The Fed, Inflation, and Me: A Trader's 45-Year Journey Through the Numbers

KR Opinion

Looking at this inflation dashboard, I see my entire adult life mapped out in colored zones. Each spike and valley tells a personal story—from a kid graduating high school in 1970 to a trader who's seen it all. But the real story starts with a professor who saved my financial life by teaching me one simple truth: if you don't understand interest rates, you'll never survive in this business.

Growing Up in William McChesney Martin's America: The Calm Before the Storm (1951-1970)

I was born into William McChesney Martin's Fed—the longest-serving Chair in history, 1951 to 1970. That blue zone on the chart? That was my childhood. Look how stable it is through the 1950s and early '60s—inflation averaging just 1.4%. My dad worked the same factory job for twenty years, bought a house, and raised a family. A dollar saved was actually a dollar saved.

Martin had this saying about taking away the punch bowl just as the party gets going. As a kid, I didn't get it. By high school, I was starting to. See that blue line creeping up in the late '60s? That's Vietnam and the Great Society heating up. By 1968-69, inflation hit 4.2%, then 5.5%. The grown-ups were getting nervous.

I graduated from high school in 1970 when inflation was at 5.7%. Martin retired that January, warning Nixon that inflation expectations were becoming "embedded." Looking back, he was handing over a ticking time bomb. After 19 years of stability, the foundation began to crack. I was 18 years old, heading to college, and I had no idea about the economic earthquake that was coming.

The Burns Disaster and My Real Estate Education (1970-1978)

Enter Arthur Burns—in my opinion, the worst Fed Chair since the creation of the Federal Reserve. Nixon wanted someone he could control, and Burns sold his soul for the job. That red mountain on the chart from 1974 to 1982? That's the Burns legacy, and I lived every inch of that climb.

College from 1970 to 1974 was surreal. The 1973 Arab oil embargo hit during my junior year. Look at that spike to 11% in 1974. Gas lines stretched for blocks. We had odd-even rationing based on license plates. Prices changed weekly. A pizza that cost $3 during my freshman year cost $5 by graduation. Burns kept calling it "temporary" and "special factors." He literally invented "core inflation" to exclude food and energy—exactly what was killing everyone's budget.

But here's where my story takes a turn. Fresh out of college in 1975, I jumped into real estate. Crazy? Maybe. But I was young, hungry, and despite 9% inflation, people still needed houses. I crushed it my first few years—young hotshot realtor making deals while the older guys complained about the economy.

By 1977, I had bigger ambitions. Commercial real estate was where the real money was. So I went back to school—Valparaiso University for my CCIM designation (Certified Commercial Investment Member). That's where I met the man who saved my financial future: Dr. Dick Adamites.

The Professor Who Changed Everything

Dr. Adamites was different from any professor I'd had. First day of class, he walked in and said: "Forget everything you think you know about real estate. If you don't understand interest rates, you're dead in this business."

While other real estate courses focused on location, contracts, and negotiation, Dr. Adamites taught us to watch the Fed, study yield curves, understand cap rates. "Real estate isn't about buildings," he'd pound into us, "it's about the cost of money. When money gets expensive, buildings get cheap. When money's cheap, buildings get expensive."

He made us chart Fed funds rates going back decades. Made us calculate how a 1% rate change affected cap rates, cash flows, and property values. "The Fed Chair is more important to your success than any president," he'd say. Looking at Burns's inflation numbers—now pushing toward 10%—his lessons were getting very real, very fast.

September 1979: Twenty-Six Deals and an Epiphany

By early 1979, I was an experienced agent, armed with Dr. Adamites' training. Business was tough but manageable. Then Paul Volcker took over the Fed in August. Unlike Burns, Volcker had one mission: kill inflation, whatever the cost.

September 1979 started normally. Interest rates were high, but I was hustling. That month, I went into overdrive. While other agents sat paralyzed, watching rates rise daily, I worked harder. I wrote 26 purchase agreements that month. Twenty-six! I was writing contracts on single-family houses.

My office manager thought I was a hero. "Look at this kid," he'd say, "rates are going crazy and he's still producing!" The other agents just sat there, afraid to pick up the phone. Not me. I figured if I just worked harder, wrote more contracts, something had to close.

By the end of September, reality hit. Not. One. Single. Deal. Closed.

Buyers walked away as their quoted mortgage rates jumped from 13% to 15% and then to 17% between the contract and closing dates. Sellers refused to negotiate as their properties became unsellable. Twenty-six contracts, and every one died. I remember the last one—a young couple buying their first home. The wife was crying as they signed the cancellation. Their American dream evaporated because rates moved 2% in three weeks.

The Night Everything Changed

I'll never forget that night. Sitting in my car outside the office, stack of dead contracts on the passenger seat. Dr. Adamites' voice in my head: "If you don't understand interest rates..."

But I DID understand them. That was the revelation. This wasn't Burns making excuses. Volcker meant business. He'd announced his "Saturday Night Special"—the Fed would target money supply, not interest rates. Rates would go wherever they needed to go. And I knew where that was: 20%, maybe 25%.

The real estate business I'd known was dead. Not dying—dead. Those 26 failed contracts weren't bad luck. They were a message. Dr. Adamites had taught me to read that message.

That night, I made the decision that changed my life. If the game was now about interest rate volatility, then I'd trade that volatility. Within weeks, I was heading to Chicago to trade bonds at the Board of Trade.

From Real Estate Disaster to Trading Success (1979-1987)

The Chicago bond pits in the early Volcker years were insane. Interest rates hit 20%. The economy was in free fall. But for a trader who understood what was happening? Paradise.

Every Fed meeting was the Super Bowl. The pit would go silent, then explode when numbers hit. Fortunes made and lost in seconds. But I had an edge—I understood the game. While other traders bet on political pressure forcing Volcker to cave, I knew better. Dr. Adamites had taught me: watch what they do, not what they say.

When Congress screamed for Volcker's head, he raised rates higher. When homebuilders mailed two-by-fours to the Fed in protest, he didn't blink. When unemployment hit 10%, Reagan could have fired him. But Reagan understood what Nixon didn't—you need an independent Fed.

I traded that conviction. As inflation fell from 13.5% to 10% to 6% to 3%, bond prices surged. Every point decrease in inflation resulted in massive gains in bonds. The traders who bet on politics were carried out. Those who bet on Volcker's resolve became wealthy.

The Great Moderation: Reaping What Volcker Sowed (1987-2006)

When Greenspan took over in 1987, I was an established institutional trader. That green zone from 1983-2008? That was my prime earning years. Stable 2-3% inflation meant you could actually invest, not just speculate.

I transitioned from pure bond trading to portfolio management. Why? Because with inflation tamed, fundamental analysis mattered again. You could buy a stock based on earnings, not just inflation hedging. You could hold bonds to maturity without wondering if inflation would destroy your principal.

Through every crisis—Black Monday, S&L collapse, Asian contagion, LTCM, dot-com crash, 9/11—that green line barely budged. Greenspan had learned the lesson: credibility is everything. No Burns-style excuses, no political games. Just professional monetary policy.

The Upside-Down World: When We Couldn't Create Inflation (2006-2020)

Bernanke's Fed fascinated me. Here's a Princeton professor who studied the Depression, facing deflation in 2009. That purple zone averaging 1.78%? We were desperately trying to CREATE inflation.

QE1, QE2, QE3—the Fed bought trillions. In Volcker's day, that meant hyperinflation. In 2010, we couldn't get inflation above 2%. Everything I'd learned was backwards. The Fed was pushing on a string.

COVID and Echoes of the Past (2020-Present)

Semi-retired but still trading when COVID hit. That orange spike to 8% in 2022? First time since my youth that inflation led the evening news. Powell's "transitory" reminded me of Burns's "temporary."

But here's the key difference—when wrong, Powell pivoted hard. No excuses, just action. Volcker-style rate hikes, clear communication. The market believed him because the Fed had credibility—Volcker's gift that keeps giving.

What This Chart Really Means

Every zone on this chart represents a chapter of my life. The blue zone signifies my transition into adulthood. The red zone marked my shift from real estate to trading. The green zone is where I built my wealth. The purple zone challenged everything I knew. The orange zone brings back ghosts I thought were buried.

However, the real story begins in September 1979. Twenty-six failed real estate deals that weren't failures—they were tuition. Dr. Adamites taught me to read interest rates, and those dead contracts taught me to respect them. Volcker taught me to trade them.

That red mountain on the chart? It wrecked the real estate business I knew, but established the trading career I needed. Every Fed Chair since has contributed to my education. Martin demonstrated that stability was possible. Burns illustrated what occurs when politics overshadows policy. Volcker proved that courage could remedy catastrophe. Greenspan showed that credibility compounds. Bernanke indicated that flexibility surpasses ideology. Powell shows that the lessons endure.

After 45 years in markets, I know this: that inflation chart isn't just economic data. It's millions of life stories—people who bought houses they couldn't afford, businesses that collapsed from rate spikes, savings wiped out by inflation, and fortunes built by those who understood the game.

Mine is just one story. But it starts with a professor who taught me the most important lesson in finance: if you don't understand interest rates, you're dead in this business. September 1979 proved he was right. Those 26 failed deals didn't end my career—they started it.

The chart doesn't lie. Neither do interest rates. And if you understand them—really understand them—you can survive anything the Fed throws at you. Even a red mountain named Arthur Burns.

Expectations for Wednesday

As we approach today's reports, market expectations indicate a modest monthly increase of 0.2%, while year-over-year figures are expected to remain relatively unchanged. This sets up an intriguing scenario for market participants to monitor.

From a technical analysis perspective, the underlying market structure continues to display bullish characteristics. The current price action and momentum indicators suggest that we're likely to maintain our recent trading pattern—one that favors either sideways consolidation or continued upward movement. This resilient upward bias, despite the modest economic data expectations, reinforces the market's overall positive trajectory.

What makes today particularly noteworthy is how the actual data will either confirm or challenge this bullish thesis. Should the reports align with or exceed expectations, it would likely strengthen the current uptrend. Conversely, any significant deviation could test the market's resolve and potentially shift the near-term dynamics.

For now, the path of least resistance appears to remain higher, with the market demonstrating a clear preference for maintaining its constructive tone even as we navigate through this period of data releases

Economic Releases

Jun 11

• 07:00 ET: MBA Mortgage Applications Index For: 06/07 | Trading Impact: Low | KR Forecast: NA | KR Cons: NA | Prior: -3.9%

• 08:30 ET: Core CPI For: May | Trading Impact: High | KR Forecast: 0.2% | KR Cons: 0.3% | Prior: 0.2%

• 08:30 ET: CPI For: May | Trading Impact: High | KR Forecast: 0.3% | KR Cons: 0.2% | Prior: 0.2%

• 10:30 ET: EIA Crude Oil Inventories For: 06/07 | Trading Impact: High | KR Forecast: NA | KR Cons: NA | Prior: -4.30M

• 14:00 ET: Treasury Budget For: May | Trading Impact: Medium | KR Forecast: NA | KR Cons: NA | Prior: $258.4B

Jun 12

• 08:30 ET: PPI For: May | Trading Impact: High | KR Forecast: 0.1% | KR Cons: 0.2% | Prior: -0.5%

• 08:30 ET: Core PPI For: May | Trading Impact: High | KR Forecast: 0.2% | KR Cons: 0.3% | Prior: -0.4%

• 08:30 ET: Initial Claims For: 06/07 | Trading Impact: High | KR Forecast: 245K | KR Cons: 250K | Prior: 247K

• 08:30 ET: Continuing Claims For: 05/31 | Trading Impact: High | KR Forecast: NA | KR Cons: NA | Prior: 1904K

• 10:30 ET: EIA Natural Gas Inventories For: 06/07 | Trading Impact: Low | KR Forecast: NA | KR Cons: NA | Prior: +122 bcf

Jun 13

• 10:00 ET: Univ. of Michigan Consumer Sentiment - Prelim For: Jun | Trading Impact: Medium | KR Forecast: 52.7 | KR Cons: 53.0 | Prior: 52.2