What’s LOL backwards? US Bond market gets it right …

I posted up recently “Inflation … LOL” in which I argued there was no inflation around in the US (actually it was more a dig at the hyperinflation headless chooks & their hysteria).

Well, the PPI figures are creeping up, with the latest release at 1.1% m/m (Dec. 2010), bringing y/y to 4%. Looking on the bright side, the increase is mainly in the non-core components (leaving the core vs. non-core debate for some other time). So, my ‘there is no inflation’ call … well, there isn’t much, but it appears there may well be some in the pipeline.

So, where I said, ‘Inflation … LOL’, I guess I should reverse that. Now, given that the reverse of LOL is, of course, LOL … I may have a palindromic challenge in reversing my call.

And what about those bond markets, hey? Maybe all the commentators arguing QE2 is a failure because bond prices have fallen since the announcement (and never mind the ‘buy the rumour sell the fact’ dynamics, the commentators don’t know how markets work anyway) might have to dole out a little bit of kudos to the sellers for recognising that the deflation panic was way overdone. Even worse, the Fed. haters might have to recognise that the Fed.’s goal of switching expectations from deflation to inflation seems to actually have worked (the haters recognising the Fed. doing what they said they wanted to do? … As if).

BTW, who am I to rail against panics? I don’t create the panics, and I do deplore them and their promoters, but at the end of the day the more there are out there the more the markets move and the more opportunities there are. Markets rock.

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