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About Me

Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Tuesday, April 01, 2008

Inflation Potential

The broad market for commodities has eased off in recent weeks
following a very powerful run. The weakness has taken momentum
out of my inflation thrust indicator. Now, as it turns out, a degree
of weakness in the broader market is not uncommon during the
spring months, and would not normally be worth much comment
except that it has come at a time of growing evidence of a global
economic slowdown, paced by a weakening US economy. Moreover,
an increasing number of market commentators have been pointing
out how frothy these major sub-components have become, not
the least of which is the oil price. I have pointed out several times
how overextended the major components are in recent months,
so I find it may be intriguing to see if there is more downside
follow-through ahead.

The oil price, a major driver of inflation, remains in an ominous
uptrend that threatens economic stability. At close to $101 bl.,
it is off roughly 10% from recent top prints, but really needs
to break and stay below $100 a bl. to provide a stronger case
that the speculative fever may have broken. At present levels
we are still in mania-land.

The wobbly picture for commodities has shaken the gold price
down from the $1000 oz. la-la land and has also helped the
stock market, which has had to contend with weaker earnings
and accelerating inflation.

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