Wednesday, March 12, 2008

Hello Inflation (again)

So the Fed does a liquidity dump to bail out knucklehead bankers and chowderhead home buyers and Wall Street rejoices. Or was that just revenge for the now defunct governor of NY's past as a CEO killer?

Anyway, the dollar at first liked the news but today it gave us an Emily Litella (nevermind) and hit a fresh new low. First, we thought that it would reduce the need for a huge rate cut by the Fed. Less cuts means better dollar and a better dollar means less inflation.

In my best Shaggy (from Scooby Doo) impression, "Zoinks!" What's up with that?

With the dollar sinking, we've got both inflation and less room for the Fed to act further. Check out this blog by a colleague In it, they argue the case that the bond market, and especially TIPs, those inflation adjusted bonds, are absolutely pointing towards inflation despite pundits' denial.

Is it any wonder I am a bear on stocks? Yeah, there may be some range bound stuff for now as super high bearish sentiment is worked off (Yay! We did not fall off a cliff. Here come the helicopters!) but a buying opportunity this is not.

No comments: