Surrounded by Inflation

Yesterday, I told you about The Fed (I prefer to call them the CABAL), now owning more Treasuries than China… there was more in the FT that another reader sent me (Thanks Peter!)… And then Peter, makes has his own view…. When taken together, the message I get is that America's credit quality is slipping to the point that foreigners are losing interest and the Fed has become the purchaser of last resort and is, in effect, propping up a market that would otherwise look a lot sicker. When I have to buy your stuff, and you have to buy my stuff, because "arm's reach" third parties are no longer interested, then one has to worry.”

Couldn’t have said it better myself! Another reader asked me, if I thought the CABAL could decide to buy back all Treasuries… and just print the money to do so… YIKES! That can’t happen! Let’s hope the CABAL knows that, and doesn’t try it!

Then there was this… sent to me by a reader from Forbes titled: How Inflation Is Turning Breakfast Into A Luxury Item… Yesterday, one of our young Jedi analysts at Hedgeye, Kevin Kaiser, sent me a highlight from The Grocer (an industry trade rag) that inflating food prices are making ordinary breakfast items like orange and apple juice a "luxury."

Here are the 6-month price percentage moves in some of the things people need to live with:

• Cotton = +125.7%
• Sugar = +82.6%
• Corn = +59.0%
• Coffee = +41.4%
• Rice = +40.5%
• Oats = +36.6%
• Copper = +36.1%
• Lumber = +33.8%
• Oil = +25.1%

Chuck again… well… I have to wonder if Big Ben is ready to acknowledge inflation is already all around us?

To recap… The profit taking in the currencies that we saw yesterday morning ended, but the rebound in most currencies hasn’t happened… yet… The Pound Sterling is one of the rallying currencies this morning. The markets are pricing in a rate hike for the pound. The BOE meets next week, will we see a rate hike? The ECB meets today, ECB President, Trichet, is between a rock and a… rock… Commodity indexes are above pre-financial crisis levels, are they telling us something? Of course they are! That inflation is all around us!

That’s it for today… Well… this has been one long week! And we still have today and tomorrow to go! Is it just me, or does it seem like the hype for the Super Bowl this year is toned down? Or maybe I think that because I’m not watching ESPN all night long! HA! Actually, I’ve been spending more and more time at night, on my computer, researching, and reading… I had a big chuckle from Conan O’Brien, who joked about the Egyptian Gov’t turning off the internet… He said, “if you want to keep people off the street, turn the internet back on”… HA! I record Conan each night, and then watch the previous night’s show when I get home… He cracks me up! One of my all-time fave Led Zeppelin songs is playing as I get ready to sign off… The Rain Song, from Houses of the Holy… a great song to put on, and zone out! And on that thought, I’ll get out of your hair today… Now go out and make it a Tub Thumpin’ Thursday!

Chuck Butler
President
EverBank World Markets