[Rhodes22-list] Lies, Damn Liars, and Oil

[Brad Haslett]

Ed,

Here's a little item I stumbled across in my pre-bedtime reading ritual.
When I answered earlier in the day I was just 'winging' it based on a
hunch.  This article agrees with my "off the cuff" response.  We had a high
level meeting of all the big executives of our construction company at he
corporate aviation hangar  (my brother was driving from Gulfport to Mom and
Dad's).  Let's see, there was my brother Gary, myself, and well, all the
important people were there.  One of the items discussed was pricing.  All
the bigwigs decided that we have to charge more to cover the rising fuel
costs.  This ain't rocket science!  If I were the Captain of this economy
I'd tell people it's time to fasten your seatbelts.

Brad

-----------------------


US inflation reaches 14-month high

By Eoin Callan and Krishna Guha in Washington

Published: November 15 2007 15:55 | Last updated: November 15 2007 15:55

Bond yields tumbled as US annual inflation reached a 14-month high and signs
of trouble in the economy mounted.

The cost of living increased 3.5 per cent compared to a year ago after
consumer prices rose another 0.3 per cent last month, driven by higher fuel
costs, according to official figures.

The big jump in prices underlines the Federal Reserve's concern that
inflation could pick up pace and make it more risky to continue cutting
interest rates to keep the threat of a recession at bay.

US stocks fell and the yield on benchmark 10-year US Treasury bonds dropped
2 basis points to 4.23 per cent as investors priced in less likelihood of
rate cuts despite fresh signs of a weakening job market.

The Fed on Wednesday unveiled far-reaching plans to adopt many of the
features of an inflation-targeting regime, while stopping short of stating a
formal inflation target.

The US central bank said it would start publishing more frequent, more
detailed and longer-range economic forecasts, including its first forecasts
for "headline" inflation which includes volatile food and energy costs.

The fresh emphasis on headline inflation suggests last month's sharp
increase in overall consumer prices will be a concern for policymakers.

The rise is being driven mainly by higher energy prices, which climbed
1.4per cent last month as electricity costs spiked and the price of
fuel at the
pump breached $3 a gallon.

Economists said record oil prices were likely to continue pushing inflation
higher, predicting prices could rise this month by as much as 1 per cent to
an annual rate of 4.5 per cent.

There are also signs that the growing amounts American consumers are
spending on fuel is eating into their other household spending at a time
when the economy is thought to be weakening.

JC Penney, the department store operator, warned on Thursday of a
"dramatically" weaker sales, undermining investor confidence.

But core prices – which exclude food and energy costs – increased by a more
modest 0.2 per cent to an annual rate of 2.1 per cent, despite a jump in
medical care costs an increase in rents.

Core inflation is favoured by central bankers as a better guide of future
inflation trends and has been relatively stable at just above 2 per cent in
recent months.

This suggests an inflation trend that is slightly more elevated than the
Fed's more hawkish members are comfortable with. But it is not likely to be
sufficiently high for there to be a consensus among policymakers that
inflation presents a greater risk to the economy than the threat growth will
stall.

The Fed left open the possibility this week that it could adopt a formal
inflation target in the future, and provide investors with greater clarity
about its intentions. But it stopped short for now for fear of sparking a
fight with opponents of such a move in Congress, who suspect that a target
would make the Fed more concerned about inflation than growth.

Copyright <http://www.ft.com/servicestools/help/copyright> The Financial
Times Limited 2007

On Nov 15, 2007 12:50 PM, Brad Haslett <flybrad at gmail.com> wrote:

> Ed,
>
> "Brad, tell me how that not is a lie?  Tell us how to see thru the fog of
> misrepresentation."
>
> There is no 'misrepresentation' but let's not play games with ourselfs.
> Inflation is still low but it won't stay that way at $100/barrel oil.
> Here's a good benchmark; follow the sales of Dollar General stores.  Their
> CEO bought a farm down the road from my old one but that isn't important.
> Dollar General sells to the people who can't afford to shop at WalMart.
> When the cost of filling your pickup tank rises, the purchases at Dollar
> General goes down.  We're in a pickle here.  At $100 per barrel, the economy
> won't tank but it will adjust - painfully.  I'm anticipating a recession for
> two reasons (1) this business cycle has run its course (2) oil drives the
> market. If you are thinking long term the time to buy into the market is
> soon approaching.  Then again, if you are thinking long term, any day is the
> right time to buy into the market.  At any point in history there has always
> been an "ism" that was a threat.  Right now it is the radical Islamists.
> They have been proactive for the last three decades and they will either win
> or we will prevail over the next fifty years. Whether you think Iraq was a
> mistake or GWB is the biggest asshole on the planet won't matter in the long
> run.  There will be more battles and more US leaders without a clear vision.
> As long as we keep sucking down their oil we fund their side of the battle.
> Don't panic anyone, we've faced bigger hurdles and prevailed.  Where was I
> on this?  Oh yeah - inflation!  Coming to a theatre near you soon.
>
> Brad
>