As the Fed continues to debate what form, if necessary, their next round of QE will take as evidenced by today’s WSJ article, the CRB raw industrials sub index (includes most everything except energy) closed at a record high last night dating back to its introduction in 1981. Commodity inflation is a global phenomenon and the Fed’s analysis of the US output gap and unemployment rate to gauge their inflation forecasts seems to be missing the big, worldly picture. Days before the release of the cost to Ireland of the Anglo Irish Bank rescue, S&P said they think it will be above their high estimate of 35b euros. In response, Irish 5 yr CDS is rising back to a record high above 500 bps and Portugal is just shy of a record at 443 bps. Yields in both countries are also sharply higher. Anglo Irish 5 yr CDS is up by 25 bps to 960 bps, a new record. Germany’s Oct consumer confidence was a bright spot, rising to the highest since May ’08.
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