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Better But is it Good?

August 17, 2011 – 5:25 pm

This morning the market is showing a calmer side of its very volatile recent demeanor. Yesterday and the day before showed some strong intraday moves but they were far less dynamic than last week’s irrational daily gyrations.

Out this morning on the economic front was the PPI number. This measures inflation at the wholesale level and it was slightly higher than expected. The overall rate was an increase of .2% and the core rate .4%. The expectation was .1% and .2% respectively. Does this mean inflation is rising? Not necessarily. First, one month means very little as commodities swing up and down in price and in recent weeks it looks like commodity prices are softening. On the other hand, year over year inflation has increased just at a modest pace which is much better than deflation.

I know it sounds odd but we want inflation. We just do not want out of control inflation. Our government needs it to help pay debt with cheaper future dollars, and corporations like it so they can increase prices, usually above current inflation rates, thus they make better profits. Of course the consumer is the guy that gets stuck with all the pain of inflation. Isn’t that always the case! The consumer is always the nexus in any free economy.

Good Trading
Steve Peasley

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