Icarus Economy: Are We Flying Too Close to the Sun?
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Icarus and inflation. There’s a Greek myth, Greek myth about a young boy. His name is Icarus. And gets a pair of magic wings. I’m going to kind of keep it simple here. These wings will allow him to fly like a bird. Before Icarus takes off on his first flight, his father warns him not to fly too high and close to the sun, for his wings will catch fire and he will crash and die.
No big deal. It’s a warning go one ear and out the other and he takes off. He soars higher and higher paying no attention to the warning his father gave him his wings catch fire and the boy crashes and burns. often use Greek mythology and columns that I’ve written over the years I pulled this from a 1999 column that I wrote
titled Icarus in the stock market. It’s funny. I take way less liberties with Greek mythology and stories than actually Christopher Nolan does. But that’s story for another day. We’re flying too close to the sun. Okay. wholesale prices in April posted their highest annual increase in more than three years. The producer price index 1.4 % per the month. Consensus was 0.5. And it was actually revised higher 0.7 in March. Again, this is the largest monthly gain that we have seen. Again, this is March of 2022. On an annual basis, we are running at
6 % biggest increase since December of 2022. You take out food and energy core PPI accelerated at 1 % that was only supposed to be point 4%. This is how energy prices filter in to everything else. Again, energy at the root of the problem. I
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I don’t like these numbers at all. I knew that these numbers were going to come and we’re flying too close to the sun. We’re just just get warm guys. We’re just getting warm because as it stands right now, there’s really I don’t see any end in sight. Again, that can turn on a dime. That can turn on a dime. The president is in Iran. You know, he likes to put on a show.
maybe there’s some deal to be had utilizing China that we can stop flying in an upward trend. The reality of the terrain right now is, again, the reality is so bad, what’s coming down the pike is so bad, this is how it’s being translated in the real world right now, is that the markets are assuming
that cooler heads are going to prevail. The markets are not believing in mutually assured destruction, global destruction of the economy.
Again, President, again, too much news on this massive release from the Strategic Petroleum Reserve. We’re exporting a lot of oil at this point in time to kind of simmer down markets around the globe and keep people less pissed off at us. But we’re running on empty. You cannot have this type of supply destruction.
Okay, it needs to be replaced. Not to mention the fact you have rates going up, take a look at the 30 year, take a look at the 10 year, we have massive bond auctions that need to take place and they’re going to be paying higher interest rates. The interest expense right now, you and I are paying with our taxes on US public debt.
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Over a year we pay right now it’s $1.271 trillion in interest payments.
Get your arms around that.
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1.271 and it that’s going up. It’s it’s it’s like this. It’s like this. This is what we’re paying in interest payments on our national debt in a year where we are going to have to roll over $11 trillion. So that number is going to be larger. Sooner rather than later, that number is going to surpass what we’re spending on Social Security. Don’t doubt me.
Don’t doubt me. Many people doubted me and I wrote Icarus in the stock market back in January of 1999. I was talking about what I was seeing when it came to the markets. This was January of 1999. Okay. Oh yeah, I was early. I was early, but I put out warnings in regards to guys. lot of these dot com things are getting out of control and I was doing it for some time. You need to be a little bit more careful.
You need to understand, you know, what’s real and what’s not real. Again, nobody wanted to listen to me then. A lot of problems that we’re looking at right now, unless we can get this under control. A lot of a lot of attention being paid right now to the new Fed chair. This look to confirm and well, Kevin Warsh has been confirmed to be on the board and it looks like he’s going to be confirmed to be the new
chair of the Federal Reserve, Donald Trump, kind of counting on Kevin Warsh to lower interest rates. That didn’t happen. I don’t see how in the world right now you take a look, most people are assuming that we’re going to have to raise rates by the end of this year, lower rates.
how in the world is that going to fly? And again, this is reverberating into everything right now. The one good thing if I want to find a silver lining, and this yes, mortgage rates have come up, mortgage rates come up. Well, nobody wants really wants mortgage rates to come up. But what we really need to have happen is quite frankly, is a major correction in the housing market.
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you get the housing market to correct home prices to come down, which would be great. That actually would that’s, you know, deflationary, which I’d like to see President doesn’t want that he already made that perfectly clear. I do.
I do. I want homes to be a hell of a lot cheaper for young families. Sorry. Sorry, boomers. Sorry. No, I want the prices to come down and that might be a good side effect. This is a natural thing. know, God willing, we don’t start coming up with some far flung government bailout program, whatever it may be. There is a lot more sellers out there than there are buyers. Again, big housing market around the country, different, you know, different places.
obviously different markets are different based upon jobs and myriad of other things we discussed that but overall those prices coming down would be deflationary but again the 10,000 pound gorilla in the room quite frankly is energy. Unless this again I mentioned by the earliest part of June this is not dealt with it’s gonna get a lot shakier out there we are flying very
close to the sun. Watchdog on wallstreet.com.
