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Minyan Mailbag-PPI


Rock and a hard place!


Note: Our goal in Minyanville is to remove intimidation from the financial markets and encourage an interactive dialogue among the Minyanship. We share this next discussion with that very intent.

Dear Prof. Succo,

I am confused abou how the market is acting after the PPI release today.

The PPI indicated that inflation is lower than expected and dollar is lower, gold is higher, bonds are higher. Why should the dollar be lower ? Is it not better to buy the currency of nation where inflation is low? Why should gold be higher? If inflation is going to be
lower than expected then gold should be lower as a hedge against inflation. I guess here gold is mirroring the dollar but I wanted to mention it anyway.

Can you help clarify these issues for me?

Thank you,

Minyan KB

Minyan KB,

The PPI is showing more that the economy is just not coming around,
prices dropping. This is bad for companies.

It leaves the Fed in the position to remain easy (at least until bonds
won't take it anymore, as I have written to watch out for).

With the Fed easy it leaves gold attractive. The dollar is down as well
as foreigners become less likely to directly invest if our economy can't
recover; lower rates leaves them less compensated for that risk.



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