Inflation is Rearing its Ugly Head Again

And finally, we leave you with a note from colleague Chris Mayer:

“Arresting fact of the day: Between March 10, 2000 and January 31, 2008, the average annual return from the S&P 500 is 1.52%, according the Financial Times. That’s nearly eight years of earning practically nothing on stocks. After factoring in inflation, the returns are negative.

“Inflation is rearing its ugly head again in a way we’ve not seen since the 1970s. The top story after the first two months of the year must be the commodity price surge. Commodities – things like wheat, gold, oil, metals – are off to their best start in more than half a century.

“The historic global benchmark for commodities, the CRB Spot Index, jumped 12% in February, the highest since July 1974. It’s up 15% for the first two months of the year, its best showing since 1956.

“Still, we have the Federal Reserve chairman saying: ‘I don’t think we’re anywhere near the situation that prevailed in the 1970s.’

“Is he smoking something, or what?

“The American economy is definitely slowing. Whether it is or isn’t actually contracting is a matter of debate. Just looking at how companies are doing, it’s not hard to see that North American operations are off. Overseas, though, it’s a different story. Companies with operations in China or India report that business is good.

“So it’s an interesting market for investors. Sometimes, it’s like picking over a minefield, because the price swings seem so great. But it’s that volatility that creates room for the stock picker to operate.”

Chris is looking into a quirky and unappreciated commodity that could pay off big for his Capital & Crisis readers. Stay tuned for that…and in the meantime, be sure and check out his recently released book, Invest Like a Dealmaker: Secrets from a Former Banking Insider.

Bill Bonner
Markets and Money

Bill Bonner

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and Money.
Bill Bonner

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2 Comments on "Inflation is Rearing its Ugly Head Again"

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bill, why arent macro psychologists or sociologists consulted at any time regarding world economics?. You must agree that what crashes economies best is peoples thinking. If there was a solid statement tomorrow that america was in a depression dont tell me the rest of the world would collectively “crap” in their britches. Im also talking about social thinking like “we must have that new SUV, the jones’ have one” etc. I call it caterpillar consumption where seeing its own juicy tail eats and eats more and more until it see’s the back of its own head. “the mob mentality is… Read more »

Inflation, what charter Boat? (qld humor)

Just checked on value of house we purchased in Feb 2005 for $245,000
current value after reno around $380,000.

Measured in gold that was 445 ounces in 2005 whereas today only 365 ounces. To break even, excluding the reno, would require a sale price of $445,00. Not going to happen folks.

As for the high price of oil, measured in gold it barley altered for the last 60 years. Now you know what real money is!

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