Let’s take a moment to ponder the contradictions that seem so ubiquitous. They (authorities, politicians, Wall Street product pushers and the financial media) tell us that inflation is “tame.” This is achieved thru the laughable re-jiggering of indexes (CPI, PPI and PCE) and their components to have the desired “tame” result. Yet we live in the real world, spending real money everyday on goods and services that our own reason and common sense scream anything but “tame” inflation.
For example, do you pay property taxes? If yes, you know that these costs have increased, especially in some areas, exponentially. Yet, they’re not a part of our beloved CPI which uses instead, the peculiar “owner’s equivalent rent” calculation to measure housing costs. Did you buy a cool new flat-screen TV this year? Even though those prices are declining, you spent a lot more for this than a conventional model. Again, the way the government calculates things you actually paid less, since you gained more TV set for your money. And, so it goes. It gets downright silly doesn’t it?
So, we’re not drinking the Kool Aid they’re selling, but we’re not fighting the tape either. The data gets published and markets suck it up and we go along for the ride.
Today the PCE (Core Personal-Consumption-Expenditure Price Index) data was released which showed inflation high by the Fed’s standards but “tame” for Wall Street who were quick to quip that a future growth slowdown will “relieve” inflation pressure.
Gold prices rose above $600 as some expected stronger jewelry demand for Christmas. Since the dollar was flat today and crude oil prices declined substantially this seasonal demand makes some sense. But, at the same time, many gold bulls believe that the dollar will be a casualty as the Fed’s printing presses run overtime making gold more attractive.
Maybe this kind of information, reconstructed M-3 data courtesy Shadow Government Statistics, is what gold investors are focusing on -- more dollars in circulation, the less dear they become.
And, perhaps gold investors are focusing on the U.S. Treasury liquidity injections ($7B added today below the Fed Funds rate) to keep the good times rolling for Megabanks (dba, WS Trading Desks).
Energy prices fell sharply owing to warmer weather and a belief that terrorist threats against oil facilities aren’t valid.
In other markets that seem to matter this was the look today:
Now you know I’ve been pushing First Trust DJ Internet Index ETF (NYSEARCA:FDN) since it includes GOOG while traditional Internet HOLDRS (NYSE:HHH) as a trust doesn’t. But the latter with heavy positions in Yahoo! Inc. (YHOO), eBay Inc. (NASDAQ:EBAY) and Amazon.com Inc. (NASDAQ:AMZN) can benefit if bullish news hits those stocks.
Tomorrow is the last day of October and the window dressing that has occurred repeatedly in 2006 may still be the trend. Today’s volume was light so the decorators don’t need much help.
Have a pleasant evening!
Disclaimer: The ETF Digest maintains positions in: iShares Lehman 7-10 Yr Treasury Bond ETF (NYSEARCA:IEF), Internet HOLDRS (HHH), First Trust DJ Internet Index ETF (FDN) and iShares Dow Jones US Real Estate ETF (NYSEARCA:IYR).