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Inflation Takes Hold Globally

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Economic problems persist - and not just in the US.

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It was one of those sessions that we haven't seen since before the credit crisis smacked resolve around and sent the bulls heading for the hills.

Equities and crude oil were up big and maybe for the same reasons. I've written about this so many times, how at one point a solid economy justified higher oil and stock prices. Yesterday we saw economic data that underscored that theory. A powerful durable goods report released yesterday morning sent equity futures sky-rocketing and the larger-than-expected draw downs on crude kept oil higher into the close. People and businesses made the kind of demand adjustments free marketers expected but those changes were probably at the margins and maybe we are at a point were any cuts will be more than subcutaneous.

With the latest GDP update in the mix today one has to look at the possibility things could get better sooner rather than later. Sure, I've brought up this premise before, most recently Monday morning ahead of what turned out to be a devastating session that saw the Dow lose more than 200 points. Still, it's there and you have to feel it even if you don't want to acknowledge it. (Of course it could be folly to pour one's faith into a bullish stance unless that person is nimble enough to take profits or has the patience to hang tough… maybe for a very long time.) Of course the overwhelming amount of investors and would-be investors are looking for a situation that could borrow from the title of one of Tom Clancy's biggest sellers, "A Clear and Present Bull Market".

It will be easy to jump on the bandwagon down the road but it's much more difficult when there are daily gyrations that make even the most ardent fundamentalist want to chuck their spreadsheets out the window. When the Xs and Os crowd begins to feel emotions I give more credence to my gut as well.

America's Time has Past (Maybe)

One of the weird things about the world is how awful other stock markets are faring and the economic threats they face. Inflation is a serious threat around the world and yet, according to most market watchers, only Ben Bernanke and the US Fed have gotten it wrong.

Incidentally, there are also a couple of folks within the Federal Reserve that feel that way, too. Yet when we look at stock markets around the world and individual threats of inflation, it makes the good ole U.S.A. look like a pretty compelling place to invest. If inflation is an economy-killer then a lot of countries are in a lot more trouble then America right now. Of course that doesn't mean we are out of the woods, or in fact, could move deeper into the woods before it gets better. But, wow, the rates of inflation around the globe are something akin to nuclear meltdowns.

Inflation is grappling the world, in the European Union it's running at 4.1%, or two times as much as the central bankers say is an acceptable level. According to a recent article in the New York Times, Argentina's inflation is running at 9.24%. Russia's inflation rate is running at 15% and Japan's 1.9% is an all-time high. There are different ideas on how to combat inflation so we will see how it all plays out with various Central Banks, but it's clear that interest rates are going to increase in most places, include America. According to Morgan Stanley, 50 out of 190 countries are enduring double-digit inflation.

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No positions in stocks mentioned.
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