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In this morning's Early Look, I used a curling metaphor to describe the global macro markets news flow.  I'm not sure I can come up with a metaphor for the chart below, or that we need one.  Focus on the trend in PPI, which is used as a proxy for inflation.  As the comparisons get easier over the next couple of months, reported inflation is only going to accelerate.  As depicted in the chart below, inflation is already running well above the three year average at the 4.6% reported today.

He Who Sees No Bubbles or Inflation (Chairman Bernanke) has indicated recently that he will not keep interest rates or montary policy at emergency levels in perpetuity.  And that, thanks be to Volcker, is a prudent and rational thing.  The timing on when he takes action, of course, is the open ended question.  In contrast to the fair Chairman Bernanke, we look at the chart below and we see inflation. It is not interpretation, it is a fact.  What is also obvious is that inflation, on a reported basis, is only going to accelerate in the coming months.

A friend of the firm, who also happens to be the Treasurer of major resturant company, indicated to us a few months back that, "He didn't see a core inflation problem."  All I can say to that is to reiterate, we see inflation. And if you don't believe your friends at Hedgeye, believe the chart below.

Daryl G. Jones

Managing Director

We See Inflation - PPI