Posted by Davy on March 14th, 2008 in Market Commentary
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Inflation Flat in February

Supposedly, this gives the Fed room to cut. I guess all that talk about inflation being a lagging indicator goes out the window when sh*t hits the fan. Of course, the bad news at Bear Stearns isn’t a surprise — Msr. Merrano of Bear Stearns had said they would need lots of help way back in October, as I noted in a previous post.

Even if this inflation number is “massaged” (and I don’t trust it one bit but paranoia comes from my political background), it is a bad omen since it means that the current commodities run has not shown up in the inflation numbers and we can expect a jump in the upcoming months. The Fed’s credibility is fairly shot at this point as evidenced by the huge run in oil even with the bearish inventory numbers on Wednesday. I don’t pay much attention to inventory numbers but it’s interesting to see the change in market behavior when the market disregards inventory numbers as well.

I’m not opening new positions in commodities right now (unless it’s cheap but it’s hard to find a company that hasn’t run up in this space) but I expect this run may last longer than most expect, including myself. In any case, the long term case for commodities remains as strong as ever. A correction would be nothing to fear.