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US PPI Inflation Hits A 17 Year High...

This shouldn't be a shock to the sober and objective, but June's PPI reading came in at +9.1% year over year. This was higher than heightened expectations, and the highest monthly reading the US has printed since 1981.

Oil's spike contributed most to the month over month rise, climbing +6% sequentially. The aggregate month over month PPI increase was +1.8% versus May.

Stagflation is finally here for Bernanke to address. The facts will not cease to exist because he ignored them.
KM

(Picture: http://www.pointbite.com/images/bernanke-confused.jpg)

Finally! Bernanke Is Making Our Stagflation Call...

While we let the US government prepare to interrogate Bernanke at today's hearings, the takeaway in Bernanke's prepared comments is crystal clear.

Bernanke: "upside risks to inflation have intensified, while significant downside risks remain to growth"

This is stagflation, defined.
KM

Reader Thoughts: Chinese Olympic Preview...

A thoughtful note from one of our readers:
---
Keith,

"I would expect further declines out of China as it begins to shut down business to help the air pollution problem in Beijing for the Summer Olympics.

As a reminder China has indicated that from July 27-Sept 20th they will require Beijing and the 5 provinces surrounding it (Hebei, Inner Mongolia, Shanxi, Shandon and Tianjin) to comply with Beijing's air standards.

Furthermore it is estimated that Beijing will need 300m cubic meters of water to flush polluted and stagnated rivers, canals and lakes in central Beijing for the games -(

Sam
---

(Picture from MSNBC's This Week In Pictures: http://www.msnbc.msn.com/id/25626459/displaymode/1107/s/2/framenumber/9/)

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Bad Sushi!

The Japanese easy money bailout model resulted in two decades of economic stagnation. Their latest local issue is effectively depicted by this chart.

This is the free money chart overlaid with the resulting boiling pot of inflation.

Stocks closed lower again in Japan overnight. The Nikkei is stagflating like their domestic economy is. Japanese stocks are "cheap" relative to a lot of countries that are expensive. You can run out and buy Japan on that, but I won't.

KM

The Bandit's Chart: Nice Work, If You Can Get It!

Here is a chart of Citigroup, overlaid against the duration of Vikram Pandit's tenure. This is as ugly as the state of leadership in the US Banking system.

Pandit was however able to sell Citigroup shareholders his hedge fund, Old Lane, right before it blew up, and has since been paid handsomely irrespective of his shareholders losing large.

KM

Pershing Square and Leucadia - This Is Scary...

There is levered long investing, then there is levering up on a levered long investor. The notion that a public company would make such a "bet" is plain scary. Who signed off on this?

When my Partner, Howard Penney, forwarded me the following excerpt from the Leucadia (LUK) 10K, I thought there were typos in the numbers!

Taken from LUK 10K filed 2/29/08:
"In June 2007, the Company invested $200,000,000 to acquire a 10% limited partnership interest in Pershing Square, a newly-formed private investment partnership whose investment decisions are at the sole discretion of Pershing Square's general partner. The stated objective of Pershing Square is to create significant capital appreciation by investing in Target Corporation. For the period from investment to December 31, 2007, the Company recorded losses of $85,500,000 from this investment under the equity method of accounting, principally resulting from declines in the market value of Target Corporation's common stock. At December 31, 2007, the book value of the Company's investment in Pershing Square was $114,500,000."

No wonder why LUK insiders have been net sellers...

KM

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