gabe borenstein

Wednesday Outlook: Commodities, Emerging Markets

Clearly ,the PPI is an abberation and it did not pick up the recent minor commodity price implosion.More important,at the CPI level the data may be overstating the rate of inflation.Almost 70% of Americans are (were),the home owners .The CPI includes changes in rents ,not the home prices.If home prices were substituted for the rent component ,the drop in the rate of inflation would be noticeable.In addition it is clear that other than gasoline ,just about every consumer item is on sale.The CPI is not picking this up..As the global deceleration becomes more pronounced,the crude prices will likely sharply decline.Tell Detriot about the inflation ,they are not likely to understand the word given the economic state of the automobile business.In fact I would argue that over the longer period of time,the high energy prices are deflationary as the decimate the real disposable income causing implosion of the consumer demand for the other goods.
In the meantime we are on the way to recovery .The problems have been identified and addressed .The investors and economists should review the word monetary lag which would then eliminate the investment hysteria.
On the other hand if the FED,the investors and some of the financial institutions had behaved more responsibly 18 months ,we would not have to experience the current" trauma". One more time ,it is not the U.S that will be the economic issue in the period ahead,it is Europe and Emerging market economies (includes many Asian countries),that are about to feel the unprecedented economic pain.
As long as there are radically different opinions,the market volatility will continue.Market is consolidating and poised for a major rally in the period ahead .