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Jesse Felder
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Jesse has been managing money for over 20 years. He began his professional career at Bear, Stearns & Co. and later co-founded a multi-billion-dollar hedge fund firm headquartered in Santa Monica, California. Today he works with a select group of clients at Felder & Company, LLC in Bend, Oregon... More
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  • Inflation or Deflation? It Depends On Who You Ask 2 comments
    Feb 18, 2010 3:18 PM | about stocks: WMT, DE, ADM
    The Labor Department tells us today that Producer Prices climbed 1.4% in January suggesting that inflation is beginning to rise. This is in stark contrast, however, to what we've heard from corporate America during this earnings season.

     

    Wal-Mart had an announcement of its own today: its 4th quarter and fiscal year earnings (ending January 31). Unlike the PPI, Wal-Mart saw/created significant deflation over the past few months: 
    The world’s largest retailer, reported fourth-quarter sales that trailed its projection after cutting grocery and electronics prices, and predicted a “challenging” first quarter for U.S. stores. Sales at U.S. stores open at least a year fell 1.6 percent, the Bentonville, Arkansas-based company said today in a statement. Wal-Mart had projected sales to decline no more than 1 percent. Wal-Mart reduced prices on laptop computers, along with turkeys and cranberry sauce for holiday meals, to attract shoppers living paycheck to paycheck. The deflation hurt sales...

    There's deflation at the retail level. Archer Daniels Midland confirmed this price deflation at the producer level earlier this month in its earnings report:

     

    [ADM's] Revenue decreased 4.6% to $15.91 billion as higher sales volumes and foreign-exchange impacts were more than offset by lower average selling prices because of reduced commodities costs.

    Another company reporting today, Deere, saw its earnings affected positively by price deflation:

     

    Profit from equipment operations in the quarter ended Jan. 31 gained 2.6 percent to $315 million, mostly because of lower materials costs, Deere said. Material and logistics costs fell about $160 million in the quarter, the company said. The average price of U.S. hot-rolled steel sheet was about $516 a ton in the three months ended Jan. 31, according to figures published by Purchasing magazine. That’s down 12 percent from an average of about $587 in the same period a year earlier.

    So who should we believe: the labor department (with all of theiraccounting shenanigans) or corporate America (and all of theirs). While I'm watching the government's inflation numbers I'm listening a bit closer to the companies in the real world for a more accurate inflation picture. And all I'm hearing right now is "deflation."
     

    Disclosure: none
    Stocks: WMT, DE, ADM
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  • The Greatest Rip Off of our...
    , contributor
    Comments (655) | Send Message
     
    You have to look at the government’s definition of “Core Inflation”, this does not cover things like increase in food cost or energy cost. Which seems to be the core of inflation to me.
    18 Feb 2010, 03:43 PM Reply Like
  • The Retired one
    , contributor
    Comments (185) | Send Message
     
    The govt has to convince people that things will be better and summer will make people party no oil bill to pay more free cash.
    But how many will really have accomplished anything except feeling happy for the momentary relief??
    Banks are doing what they are because they are being given their commodity money free from the Govt zero to .25 percent wow they are going to up the rate to wow 1/2 percent and the banks want you to re-fi and re-borrow because they have a cushion of cash that does what the govt wants makes "things look better" !!!!
    Eurropeans will survive, and suffer a little for trusting American banks but just wait when here in America the retirement investments don't cover the costs of the new economics
    .American pension plans start to have the profit squeeze loss effect their growth in profits with a growing older population collecting from decimated plans and then working after retiring to stay even with the wolf at the door. Americans will dive right back into debt every penny's worth and then some to feel less depressed but just a little slower and then next winter.
    Repeat !! Downer downer.
    O.K. Things are going to be great yeah sure and Bernie Maddoff is going to make things right for all the retirees that lost a family fortune, from him.
    Retiree medical went up and benefits were sliced so nimbly that people won't realize until it's lien time on the house. I want to retire and no one has enough to qualify to buy except either at a low cost area and a lower quality area.
    So anyone caught where they have done something right and improved their lives can't cash out the capitol i would have spent down the rest of my life. Not unless they have a golden parachute worth a fortune and own a multi-million dollar condo with excess disposable income.
    Downer no industry no G.D.P. to sell to other countries so where do people make money for the country? To save spend and invest? We can't get a positive G.D.P. without the U.S.A. producing exports that support American's via jobs.
    Printing money and lending it isn't positive G.D.P. don't kid yourself!
    If you let Wall St headlines do your thinking we will only repeat the past.
    18 Feb 2010, 09:06 PM Reply Like
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