- why inflation is not a serious issue;
- obvious signs of a housing recovery; and
- how to buy McDonald's and Nike.
Inflation Is Just the Latest Bugbear
Posted at 11:21 a.m. EST, Thursday, Jan. 6 We are not going to get a spike in the dollar and a spike in inflation. A stronger dollar is inherently deflationary, especially one that is being driven by a perception that Congress has gotten religion and doesn't intend to let the budget deficit get as out of control as it has been. But this brings me to a bigger issue, one that I addressed with the always-excellent Alix Steel yesterday: There has NEVER EVER been a moment where there was something NOT wrong. There is always a wrinkle. There is always a negative. Right now it is commodity inflation. That's' the buzz. Look, commodity inflation is certainly not a good thing. But the cost of commodities even in cereal ( General Mills ( GIS) was upgraded yesterday because the analyst wanted to "embrace" inflation) is more oriented toward transport costs, not grains. It is true that Family Dollar ( FDO) cited freight costs as a reason for its disappointment yesterday, but the most salient reason is hardly inflationary: lower prices for everything, lower than they expected to get! And a wealthier consumer that is starting to shop at better places. As an aside, I think that the retail sales numbers are very distorted by the loss of a whole weekend that would normally be extremely important, because of the snowstorm. > > Bull or Bear? Vote in Our Poll As much as I think that we are becoming a more industrial country again, better at manufacturing and exporting than we have ever been, we are still mostly a service economy. The cost of labor has definitively not gone up, and I will be worried when we see rampant wage inflation. We aren't. We may have the most slack vs. sales since 1929! We also don't include the cost of housing in these indices, and the same yammerers about inflation tend to be the same people who believe your house is about to drop 25% in value.