"Forgetting crude oil’s 51% rise from its January lows, and the concurrent 63% rise in gasoline, we advise you to turn to the Wall Street Journal’s commodity section and look at the “cash markets,” particularly things you use on a daily basis. What you find will not be shocking to anyone who visits a supermarket. Indeed, what is there, hiding in plain view, are the following price increases on a year-over-year basis: corn (+38.5%), soybeans (+45.5%), wheat (+74.4%), milk (+121.8%), eggs (+167%), and the list goes on. As stated in last week’s letter, and reprised in this week’s Barron’s magazine, “Ladies and gentlemen, when you get these sorts of price increases it is merely a matter of time until they bleed-over into prices at the supermarket. We think you are going to see this increasingly reflected in 4Q07 and continuing for the foreseeable future". . . . "inflation is on the rise, a sense confirmed by another new all-time high in the Goldman Sachs Commodity Index last week. We also think that barring a severe economic slowdown, higher inflation implies higher interest rates."
The GDP figure that will be released on Friday won't say the economy is slowing down. One of these days the FED will wake up (Volker 1979), but until then enjoy the volatile ride.
