CPI came in hot, as expected, rising 0.6% for the month. Annual inflation climbed from 3.4% to 3.7%, one-tenth higher than forecast.

Bonds initially sold off sharply, but a contrarian indicator suggests the ceiling we talked about yesterday is holding.

What’s a contrarian indicator?

Barry Habib at MBS Highway shared a great example this morning. In 1929, Joe Kennedy is said to have called the stock market top while getting a shoeshine. When the shoeshine boy started giving him stock tips, Kennedy wondered: if everyone is already in the market, where will the new money come from to push prices higher? He was right, and the crash followed.

On October 8, the cover of The Economist asked, “Will Bonds Blow Up?” They didn’t. When fear hits the magazine covers, the move is often already priced in. We may have hit the ceiling on rates.

The takeaway: Get out there. There are more homes on the market than we’ve seen in a long time, prices are more competitive, and conditions are leaning toward a buyer’s market.

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