NFP today

After yesterday’s “I got nothin'” today I have got … well nothin’ much.

Awaiting the NFP along with what seems to be the rest of the market. So maybe just some random jottings from me today.

Wheat prices are beginning to tick into consciousness. Check out a wheat futures chart … the price is up something like 85% in a month … probably about time it stirred some interest hahahahahaha.

Which leads me back to deflation, again. Check out some of the other grains and ags, strong price rises too. 30yr bonds and 10yr notes have stalled (to be fair, maybe in response to waiting for the NFP today). The blogs are filled with deflation comments. Is deflation getting a little overhyped, maybe even drive by those waiting to offload their bonds and notes bought when the panic was directed at higher rates once the Fed finished QE buying? Tin hat time for me? Maybe.

But here is something else that muddies the water (mud is good). I remember reading a blog post a while back that compared inflation in the US for internationally-traded goods (tradeables) against inflation for non-tradeable goods. Non -tradeable good inflation was going up, tradeable goods inflation was going nowhere (I simplify, but that was the gist).

So, is it possible to split ‘deflation’ out like this? Deflation is a general price fall. But some prices seem to be falling or at least not going up (tradeables) while others (non-tradeables) are going up (but maybe the pace of increase is falling).

So, if some of the ag commodities maintain this price rise, or even go up more (the rational side of me says that after such a quick surge in price in wheat for example then further price rises are unlikely … but it also recognises that prices can, and do, do funny things, funny weird not funny haha … and so further rises are not necessarily unlikely). Where was I? OK – so if some of these prices keep rising, and these are tradeables, then you will have the situation where nontradeable inflation is rising and tradeable inflation is rising … and so inflation will be rising and where is the deflation argument then? Hmmm?

BTW, I can see the logic of the deflation argument, I really can, but I could also see the logic of the dollar goes down forever crowd back in really late 2009 (I was almost one of them, not completely, as I try to avoid the apocalyptic tendencies of the enthusiastic). The markets, however, sometimes do not bother too much with the enthusiastic logic of the hyper. I believe it is sometimes referred to as the ‘consensus trade, which is rarely a good trade).

So, I continue my skepticism of continuing deflation, I think it is being hyped to allow offloading of long bonds and notes into a willing market. Doesn’t mean there wont be a jump in price today after the NFP (if the numbers are poor). I think watching the reaction to the NFP could be rich in meaning.

Oh, nearly forgot. A brief article on The Big Picture blog from Peter Boockvar … he shares my puzzlement about deflation, coming from a different angle, sort of a “WTF”? angle which i really like, eg:
“oil goes from $50 to $85 in one year and the next year falls 1% to $84.15 and we’re told there is deflation “

hehehehehe – I like it. Read the article, here is the link:
http://www.ritholtz.com/blog/2010/08/food-for-thoughts-on-prices/

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