Monday, August 14, 2006

Inflation problem? Not any more

According to Technorati, references to "Inflation" are on the rise.

But is it really the problem it once was? Inflation reared its head in gold in late 2002:

and in oil prices during early 2004:

But inflation doesn't appear to be the bugbear it once was because:

*Commodities look to have peaked for the foreseeable future.

Gold loss of near term support and is well off its highs

Watch for break of support in copper, an important industrial commodity (it hasn't happened yet)

Short term supply concerns in oil have produced a scrappy chart

*Six months of an inverted yield curve has substantially raised the prospect of a recession in the coming year (= reduced demand).

*Improving dollar with plenty of room for upside. A rising dollar is disinflationary

This chart first featured here on May 2nd and is behaving quite nicely:

If inflation is not the problem the fear mongerers would have you believe then what should one be investing in?

Stick to sectors which do well as interest rates fall/inflation risks decline:

[1] Utilities
[2] Consumer Staples
[3] Financials

New (and existing readers) should subscribe to my feed to get the latest updates from this blog. I am starting to find the most trafficked blogs promoting the same opinion as each links to one another in a positive feedback loop of information (the evolution of blogs into its own form of mainstream media), making it increasingly harder to discover new opinions without getting 'picked up' by the most popular blogs.

A case of so many blogs, but not enough time to check them out :(