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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (67011)	7/28/2006 3:43:28 PM
From: bond_bubble	Read Replies (1) \| Respond to of 110194

I dont know why this is a nebulous concept for you. Natural gas for Aug 2006 delivery is $7.042. For Aug 2007, it is $8.58. That is an inflation expectation of 21% in Natural gas for a year in July. Inflation expectations are future looking instead of backward looking. Similarly, for the Crude oil (73$ for Aug 2006 delivery and about 78$ for Aug 2007 delivery), the yearly inflation expectation is 7% and it is 9.5% for Soybean oil. You can do this for pork, corn etc. I dont know how to formulate an index (like assigning weightage to each commodity and choosing the closing time to pick a price for calculation) - But you get the gist of it. I hope atleast the Fed is having some composite index like this and they must be following it. Just because we havent seen this index chart does not mean the concept is stupid and not measurable. Ofcourse if Fed sees this index is rising 15%, and they see money supply to grow only at 9%, then there is no point in lowering the interest rates because it means, large% additional money is going into this index rather than into financial assets!! Any lowering of interest rate will only feed more money into the highly inflationary futures expectation index than into assets!! If assets (again Fed could have such an index for assets, like NasDaq, Dow, TNX etc) were increasing at a much higher rate than this inflation index, then Fed sees benefit in lowering interest rates. But not when it is reverse!! Even if Fed were to publish this chart, they will have their own hedonics. Hence the best data to look for is employment...