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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: mishedlo who wrote (17548)12/6/2004 5:51:05 AM
From: zonder  Read Replies (3) of 116555
 
Mish - Check your e-mail for "Inflation Concerns Growing", a report by Bear Stearns out on Friday.

Summary

- Gold, our favorite indicator of future inflation, has established a
beachhead above $450 per ounce despite near universal expectations
that the Fed will raise rates again on December 14th. We think core
CPI inflation will rise a further percentage point, to 3%, by the end of
2005.

- According to Greg Ip of The Wall Street Journal, it appears that a
growing number of Fed officials feel the same way, making it unlikely
that the Fed will pause anytime soon.

- Our view on inflation for 2005 leads us to believe that the funds rate
will end next year above our current forecast target of 4% and we are
raising our 2005 year-end forecast for fed funds to 4½%.

- We think the economy continues to grow at a robust pace in the fourth
quarter, despite the modest November payroll gain. Private surveys of
economic activity were fairly robust in November and October’s
economic data were generally strong.

- One risk to the growth outlook—the price of oil—has diminished
significantly as oil prices have pulled back to their lowest levels since
late August.

- We think the bond market rally following today’s jobs report will
prove to be short-lived. In 2005, we think the attention of bond
investors will shift to the inflation outlook and we still expect a tenyear
yield of 5¾% by the end of next year.
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