ajtj99's Market Pulse

[Lone Ranger]

aj,
I really don't see runaway inflation either. Inelastic consumption related to energy prices has definitely seen inflation ie gasoline. This imo has the greatest impact on discretionary income which gives people less money left over to buy things. This is actually deflationary for goods that are elastic ie discretionary consumption items like cheaper cars and electronics equipment. The difference with now and the inflation of the carter years when oil prices surged is at that time the rise in the price of oil was able to be passed through to consumers which resulted in significant inflation. That is NOT the case now, the pass through effect is much less. I'm not sure why but I think it is because worker's competitive status with management has declined tremendously due to less union influence and less high paying competitive jobs. But for whatever reason the pass through cost of higher energy/commodity prices is not happening.

The manufactures are just "eating it" as they say for once again workers without wage increases can't afford higher prices for elastic goods. If consumers could afford higher prices we would be seeing it for it is not the nature of our system of capitalism to sell products for lower prices if the demand was there and if consumers would be able to afford it.

On the subject of housing that has been incredibly inflationary and really pisses me off. For someone who has children the future possiblity of them earning enough to be able to afford a house in California is lessened. Even kids with good education. This is a travesty imo for i consider home ownership to be a pillar of the middle class and a stable united states.

In any case unless one sees wages increasing at a rate to drive inflation in elastic goods I think inflation fears are overblown.

fwiw, if we get get back to prior highs in may I'll begin shorting the sp500, now basically in cash.