Year	% Change in Avg CPI Year over Year
1929	0.00%
1930	-2.30%
1931	-9.00%
1932	-9.90%
1933	-5.10%
1934	3.10%
1935	2.20%
1936	1.50%
1937	3.60%
1938	-2.10%

GDP flatlining.

The Fed aggressively hiked into this mess. The outcome?

The US plunged into recession and stocks nearly halved.

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Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research