Wednesday December 7, 2005 - 12:17:18 GMT
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Black Swan Capital - www.blackswantrading.com
Still searching for inflation
“If you don’t profit from your investment mistakes, someone else will.”
We are still hunting for the elusive “runaway” inflation that will force the Fed to hike rates farther and faster. It’s like playing a game of “Where’s Waldo.”
Not seeing it up there in wages…
Is that it in the copper and gold price? Because you’re not seeing it in the food stuff! Wheat and beans are scrapping the bottom of the bushel.
And in the long bond, conundrum or not, you’re not seeing it there either…
“UWe are experiencing commodity inflation, but it is mostly confined to industrial materials: foodstuffs, such as the grains, remain at prices that would have looked like bargains during the 1980s. UWe know from history that commodity inflation occurs only when foods and fuels soar together—not when one or the other is inflating. We have managed to absorb a trebling of oil prices and a quadrupling of natural gas prices without a real outbreak of global inflation, and only a few forecasters think we'll see such increases in the near future. Inflation in key Asian economies remains in the 2% range despite those soaring energy prices, because there has been so little cost pass-through. If there was only slight evidence of pass-through when the global economy was growing very rapidly, it is unlikely to occur now that the global economy is slowing down,” according to Donald Coxe, in his brilliant piece “Basis Points.” [Our emphasis]
And even the HTUChina-thing is still being debatedUTH. Morgan Stanley says they see a slowdown that will be deflationary. ANZ Bank sees another leg up in growth as China development moves inland.
Near-term, none of this may matter as real money flow on attractive US yields and a stock market rally may be dollar supportive. But at some point, a dollar correction could likely hinge on whether or not we find Waldo.
Black Swan Capital
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