Monday, April 7, 2008

When Bad News is Good News

The employment report was a bit of a disappointment, showing cracks in the "strong job market" argument that bulls had been using to justify their buying. Nevertheless, the market managed to come back from a loss to finish roughly unchanged on Friday. Meanwhile, in related news, anecdotal evidence is popping up everywhere I turn that inflation is about to bust out and rear its ugly head in the US. Commodities prices continue to roar and post new highs. Gold and oil are on the rally train again. "Bah! Who cares about gold and oil?" say the bulls, "you can't eat it!" Well, check out the commodity that 3 billion people depend upon for nourishment. Rice prices are soaring, causing major calamities all over the globe for developing nations. Every day I read something new about some part of the world that is experiencing growing inflation. The BRIC's are starting to have problems with inflationary pressures.The middle east is experiencing high inflation due to the weak dollar that is causing a surge in commodities prices. Although all the stats in the US point to low inflation, with the rest of the world experiencing problems and the US still hugely reliant on imports, how soon before it hits us too? The stock market loves all this news. We are again on the "all the problems are behind us, you've got to buy stocks!" train. Call me crazy, but I still think bad news is bad news!

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