INFLATION ALERT: The bill may finally be coming due for “free” money.
Feeling the Pinch
By Bill Fleckenstein President Of Fleckenstein Capital
November 6 (King World News) – Inflation is one topic that I haven’t mentioned in a while, and we are now starting to see an ever-so-slight change in inflation expectations. I mention that because today, Sysco Corp., which distributes food and related products in the food service industry, was unsuccessful at beat-the-number and the stock price fell 10%. The company cited higher costs, particularly for warehousing and transportation, as one of the reasons its results came up short…
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I mention this because in last Thursday’s Wall Street Journal there was an article above the fold headlined, “From Coke to Clorox, Inflation Hits Home,” which began,
“U.S. companies are raising prices on everything from plane tickets to paint, passing on to customers higher costs for fuel, metal and food after years of low inflation…
“The higher prices have effectively ended a long period of low inflation that led the Federal Reserve to keep short-term interest rates near zero for years.”
When the Bill Comes Due for “Free” Money
So it appears that folks are finally beginning to become sensitized to rising prices, and once that happens it ought to be clear that prices have really been rising more than folks have realized for some time. Eventually it will be obvious to everyone that printing money leads to higher costs for goods and services after the money washes through the financial markets.
This means that future rounds of QE may not be treated the same way by markets as the last three. In other words, at some point the Fed may try to ride to the rescue with the same policy and it may backfire on them — that is, they will lose control of the bond market.
Not to get ahead of myself, but my goal is to point out that, after waiting patiently for signs of changes in inflation psychology, they may be here.
King World News note: A change in inflation psychology, including a surge in inflation, will be extremely bullish for gold and silver in the medium- to long-term. Remember, gold and silver are still extremely cheap on a relative basis as well as the shares of the high-quality companies that mine the metals.
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