Kass: Fed Cuts Leave Ugly Scar -- Blahflation
This blog post originally appeared on RealMoney Silver on Feb. 20 at 7:27 a.m. EST.
"You're walking around blind without a cane, pal. A fool and his money are lucky enough to get together in the first place." -- Gordon Gekko, Wall StreetBullish equity investors are thinking too linearly in attempting to rationalize value by observing rearview mirror indicators of economic activity and corporate profits while ignoring the emergence of blahflation (i.e., blah economic growth and stubbornly high inflation). Not surprisingly, the media, preoccupied by the past tense of Wal-Mart's (WMT) and Hewlett Packard's (HPQ) earnings reports (and others), are missing the bigger picture as well.
On the other hand, bond investors see the future more clearly, as they have recently observed inflation's disruptive effect on the back end of the curve, which has gained nearly 50 basis points in yield over the last few weeks.
For over a year, The Edge has anticipated the re-emergence of blahflation. Blahflation has now arrived, and it will be the cruelest tax of all.
We see its symptoms almost daily now:
- Gold rose by another $25+ yesterday, and other precious metals followed with higher prices.
- Oil traded above $100 per barrel.
- Gains in the prices of Industrial materials buoyed the CRB Index to near-record highs yesterday.
- Higher prices of grains, soybeans and other soft commodities also contributed to a rising CRB Index.
- China's consumer price index has ramped, and that country is now exporting inflation into the U.S.
- The yield on the 10-year U.S. note gapped to over 3.90%.
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| Dow Jones | S&P 500 | NASDAQ | 10-Year Note | |
|---|---|---|---|---|
| 12,801.23 | 1,342.64 | 2,903.88 | 19.69 |
Oil *
117.67
|
|
DOWN
89.23 |
DOWN
9.31 |
DOWN
23.35 |
DOWN
0.78 |
10 Yr
1.97%
SPDR Gold
167.14
|
|
-0.69%
|
-0.69%
|
-0.80%
|
-3.81%
|
Data delayed 20 minutes |

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