Trump Is No Reagan & Powell Is No Volcker – Ep. 331

Dow Down Over 250 Points
Today the Dow Jones was down just over 250 points; we're back below 25,000. I think we were down better than 300 on the lows of the day, but we went out pretty low.  The dollar was actually quite strong today; the dollar index had one of its better days of the year - +.61. We're back at 89.71. We had gotten back below 89, with an 88 handle.  Gold had a bad day today after having had some pretty good days last week.  The price of gold down almost $18 now; just below $1330. We got above $1350 last week, but we couldn't hold it.  I think we really need to go above $1400 to clear away this overhead resistance.
Bond Market Continues Decline
The only trend that really continued was the bond market, continuing to go down.  It's pretty much a daily affair.  Yields rising off the highs of the day - we're back below 2.9.  We got to 2.915 on the 10-year.  We closed at 2.893.  But I think it is the back-up in yields that continues to put downward pressure on gold and some upward pressure on the dollar. Now, in the scheme of things, it does not matter because the dollar has been falling all year, despite the fact that rates have been rising all year.
False Narrative That High Rates Are Good for the Dollar
But the narrative that higher rates is good for the dollar still permeates the markets. Traders still have not figured out that they've got this one wrong.  Likewise, they still haven't figured out that rising inflation is good for gold, not bad for gold.  In fact, I think the catalyst for today's rally in the dollar and the sell off in gold is the news that came out on inflation on Friday.
Bad News about Inflation
We got some really bad news that inflation is picking up.  We got the data for import prices and export prices.  Export prices were up by .8% but import prices, which were clearly more important, because we have to pay for our imports - our import prices shot up 1%. They were expecting a gain of .6%, so 80% higher than what was expected.  Year over year, you're talking about a 3.6% increase in the price of our imports.
Import Prices Rising Faster Than Export Prices
Now this is bad for a couple of reasons: 1) If our import prices are rising faster than our export prices, what does that mean about our trade deficit? That means its going higher. But 2) It's inflation, or the cost of living, because we have to pay for these imports.  If imports are 1% more expensive, month over month, that means it costs Americans more money to buy whatever is imported.