Not much to say this am (since I am on the road this week) so this will be brief. The Fed said yesterday that inflation was tilted to the downside and this the $900 billion (includes maturity reinvestment) was necessary to facilitate growth. First, the threat is not deflation but inflation and it is here folks no matter what the CPI says. The CRB is climbing, General Mills and other food distributors are now passing prices through and profit margins are going to be squeezed. This is not stock friendly - the question is at what point it becomes painful to corporate america?
This is not to say I am not bullish on stocks. However this is a threat that could upend the stock market. Incomes and job growth are not rising quickly enough to offset the current levels of inflation...never mind 4 or 5 times! Also bonds now do not have fed buying support or inflation support. In other words, long rates are going to climb. And the dollar, well I would be looking for a test of the lows now no matter how much I dislike the Euro.
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