Trindy, re. QQQ, i have not yet encountered problems shorting it, and yes, it can be shorted on a down tick. it's interesting that Datek doesn't allow you to short it...i wonder what that means.
re: inflation, i disagree on that point. while i acknowledge that globally speaking deflation seems to have the upper hand and capacity utilization suggests that there is still plenty of excess capacity, if you follow the classical interpretation of inflation as the increase in money supply, inflation is here for sure. it has been channeled into asset prices instead of the prices of goods and services, where it may begin to show up soon.
note that the PPI showed strong signs of incipient cost push inflation in it's raw materials and intermediate goods components. this, coupled with tight labor markets is starting to pressure margins. once productivity growth decelerates (the latest data suggest this is already happening, plus there is a debate if there are actually any measurable productivity gains at all outside the computer industry)and unions begin to press for higher wages (also happening already), corporations will be forced to raise prices.
economy-wide there is already a contraction in margins and Q2 profits across the economy (publicly AND privately held corporations) have actually declined by 5% because of this. the weaker dollar will be a great excuse to actually push through higher prices. so while inflation may still be a no-show in finished goods, the pressures in the pipeline are unmistakable.
i DO agree that the Fed will raise rates further - if not at the next FOMC meeting then probably at the meeting after that. the bond market is trying to send a message, and the Fed will likely heed it.
this won't do the mania much good, or so one would think. however, i repeat what i have often stated here: once a certain degree of 'craziness' has taken hold, and previously unthinkable valuation extremes have been left in the dust, there is no way to gauge how much more extreme things can get. usually they surpass even the most optimistic projections...
in view of recent publications entitled "Dow 36,000" and "Dow 100,000" i retract the last statement...<g>
regards,
hb |
