March is here, spring is not far off, and overall futures are in the green again. Manufacturing data (in the form of PMI surveys) in Europe and in the U.S. are beating expectations handily.
Unemployment in Germany is at a 19-year low. And some are forecasting a strong showing from U.S. Non-Farm Payrolls on Friday. Our unemployment rate may have even declined a bit, but we'll need to wait for those numbers to come out.
In the last six months or so, we've seen copper up 36%, cotton up 100%, wheat up 24% and soybeans up 42%. And it's hard to miss the price gains at the pump.
Gasoline is now at a national average of $3.36 a gallon, with places like San Francisco seeing some areas reporting just under $4.00 a gallon. (For comparison, that national average was $1.90 just two years ago.)
High unemployment and still falling housing prices are offsetting commodity price gains in popular measures of inflation, like the CPI.
As one BlackRock (NYSE:BLK) money manager told Bloomberg:
"These commodity price increases are staggering...Each commodity is different, but there is a supply issue for oil. There has been real economic demand for these commodities since the economy began recovering."
There have also been floods and droughts around the world, which have lowered grain production and pushed agriculture prices higher. A stronger U.S. dollar won't stop price rises in commodities with skewed supply/demand fundamentals.
Of course, that's not really the issue. The impact of interest rates at zero will create imbalances. And the root cause isn't an excuse to minimize or ignore a rising CPI.
Interestingly, it could be that rising housing prices will push the CPI into dangerous territory. Now, we're clearly not in any danger of seeing housing prices rise anytime soon. However, it could happen later this year.
I think there's no doubt that most investors would interpret improving home prices as a sign that the economy is truly getting healthy. And that could be the exact moment that the Fed has no choice to start hiking rates.
I understand that Fannie Mae (FNM) is starting to get more of its FHA foreclosures onto the market. I suspect there will be enough supply during the spring home-buying season to keep prices in check.
Libya is still a mess, and the U.S. is reportedly starting to reposition troops into the area, just in case. That's keeping uncertainty, and by extension oil prices, high.
And so long as there is instability in the Middle East (at least more than the usual amount of instability), oil prices will carry a "supply disruption' premium that gets passed directly to consumers like you and me.
There's fear that Libya could see its oil field fall into the hands of rival groups struggling for power in the wake of Gaddafi's inevitable fall. That's clearly not good.
Also, there are reports that political opposition in Iran is feeling stronger. I think we'd all like to see the fundamentalist wing-nuts in Iran lose power. But that will also create serious instability in a major oil exporter. Oil prices will move higher.
I've told you about some of the trading gains Jason Cimpl has recently racked up for his TradeMaster Daily Stock Alerts members. Like 40% on CCME, 50% on ALJ and 55% on HILL.
Jason was able to nail down these outstanding gains largely because he was able to stick with the rally that started in late August. Even though a lot of traders were skeptical of that rally and repeatedly called for a reversal, Jason stayed long and strong and delivered.
That's because, quite simply, he knows what to look for before a rally reverses.