Posts filed under “Investing”

New Column: The Street Gets Inflation Threat Backwards

RealMoneyI have a new column up at, titled  The Street Gets Inflation Threat Backwards.

It is an expansion of a few recent postshere:  Street Gets Inflation Exactly Backwards and Unemployment Levels and Labor Participation Rate.

Here’s an excerpt: 

"In my opinion, the majority of economists, strategists and financial media –
the full "punditocracy" — are exactly wrong on inflation. Indeed, I am
hard pressed to think of another item of such grave economic consequence that
most of the Street has so backwards.

The problem is, they are looking for inflation in all the wrong places. The
inflation (ex-inflation) crowd has managed to ignore robust price
increases across a variety of goods and services. Yet somehow they seem to have
found inflation in the one part of the economy where there is almost none:

One only had to see the market reaction to last week’s data on non-farm
payrolls, hourly wages and unemployment rate to realize how much the Street has
gotten its panties in a bunch.

The Federal Reserve is acutely sensitive to wage pressure — much more
so than to the commodity price increases we have seen over the past five years.
Maybe that’s why the FOMC quietly announced
that the upcoming meeting, previously planned for March 28, has been expanded to
two days. It will now begin on March 27. (I’m sure the extra day isn’t for more
time to welcome aboard Ben Bernanke.)

If the Fed falls prey to the erroneous interpretation of wages and jobs, we
could see a tightening cycle that goes far beyond what many on Wall Street
currently expect. And that would bode extremely poorly for market prospects,
both this year and next."

Regular blog readers will, of course, recognize many of the arguments in the column.


The Street Gets Inflation Threat Backwards, 2/9/2006 4:02 PM EST

Category: Employment, Federal Reserve, Inflation, Investing, Markets, Psychology

Exploration versus Share Buybacks ?

Category: Commodities, Investing, Markets

Anticipating Consumer Slow Downs

Category: Consumer Spending, Investing, Wages & Income

Consumer Spending Slowdowns and Bear Markets

Category: Consumer Spending, Investing, Markets

Sourcing the Greenspan Chatter

This is the article that the Greenspan quote came from that popped the market today; I don’t know how accurate it is (holographic image?) but

Gold price riding high on fear of terrorism, says Greenspan
Leo Lewis, Tokyo
February 09, 2006


"ALAN Greenspan, who stepped
down last week as chairman of the US Federal Reserve after 18 1/2 years, has
blamed the threat of terrorism for the high gold price, in his first private
sector speech since being let off the leash of officialdom.

According to
members of his audience of international investors – watching a holographic
image in Tokyo as he spoke in New York – Greenspan said the high cost of gold
did not reflect inflation or the strength of commodities, but rather a fear
among investors of a major geopolitical conflict. There were people who believed
that a nuclear weapon could be detonated within five years, the former American
central bank supremo said.

The low probability of such an event occurring would not necessarily avert a
spike in the gold price, he added.

Greenspan went on to discuss a range of topics, including the problems
created by a lack of investment in refining capacity by the oil industry. He
said this failure by the oil majors meant that the era of cheap energy was
almost surely over.

The former Fed chairman is also said to have indulged in a moment of
self-criticism over the central bank’s failure to prevent the market bubble in
the late 1990s.

That may explain Gold’s $20 whackage yesterday, but what about all the rest of the metals and commodities?

Also, if you missed this, you MUST read it:

Former Fed Chief’s Inscrutable Statements Baffle Wife

Its a hoot!

and on the chance the article disappears, I’ll archive it after the jump . . .

Read More

Category: Federal Reserve, Inflation, Investing

The Risk to Equities from Rising Rates

Category: Federal Reserve, Fixed Income/Interest Rates, Investing

It’s (Still) a Small (Cap) World

Category: Investing, Markets

Top Ticking Real Estate is Different Than Stocks

Category: Investing, Markets, Psychology, Real Estate, Trading

Bulls Looking for a Cinderella Scenario

Category: Economy, Investing, Markets, Technical Analysis

The Power of Compounding

Category: Investing