PPI-CPI: I'm Even More Bearish Now

I know it is hard to believe, but I am becoming even more bearish than I was before. This has nothing to do with Greenspan's comments by the way. I never pay attention to other Economists or analysts because they distort my way of thinking, and I pride myself at being independent and that allows me to think outside of the box.

Everyone knows that I am out in front of the curve in every respect, and this is a good example. I warned you 2 reports ago that the PPI prices would begin to increase quite aggressively, bringing inflationary pressures to the surface on a producer level. I also warned that the ability to pass those prices along to the consumer in the wake of the liquidity concerns was probably going to be hard to do. We'll find out just how hard on Friday.

However, I expect there to be little change from the consensus estimates for the CPI on Friday.

This creates one of the most bearish scenarios that I could imagine. I reserved the aggressive nature of these comments for after-the-process had begun, and now that it seems to have begun I will illustrate this scenario in greater detail:

The Fed is caught between two double-edged swords. They can't do anything to stop what's coming though, and the landscape is becoming very clear. Inflation is real, and inflation is rising on all levels. It will soon eat into corporate profits, corporate margins are going to diminish because they will not be able to pass higher costs along to the consumer. This is a horrible scenario for the prospects of corporate earnings going forward; if the Market is truly earnings driven, the scenario is equally as bad for the market too. If producers are able to pass along the added prices to consumers, at least margins will remain in tact in the face of a weakening economy.

However, if they are not, not only will their net growth rates decline as consumers step away from non-staples in this weakening economy, but they will not make nearly as much money from the sales they make to consumers in the United States because they will not be able to pass on the higher costs they are faced with.

A weakening Economy, higher levels of producer inflation driven by food and energy costs, no pricing power, lower margins, and a fed that can't do anything about it. I don't know if the landscape could be more obvious, or more revealing.

The Investment Rate told us this landscape was coming a long while ago. Again, I was ahead of the curve there, and my mission is to remain independent and ahead of the curve to serve you always going forward.

Most people don't see the forest for the trees, but I hope I am able to shed light on this subject.

Comments

[j'adoube]

"Everyone knows that I am out in front of the curve in every respect, and this is a good example."

What a pompous ass. Sure to be ground up by a market that laughs at egotistical lunkheads like him.

[WAKEUP]

"It ain't braggin', if you can do it," is an old-but-still-valid folk saying. It ain't pompous, either, if you're RIGHT. The only thing this market is going to grind up is the capital of those who still don't know which way SOUTH is.

[jcrash]

Yeah? Like NVDA was supposed to tank last year? And this guy picked SNDK to tank prior to a 100% runup about a year ago.

With a record like that, he either just is ignorant about tech stocks, or he has little in the way of clues. I think this one is best filed under entertainment until the record improves.

[Lord Kraken]

Please! Given that inflation never really was under control before the Summer rate cuts began, I would not brag too much about predicting an increase in inflation. Actually, the increase in gold and commodities kind of tells us that the market knew this ages before this guy....

[d]

Besides this writer high fiving what appears to be just himself, I did not come away with anything of value in his ramblings that a beginning econ 101 course hasn't illustated-

He portends to be ahead of the curve, but anyone that reads something besides what uncle sam puts out, knows full well inflation has been rising at a minimum of the CPI for the last 5 years, as mentioned by an earlier post referencing oil and gold-

I would like writer to provide something of substance-i.e., where's housing next year? oil prices?, gold?, S&P?

Get these right then I'll think you're more than just a blowhard-

[UH OH]

What is slowing growth, increase in inflation, and deflating assets? STAGFLATION! In fact, the only this different about now and the 70's is that int and inflation rates were in d-digits but makes sense as economy was much smaller. Mkt cheap as every bull is end the end of cycle jsut like home builders and financials were before they tanked BIG! this guy is right but for wrong reasons....

[Thomas Kee]

j'adoube, I don't mind being confident when I am right. I have been right about the trend of the Market since 2001. Your should read the investment rate for more information on this.

[Thomas Kee]

jcrash

Thanks for pointing out NVDA...it worked perfectly too...the stock dipped by about 15% after I mentioned it, tested longer term support, and then performed like a leader...

Read this (last paragraph fromt he NVDA article):

In summary, NVIDIA is a market leader in GPUs and the company is poised to benefit from major product cycles going forward. But from a valuation perspective and from a technical analysis, the stock looks more likely to decline over time than it does to increase. This will be the scenario until such time as NVDA's valuation comes into parity with longer-term earnings expectations, and that should happen when the stock tests longer-term support.

[Thomas Kee]

Jcrash

Sandisk was a 1 week trade...please read carefully before making comments like this...thanks.

[Thomas Kee]

LordKraken

Most of my comments do not get posted to seeking alpha as you might expect. These articles get posted to my clients, and they are the ones who know best just how in front of the curve I am.

I know that inflation has been a problem...for a long time...but no one really seemed to be concerned with it.

I don't think they are now either...

I wrote about this 6 months ago...in an article in Seeking alpha called where's the inflation?

One thing I found interesting though...when Interest rates Decline the US Gov has an easier time paying off it's own debt. There's an added inceptive to cutting rates....

The takeaway is...the fed can't do anything about the economy anyway.....but inflation is on the rise

[Thomas Kee]

D.

Please read my strategic plan for 2007 and beyond....There, for my clients, I have illustrated exactly where the Dow would turn throughout the entire year. I do not predict gold, or oil, just the Markets.

Let me just say..the market has begun a decline already that will last for the next 5 - 10 years.

Click here and read the strategic plan:

www.stocktradersdaily....

[Thomas Kee]

Uh Oh:

This article demonstrates the problems facing the Fed. The problems facing the Market is that the Market just isn't able to find the liquidity to move higher. In fact, liquidity levels will decline steadily for the next 16 years.

The Investment Rate tells you why:

www.stocktradersdaily....