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Today’s PPI number gives us another chance to reiterate one of our key 2Q themes - Inflation’s V-Bottom.

Stagnating consumer confidence figures suggest that most consumers don’t trust the direction the country is going in.  We are in agreement with that sentiment and think that most politicians lie and Washington’s free money man, Ben Bernanke, can’t see inflation.  Or, at least, he doesn’t want to -- until he has to.

The PPI rose 6% year-over-year in March and was up 0.7% sequentially - more that the 0.5% consensus estimate on Bloomberg.  Today’s PPI report recorded its largest annual gain since September 2008 and was up on the back of a 2.4% rise in food prices, its sixth straight monthly increase. The increase can be attributed to a 49.3% increase in prices for fresh and dry vegetables (meats and eggs also contributed to the increase in prices for finished consumer foods.)

As an aside, I point this out as my beloved Restaurant stocks are white hot on the back of accelerating sales trends and higher margins on lower food costs, a trend that will come to an end in 3Q10!

Look no further than the chart of PPI below to see Inflation’s V-Bottom.

Howard Penney

Managing Director

Q2 THEME - Inflation’s V-Bottom - PPI is HOT - bernanke