Stocks: Negative Return Due to Inflation

Interesting Bloomberg article this afternoon on corporate profits and raw cost inputs:

"Inflation is eliminating the rewards of owning U.S. stocks.

Surging commodity prices have eroded earnings and spurred the Federal Reserve to consider raising borrowing costs just as equities are trading at their most expensive in four years. Standard & Poor’s 500 Index shares yield 0.22 percentage point more in profits than the interest on 10-year Treasury notes, the smallest advantage since 2004, data compiled by Bloomberg show. The last time corporate earnings returned less versus bonds, the index posted its first quarterly decline in more than a year.

The 44 percent advance in oil, 72 percent jump in corn and 41 percent climb in rice pushed the UBS Bloomberg Constant Maturity Commodity Index to a record this year. That’s squeezing profits as raw-material costs outpace consumer prices by the largest margin since the 1970s. Companies in the S&P 500 will earn 7.7 percent less in the second quarter than a year ago, according to analysts’ estimates compiled by Bloomberg."

We know inflation has been significant — how much is this going to matter in the coming days  months and quarters?

What say ye?

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Source:
Stocks in U.S. Show Negative Return on Inflation Gain
Michael Tsang and Alexis Xydias
Bloomberg, June 16 2008
http://www.bloomberg.com/apps/news?pid=20601213&sid=afIM_UR69tbo&

Category: Commodities, Earnings, Valuation

Robert Novak is No Fed Expert !

Category: Federal Reserve, Financial Press

Crude Oil = $140

Category: Commodities, Energy, Technical Analysis

Metals Conference: Currency, Fed policy, and Debt

Category: Commodities, Credit, Currency, Federal Reserve

Washington Post: Boom, Bust & Aftermath Part II

Anatomy_meltdown_wallst

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Part II of the WaPo Real Estate & Credit series we mentioned yesterday is out today. A few excerpts after the jump will give you a flavor of the article.

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Source:
The Bubble
Zachary A. Goldfarb and Alec Klein
Washington Post,  Monday, June 16, 2008; Page A01   html
http://www.washingtonpost.com/wp-dyn/content/story/2008/06/16/ST2008061600096.html

Read More

Category: Credit, Derivatives, Federal Reserve, Real Estate

UK Cost of Living Increases: 9.5%

Category: Inflation

Roubini: ‘Long and Protracted’ Recession

Nouriel Roubini, professor of economics at New York University’s Stern
School of Business, talks about May retail sales, Federal Reserve
policy and the outlook for the U.S. economy. Retail sales in the U.S.
rose twice as much as forecast in May, with purchases climbing 1
percent, the most in six months, the Commerce Department said.

click for video
Nouriel_roubini

00:00 Prospects for weaker consumer in autumn
02:05 Fed to hold despite "hawkish" rhetoric
03:22 "Very pessimistic" about housing
04:32 Could be "long and protracted" recession
05:34 GDP to fall for four quarters

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Source:

Roubini of NYU Sees ‘Long and Protracted’ U.S. Recession: Video
Bloomberg,
June 12, 2008
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=a3myVRRgXVSY

Category: Economy, Video

Washington Post: Boom, Bust & Aftermath

Category: Credit, Derivatives, Financial Press, Real Estate

Ten Notes on Crude

Category: Energy, Weblogs

Achuthan: Recession a Bigger Concern Than Inflation

Lakshman Achuthan, a managing director at Economic Cycle Research Institute, talks with Bloomberg’s Carol Massar in New York about the outlook for the U.S. economy, inflation and consumer prices. The consumer price index increased 0.6 percent in May, the Labor Department said today. So-called core prices, which exclude food and energy, rose 0.2 percent. (Source: Bloomberg)

click for windows video
Achuthan

00:00 Recession as "primary concern" over inflation
01:03 "We do not have strong signs of a recovery."
02:50 Reasons why inflation not "out of control"

Source:
Achuthan: Recession a Bigger Concern Than Inflation: Video
Bloomberg,June 13 2008
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=az8dsAnExK9c

Category: Economy, Video