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Auto PPI numbers at the turn of the year are very difficult to get
right. The BLS has to allow for model year improvements, etc. and they
rarely get it right. Also, while the manufacturers may be increasing
invoice prices, they also have an unprecedented, it seems to me, amount
of rebates on 2000 models on at this early stage. So, prices to consumer
may not be going up much at all. What counts is if they can make the
vehicle price increases stick. And, so far, it does not seem that way.
Watch vehicle prices in the CPI for the real answer.
As for intermediate, that just does not always find its way into
finished good. Prices fell for a while there, and CPI did not drop, nor
did finished goods, so I suspect there are some margin issues there. The
bottom line is that there are some signs of POSSIBLE inflation, but
right now, the Fed is waiting for screaming signs before becoming super
aggressive.
That said, the Fed funds futures show a 68% risk of a rate hike on
Tuesday, and my own analysis says that they go too next week. It also
shows room for a large (continued) rally in bonds, possibly after a
knee jerk sell-off. And, of course, equities will go to new highs (real
indexes, not the NASDAQ only).
Steve Poser
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Steven W. Poser, President
Poser Global Market Strategies Inc.
url: http://www.poserglobal.com
email: swp@xxxxxxxxxxxxxxx
Tel: 201-995-0845
Fax: 201-995-0846
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