GST, Thanks for the kind sentiments. I can stick around for a while. I have this software project that takes a lot of time. Meetings, tests, etc.... You know, the work thing.
But anyway, are you getting up at 3:30 AM for the CPI ?
We'll see in a few hours, of course. But I don't know how the CPI can be still valid when it doesn't show the inflation of the past several years in housing, fuel, cars, medical, restaurant meals, etc....
Regarding Fed tightening. If rates are increased, that strengthens the dollar, making imports cheaper, and reducing exports. By itself, cheaper imports (in dollar terms) reduces reported CPI inflation. The threat of cheaper imports keeps prices of substitutable domestic goods lower. Which is great for the Fed and validates its policy of raising rates.
But this policy breaks down in the areas that are not threatened by imports, such as housing, medical care, meals, and services of all kinds. ANd these are exactly the areas of greatest inflation, and strangely they are not reflected in the CPI, since much of their increase is excused as "quality improvement". And I think the Fed also understands that.
So if they keep raising rates, they'll kill exports and balloon the trade deficit. But will not have much effect on CPI inflation, except if they go up far enough to cause a recession and kill demand for housing, autos and other investments that are financed by loans.
So my guess is they'll raise a 1/4 point and pray that it works. Anyway, I invested my last dime today on the usual value stocks and broken techs.
-Sarmad |
