I raised the issue of inflation previously in December 2010 on my blog. Are you convinced? If not, the following arguments should firmly put you into the inflation camp.
Now it is getting more obvious. Inflation fear is getting onto to mainstream press. Gold and silver are at historic highs. Oil hits >$110 although it fell back today after the IMF downgraded economic growth in US and Japan.
Bernanke of US Fed is the only one now that believes that there is no inflation.
Europe raises interest rates despite all the needs to bailout Portugal, Ireland, Greece and possibly Italy and Spain. Canadian rates are strengthening.
Bill Gross announced that he sold off ALL treasuries. Today, I also read that Gross is net short on US treasuries.
In almost every part of the world, government are fighting inflation.
- Singapore consumer inflation hit 5% in Feb. Food, fuel, commodity and property prices showed the fastest price increases.
- Inflation in Indonesia is 6.6%. That is taking consideration of government subsidy on food and fuel. Without it is a lot higher.
- South Korea's inflation is 4.7% - a 29 month high. It is announced that fighting inflation is first priority.
- Inflation in Vietnam is expected to reach 13.3%
- India experienced the high inflation rates of 8.3% in Feb 2011
- In China, the consumer price index rose by 4. Last week, the Peoples Bank of China
raised interest rates by 25 basis points, the fourth time in six months and second time in 2011.
China’s imports in March rose 27.3% from a year earlier, up from February’s 19.4% rise. For the quarter, China registered adeficit of $1.02 billion. This is pretty big news.
Looking at the private sectors,
o Walmart CEO came out and warned seriously about inflation
o Hershey announced that it will raise prices of its candy products by 9.7% to cover rising material cost, fuel and transportation.
o Starbuck raised the price of its package coffee products by 12%. Coffee price has nearly doubled in the last year.
o Nike announced that it will raise the price of its shoes by average of 5.2%
o Kraft Food is serving smaller portions and reducing serving sizes to respond to rising costs. It is similar to increasing the price by 8.3%
Fresh vegetables and meats rose the fastest, and dairy products are at their highest level since 2008. Fruit is up 10.6%; pork up 9.9%; ground beef up 9.9%; and potatoes up 5.9%.
The short-term picture looks ever more worrisome. The annual rate of price change for the six months ended in February was 3.9%. Using the last three months, the annual rate of change is 5.6%.
Conditions will get even worse now that oil has crossed the $100 threshold and looks to stay high — if not move higher — because of Middle East unrest.
The national average for a gallon of gasoline hit $3.61, but it’s even higher in some parts of the United States, according to AAA. Gasoline prices in California, for example, hit an average of $4.04 last week.
Gas prices are roughly $1 a gallon higher than they were a year ago, and since the average American family uses about 1,200 gallons of gasoline a year, that’s an extra $1,200 a year out of their pockets and a major hit to household budgets.
One baffling event is that consumer stocks are still up. BBBY announced excellent results. Retails are surprisingly strong! Honestly, I cannot explain. Possible reason is that people are making money from the stock market and start spending again!
One thing that is not rising is housing price. On the whole, people are poorer in assets and they have to pay more for necessities like food and gas. Despite low interest rates, both new and existing home sales continue to fall. This is for a number of reasons. The market is well aware of the foreclosure overhang in the market and recent reports suggest that 27% of homes in the US are now underwater (the homeowner owes more on their home than it is worth). Banks are holding onto significant foreclosure reserves, and either are unwilling to sell them as they look for better market conditions, or else they cannot sell them because the paperwork is not in order.
So it is a double whammy. People are poorer because of lower housing price and have to pay more for their daily necessity.
Still not convinced? Inflation rate is actually around 10% if you the methodology used during former Fed Chairman, Paul Volcker. Read this in CNBC yesterday.,
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