Hot Inflation and Hot Heads in Congress

Ignore the drop in bond yields, I said, as money poured out of the AI bubble and out of stocks generally, seeking a place to rest, because inflation will quickly send interest rates back up. It did that when a slightly higher-than-expected CPI report jolted bond yields, even as money seeped out of stocks.

I included an article from economist Wolf Richter last week that said,

Would Be a Worrisome Sign for the Bond Market if Treasury Yields Turn Higher Next Week

If the rally ends here with a 40-basis-point drop, and yields turn higher from here, that would be another worrisome sign for the bond market, because it would show that it can’t even get a decent relief rally together.

Hot inflation

Well then, the worrisome sign appears to have just arrived in our news headlines.

Here is what that rally (drop in yields) looked like (the final downstroke at the end of the line) before yields went back up:

 Wolf Street

Not much—a mere common case of there being no straight lines to anywhere in economics—not for long, anyway. The bond rally didn’t get far before inflation spun it back around, even with money still ebbing out of stocks.

10-year yield heading higher from here, said Richter, would also be another bad sign for the bond market. So, the bad signs are all back as expected here at The Daily Doom. Before declaring certain victory on that quick rebound, I suppose we should see if yields, having tested this return, go up any further this week, especially when producer price inflation gets reported again. In the meantime, I expect the market will tread water, waiting for that report. (The market is closed for Veteran’s Day.)

Richter followed up last week’s article with one about the moves triggered by the rise in CPI:

The 10-year Treasury yield spiked by about 12 basis points to 5.0% at the moment, upon the release of the hot CPI data this morning which showed that inflation has seeped deeply into the economy, especially non-housing services, but also food, core goods, and still energy.

This chart shows recent hourly moves, including the spike when the inflation report came out:

Wolf Street

Oddly, CNBC’s inflation article mentions only the smaller monthly number and says nothing about the annual inflation rate, which is usually the focus. I wondered mischievously if that was because the annual number was so bad they couldn’t bear to publish it. The actual reason was this:

The BLS did not estimate a yearly rate in its October inflation report. The government shutdown last year prevented the bureau from collecting sufficient data in October 2025, so there is no comparable figure to use. However, the report did include annual figures for some individual items where it was able to collect data.

Richter pulled a standard solution for the missing baseline number for last year, and took the average from the mean annual rate in the month before the missing month and from the mean of the month that followed the missing month to establish a benchmark. Off of that benchmark, he came up with this for the annual rate right now:

The year-over-year increase = 4.0%. And that’s hot.

Double the Fed’s target, and that was for the “all items” inflation rate.

Food, of course, is something that hits home for all of us, and the news there was a little worse, with beef prices particularly continuing to get charbroiled:

Food costs accelerated 0.5%, pushed higher by increases of 1% for snacks, 0.9% for beef and 0.5% for meats, poultry, fish and eggs.

Those are big numbers for one-month increases.

Despite the moderating gas prices recently, Fed officials have expressed concern that the impacts from the Iran war and President Donald Trump’s tariffs are becoming embedded in the economy. Inflation has been running above the Fed’s 2% target for some 5½ years.

That is how serious inflation is when it gets out of control and why it is such an issue. It is VERY hard to get the inflation genie back in the bottle once he or she is out.

Electricity prices rose 0.9%, a potential complication from the AI story.

The latest report has the Fed’s attention:

“It’s another distressing report, borderline disturbing,” Chicago Federal Reserve President Austan Goolsbee told PBS News Hour. He said the impact of tariffs on prices should’ve faded by now, yet it still continues. “Perhaps the most troubling part is that services inflation is not coming down, and is probably not mostly driven by oil prices or tariffs or things that might be transitory,” Goolsbee noted.

Oh no, not the “transitory” again. That belief is what got us here in the first place. After all, life is transitory. Hopefully, it won’t be used as an excuse this time for inaction (not that there is much the Fed can do about tariffs and war).

“We must get inflation back down to target, and it’s going the wrong way at this point.”

Philadelphia Fed President Anna Paulson believes “further gradual tightening seems appropriate” for now as “inflation pressures are still very much with us.” She said tariffs, energy and AI have all been pushing prices up. “Tariffs look like they’re fading. Energy supply and AI demand pressures are harder to call. What matters for monetary policy is where inflation ends up once the effects of these shocks run their course,”

The new big House hot-head

Rep. Jim Jordan just got elected as the next head of the House Republicans, following their huge election losses. That means they decided to vote for two years of tooth and claw to the next election by choosing as their leader one of their most-partisan and feistiest members. Expect nothing but bitter, acrimonious battles that put party over country every time and particularly that bury corruption in his own party.

It won’t be a pursuit of justice in, say, the Epstein proceedings. It will be a pursuit of slaughter the other party and save ours by any trick in the book. Jordan summarized his upcoming battle plans like an attorney:

“I am battle-tested on the oversight front and I know the Democrats’ playbook,” he wrote to his colleagues.

That statement demonstrates things will continue to be all about party plays, in spite of this election that demanded otherwise.

It’s a remarkable ascent for Jordan, who has spent two decades in Congress and had once been considered a conservative bomb-thrower.

Lots of bombs to come. None that seek justice from Jordan, except against Democrats. Jordan loves the fight for the fight’s sake. Not surprisingly, Jordan was assistant wrestling coach at Ohio State University.

He won’t fight for justice, though. It was right there at OSU that he proved his bonafides for burying the crimes of those he favors:

Former students at Ohio State University … brought forward allegations of sexual abuse by the team’s doctor. Jordan has repeatedly denied any knowledge of the abuse by Dr. Richard Strauss, who abused hundreds of men over decades, according to an independent investigation; Strauss died in 2005. In July 2018, a group of former wrestlers accused Jordan of failing to stop the abuse, saying it was common knowledge.

It seemed all he could do on the matter was stonewall it. He’s a vicious fighter with a 100% partisan prejudice. Expect two years of battle charades between the parties with little to nothing useful in guiding the nation toward a better path.

Note that even the publicized Republican release in the following headlines of a report on the Epstain Scandal, which came out of the House Oversight Committee that Jordan is a member of, was actually …

purported to close the book on the House Oversight and Government Reform Committee’s 15-month investigation into the late, convicted sex offender.

Close the book?! How about we finally OPEN IT?!

Rep. Robert Garcia (D-Calif.), the incoming Oversight Committee chair, … decried the GOP report as “based on an incomplete investigation and zero public hearings” as the Justice Department “continues to illegally withhold over 2.5 million pages of documents.”

Democrats are now talking about recalling witnesses to testify under oath and issuing subpoenas to major banks that helped finance Epstein’s trafficking of young women and girls for years.

Yeah, why don’t you Dems try getting the book open now that you are in a position to pry it out of Team Jordan’s clenched claws. Jordan puts on a grand show with great cage fights but produces no justice anywhere because the show is intended to dominate attention in order to take it away from any actual pursuit of justice. He’s a deeply despicable junkyard dog.

Both sides pretend to be fighting for justice by attacking the other side, but they do all they can to protect their own. So, the Epstain inquiry gets nowhere. We’ll have to see if the election kicks Democrats into gear hard enough to move things forward after the scandal has seen years of stonewalling under Jordan. There will be plenty on both teams who will argue, “We need to get on with the business of governing the country,” but only because they are either implicated in the files or are in bed with someone implicated in the files (both figuratively and literally).