Thursday, February 10, 2011

Keep Printing Ben

You are right!..There is NO inflation.  NONE! ZERO! ZILCH! NADA!:

"PORTLAND, Ore. (AP) -- Kraft Foods Inc., like many of its peers, is feeling some pricing pressure.

The company reported Thursday that price increases it made to cope with higher ingredient costs are not going to be enough to sustain its profitability and it plans further hikes this year.

As one of the world's largest food companies, Kraft is feeling the pinch from higher costs for wheat, corn, sugar and other commodities.

The company already raised prices on most of its products in Europe and more than half in North America. But it said its input costs rose nearly $500 million during the fourth quarter and its profit margins suffered accordingly."

Quick Take:

Somebody please wake me up when all of this stupidity ends.  I just can't take it anymore!

This is all going to end in tears.  Prices will keep rising until demand falls off a cliff and earnings collapse.  We are seeing signs of it already in earnings from Cisco and now Kraft.

This whole scenario reminds me of May of 2008 all over again.   

It's important to note that our inflation problem is now officially worse than last time.  As you can see below,  most commodity prices have now passed the all time highs of 2008.  Many don't realize this because they are too focused on oil which is rising but remains far below it's 2008 peak:
"Global food prices hit a fresh record high last month, surpassing the levels seen during the 2007-08 food crisis, the United Nations said on Thursday.

The Rome-based Food and Agriculture Organisation said its food price index, a benchmark basket tracking the wholesale cost of 55 commodities such as wheat, corn, rice, vegetable oils, dairy products, sugar and meats, jumped to 231 points, up 3.4 per cent from December. The FAO started tracking the basket in 1990."

The Bottom Line

Our inflation problem has gotten beyond ridiculous, and it is time for the whole house of cards to come tumbling down once again. 

The problem this go around is there is no money for large bailouts.  Congress pissed it all away on saving the banking system.  In fact, it's still pissing it away on these tards as we speak. 

There was a lot of market violence today despite the flat close.  APPL saw a violent sell off midday before rallying back.   Bond yields spiked back up.  All is not well.

I was expecting to see some serious violence this spring as the end of QE nears.  However, as things develop, I am starting to get concerned that we might not make it through the winter without seeing something nasty marketwise.

I didn't expect these earnings issues so soon.  If this trend continues then the market has some serious problems to deal with right NOW.

The recovery is starting to sputter thanks to inflation just like it did in the fall of 2008.    Stocks are priced at ridiculously elevated levels.  Many stocks have passed their 2007 highs.

Earnings must come in PERFECT in order to hold these levels, and companies are failing to do so thanks to the rising input costs that Ben fails to see.

Meanwhile, 20% of the nation remains unemployed and their homes continue losing value on a monthly basis.  This is hardly the proper foundation that economic recoveries are built on.

Reality is starting to set in folks and it's not going to be pretty for anyone involved.


Anonymous said...

Actually, these times remind me of the late '90s, where when you think valuations are getting excessive and the markets are feeling toppy, it just keeps going higher no matter what the news. Thanks QE2 for propping this market up. Hopefully this can all be unwound safely but my guess would be, NOT!

Jeff said...


I hear ya.

Googles former CEO said that tech stocks looked bubbly yesterday.

Thanks QE2+trading robots!