Dropping The Gloves With Inflation...

We can have a healthy debate as to why the actual CPI calculation is ridiculous, or we can just look at it in terms of what it, as a basket, has done over the course of the last 30 years. As long as the basket is measured relative to itself, there are takeaways that we can come away with. On this single factor scorecard, the Greenspan/Bernanke fight with inflation has had surprisingly impressive results.

This morning’s Consumer Price Inflation report in the USA (see updated CPI chart below) reminds us that the inflation fears of yesteryear are no longer an immediate term concern. In the immediate term, inflation has been brow beaten to the mat. In the long term, we are all dead…

While I do think that, in the intermediate term, all of these free moneys will create another reflationary bubble … for now, we are a long ways away from that reality. Additionally, the notion of inflation re-emerging is no longer a unique investment thesis. Inflation always comes back.

On the margin, this is one more fundamentally positive stimulus to year over year consumer spending which, after all, represents over 70% of this ailing US economy. This is one reason why the consumer stocks are outperforming today.

Keith R. McCullough
CEO & Chief Investment Officer