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Lost in the madness of the media’s mania with Goldman Sachs this morning may have been the impressiveness of the y/y decline in consumer price inflation (see chart). The Consumer Discretionary stocks aren’t missing this – that’s why the XLY consumer index is breaking out.

Headline CPI fell by more than where the Street had their heads (in the sand), coming in -1.7% month over month, driven by a massive drawdown in energy prices which tanked by -17% month over month!

Consumer price inflation growth in the USA is now growing at a snail’s pace (lowest sequential monthly growth since the early 1960’s), and this is a screamer for the consensus “short the consumer” crowd, at least in the immediate term. While it now matters to one Warren Buffett, Goldman losing $5/share matters to less than 0.01% of this country’s population. Falling gas pump prices matters to more than 99%.

Facts don’t lie, people do. This US market’s immediate term lows are in. If the only reality is that the US consumer’s confidence is improving because it couldn’t get worse (Madoff), that’s good enough for me. It’s what matters on the margin that matters most to my macro model.

Keith R. McCullough
CEO & Chief Investment Officer