CPI: Up Again

If you were waiting for a world-ender deflation to strike, forget it:  CPI is still going up so that’s one sign that deflation is being held at bay:

“On a seasonally adjusted basis, the Consumer Price Index for All Urban Consumers (CPI-U) rose 0.3 percent in October, the U.S. Bureau of Labor Statistics reported today. The index has decreased 0.2 percent over the last 12 months on a not seasonally adjusted basis.

The seasonally adjusted all items increase largely reflected advances in the indexes for energy and for new and used motor vehicles. The energy index rose for the fifth time in the last six months, advancing 1.5 percent as the indexes for gasoline, fuel oil, natural gas, and electricity all increased. The index for all items less food and energy rose 0.2 percent in October, the same increase as in September. The indexes for used cars and trucks and for new vehicles both rose sharply and together they accounted for over 90 percent of the increase in the index for all items less food and energy. The indexes for airline fares and medical care also increased, while the shelter index was unchanged and the indexes for apparel and recreation declined.

The food index also increased in October, rising 0.1 percent after declining in two of the previous three months. The index for food away from home increased slightly, while the food at home index was unchanged. Within the food at home group, the index for dairy and related products rose significantly, while the fruits and vegetables index declined for the fourth straight month.”

I spent a little time in the BLS data archives this morning (hence a somewhat shorter report) and threw together some numbers that are pretty interesting.

The revealing part of the following table is that the ONLY reason that the year-on-year CPI numbers look anything like restrained price inflation is that the CPI dropped by almost 3% over the November-December period last year.  If you turn around and look at the cumulative inflation since the last December when those declines were replaced with small advances, then one can build a case for a big jump in the numbers over the next few months as those minus signs get backed out.  (Yellow highlight is a dart throw at the increases I’d expect, gas prices going up, yada, yada, yada…)

Those projections are conservative as the Dickens. Of course, who heaven only knows what will happen with “corrections” — as usual, the devil is in the details.  It’s well know fact in this part of Texas that the devil’s a statistician when he’s not stoking fires elsewhere, sending out junkmail & spam, or doing his work inside the Beltway.

Pay Attention to Whitney

That the market has been on a fine tear since the March lows is beyond a doubt.  That I moved to the short outlook prematurely is also correct.  But, what’s the old saying?  “Even a broken watch is right two times a day…”  As we’re now seeing the averages in Robin Landry’s target range, we should be ready to plunge back down and test the March lows but the specific trigger is not yet in sight.

Setting off a bonfire of the equities is something I’ve always thought of sort of like fire starting.  When the market has just done a major correction and is bouncing, another major down move takes a fair bit of doing.  Like trying to start a fire on a rainy day in the woods when there is no tinder about.   But at the market reaches certain points, the fire task becomes easier.  Some days it’s like lighting a normal campfire.  But then there are days – like now – when it seems the least little spark could set off a major collapse of prices.

All this is shared since one of the few people I track closely outside my own circle of friends is Meredith Whitney who was on CNBC Monday saying she hasn’t been this bearish in a year.

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Another realist the herd seems not to hear is Nouriel Roubini who’s also been saying lately that Americans should be ready for more downside to come.

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As I’ve said before, about the only reason I can come up with for the market moving up is that the market may be changing pricing regimen from some (wonky) relationship with earnings to ‘fixed assets as inflation hedges’ which may have been Warren Buffett’s BN acquisition motivation and which is about the only thing that makes sense to me on pricing:  The replacement cost of plant, equipment and market share has to be rung up somehow in all this.

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The dollar dropped this morning to the area around .666 Euro – dangerous stuff that – and I’ll leave you to ponder whether I mean the .666 part or the Euro…up to you.

Percentage wise, silver has been lagging since it was once above $20 an ounce when gold was around $10,40 a good while back.  Still under $19 when I looked this morning, so short term silver will either want to play ‘catch up’ with gold, or gold will come down, or the gold/silver ration will become even more extreme.  Choose one – or several.

Led by Geniuses

“Obama: Too much debt could fuel double-dip recession.”  Gee, yah think?

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Obviously, California is still looking for the mythical free lunch as the once Golden State has becoming something else…with a $21-billion+ budget shortfall.

Taxing Marijuana Questions

Interesting decision out of Colorado that “Medical marijuana dispensaries subject to sales tax, retail license laws.“  Even leaving aside that the AG’s office would potentially benefit from the additional revenue into the state’s coffers as a conflict, there’s a more pertinent question here:  How are people popping Big Pharma backed pills treated:  Do they pay sales taxes on meds in Colorado?

The answer is the AG is trying to treat medical marijuana differently that other prescriptions which are tax exempt in Colorado.  Wonder if the pharmaceutical outfits made campaign contributions?

Speaking of Drugs

“Failed anti-depressant drug could be ‘women’s Viagra’ ” says a report out Tuesday.  No, it’s not ecstasy – that names already been taken…