POSITION: long inflation
There are obviously a lot of ways to be long inflation (short bonds, emerging markets, or consumer stocks) or just run on out there and buy something that’s, well, inflating in price!
I can see how a Keynesian was right depressed when the chart below (ISM Prices Paid) hit its December 2008 low. That was the other side of the printing moneys from the heavens idea that created things like $150/oil. What goes up in terms of a government supported price, eventually comes down.
What’s been going up since December 2008 are the prices that business pay for stuff (+353%). If you don’t think that a manufacturer of something with copper or corn in it is feeling this chart, ask them.
We’ve long time predicted (2007-2008) that when reflation becomes inflation, that someone gets plugged. In this case, either consumers of end product are going to get it (McDonalds says they are going to raise prices – look how the market took that idea) or the fattened corporate margin is going to get it.
There’s a reason why inflation created a very bad margin environment in the 1970’s. There’s no reason why inflation can’t force corporate margins to mean revert from all-time highs either.
So when The Ber-nank tells you there is no inflation, remember this – if he didn’t see it in this chart in 2008, he sure as heck won’t see it now.
And that, folks, is why the US Dollar or the government policies that back it no longer have any credibility in global currency markets.
Keith R. McCullough
Chief Executive Officer