With the Dow back at 10500, certain TARP funds being re-paid so banks can bonus out millions and not have to OK it with the Dem’s in Congress, today we got some inflation in the mix. PPI rose more than expected. There are more numbers out this week, and I am not going to list each one. If you’re curious, go to the cme.com web site and click on events calender. They have a nice listing, with times of release, as well as the expected consensus. That’s something I really don’t want to focus my time on.
In any event, the stocks moved lower, on fears that sooner or later the Fed will have to raise rates to curtail inflation. However, it will be a delicate balance, because if the Fed hikes too radically, it could shift this not so vibrant US economy back to the dregs of last March. 12 year lows in the markets are nothing anyone wants to live through again, and as we move into 2010, believe it or not, we will begin hearing rumblings of the next Presidential election getting underway, so the economy will once again become politicized.
The beauty of the federa reserve is that they are supposed to be a-political.
2010 and 2011 will be definitely interesting as the fed walks a tightrope, between fighting inflation on a wholesale level, while also trying to encourage a re-inflation of housing values.
The US economy is so dependent on consumer spending, and a lot of consumers watched their largest investment drop by 30 percent or more over the past 3 years.
So, we will watch inflation, but on a day to day basis, these economic numbers will just shake things up when they are released. The larger move will come in the bonds and notes if the fed shifts policy.
In the meantime, the story will remain the US dollar and how it impacts commodity prices. If you are a fan of Jimmy Rogers, you should watch his interview on CNBC. He is looking for at 10 year bull run in commodities. He told Maria Bartiroma, in ten years she will want to be a farmer because prices for grain will be so high.
Good Trading
