I have a new column up at TheStreet.com, titled The Street Gets Inflation Threat Backwards.
Here’s an excerpt:
"In my opinion, the majority of economists, strategists and financial media —
the full "punditocracy" — are exactly wrong on inflation. Indeed, I am
hard pressed to think of another item of such grave economic consequence that
most of the Street has so backwards.
The problem is, they are looking for inflation in all the wrong places. The
inflation (ex-inflation) crowd has managed to ignore robust price
increases across a variety of goods and services. Yet somehow they seem to have
found inflation in the one part of the economy where there is almost none:
One only had to see the market reaction to last week’s data on non-farm
payrolls, hourly wages and unemployment rate to realize how much the Street has
gotten its panties in a bunch.
The Federal Reserve is acutely sensitive to wage pressure — much more
so than to the commodity price increases we have seen over the past five years.
Maybe that’s why the FOMC quietly announced
that the upcoming meeting, previously planned for March 28, has been expanded to
two days. It will now begin on March 27. (I’m sure the extra day isn’t for more
time to welcome aboard Ben Bernanke.)
If the Fed falls prey to the erroneous interpretation of wages and jobs, we
could see a tightening cycle that goes far beyond what many on Wall Street
currently expect. And that would bode extremely poorly for market prospects,
both this year and next."
Regular blog readers will, of course, recognize many of the arguments in the column.
The Street Gets Inflation Threat Backwards
RealMoney.com, 2/9/2006 4:02 PM EST