Tuesday, May 13, 2008

Inflation Has Peaked!

American Idol judge Paula Abdul raises her hands to the audience and asks, "Don't my hands look like bunny rabbits?"  But we love Paula, and she's part of the family!

SF Fed President Janet Yellen says that inflation has peaked"My forecast is the most likely outcome over the next couple of years is that total and core inflation will moderate from present levels," Yellen said in a speech to a business group in Vancouver.

Uh, core rate is around 2.0%.  Is this peaking?  My definition of peaking may be different that Janet's.  2% just doesn't seem like a very big number.  Food and energy have been more volatile, but the number (including everything) is 3.2%.  Again, doesn't seem like a big enough number to get labelled "peaking."

I get the feeling the Fed is always looking at the rear-view mirror and reacting to data that has happened in the past.  As an investor, I'm looking to the future and trying to anticipate what's coming next. 

Interest rates are down and I don't think they'll be coming down more.  With rates down, I think we can anticipate a faster growing economy in the future.  Along with a growing economy, we could anticipate (down the road) a tightening job market, wage increases, and the like.

Yes.  That's right!  Growth!  I wouldn't be surprised if by later 2009 or into 2010 we see the Fed raising interest rates.  Because by then, they'll be looking at the rear-view mirror at what has happened in 2nd-half 2008 through 2009.

The stock market anticipates the future, so I continue to believe that the trend is up.

Just my opinion, of course.

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