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OUTLOOK FOR WEEK JUNE 25TH
by Stephen Tetreault
June 25, 2007

The tonality at the beginning of this week will be critical for the development of market's overall tonality/sentiment�as further selling if accompanied by volume could reverse the recent significantly this bullish-trend, and a top-is most-likely in place as after Friday�s huge late day selling (possible key-reversals) looks ominous, and now the $64,000 question is will the down trend resume; or was it the result of some rebalancing, Russell-3000/2000/1000 and the BCS contagion wherein a hedge fund went belly up (extreme weakness in the transports after a FDX mini-warning and soaring crude has taken its negative toll). This past week was a heck of a week for the bulls as news peppered the airwaves from the subprime sector... precipitated by the blowup of two Bear Stearns mortgage backed securities hedge funds...and this news spooked the markets and I believe that this is just the tip of the iceberg as the longer-term damage is far from over (but we could get a slight reprieve this week). With the market on slippery footing Congress through some gasoline on the fire (tax related issues) that most didn't envision. Add in the Russell rebalancing and Blackstone IPO and volatility was the main winner this week. Remember folks that this past week was light on economics releases but this coming week is a event filled proverbial minefield of significant-possible market moving reports not to mention a FOMC meeting (see table below). As of the writing of this report I do not expect the Fed to change rates but there was a slight chance (before the BSC contagion) that the Fed could change their overall bias and put language in the bias statement signaling a coming rate hike at the August meeting (not very-market friendly) But after the selling we have recently seen I doubt that that happens now. There will always be cautionary tone around a FOMC meeting and this week will be no different, however after the last 4 fed-head meetings the markets have soared...a trend worth watching.

We need to watch bonds very-carefully folks as we could be seeing a mega Tsunami in the making which could send a mega Bond-shockwave through our markets following the recent bond sell-off and corresponding rise in yields. As any sell-off in the bond-markets this week could have serious implications for the whole economy, as rising yields will act like a fast-acting cancer for the housing market and all those trapped in ARM�s they will be resetting very soon, and over the next 3-4 years. And this type of development would clearly become leveraged into a loud cry that; **the worst is yet to be seen for housing markets. ** The recent rise in the ten-year-note during the past month is resulting in a huge strain on many who will see their Adjustable Rate Mortgages reset at levels that they can-not afford�also those homebuilders looking to reverse the current malaise will be hurt as a crackdown in subprime lending standards limits the overall pool of qualified individuals coming into the markets. We have through the data being supplied that the national median home price is poised for its first annual decline since the Great Depression, and the supply of unsold homes is at a record 4.2 million units according to the National Association of Realtors.

We could be on the verge of a bond-meltdown that could quickly turn into a very bloodily scenario. And unless the fairy god-mother of stock market/bond-market can’twave her magical wand quick enough we could see a global meltdown as well and this situation could become a whirlpool that sucks all markets down into the proverbial cesspool and this could result in a significant bond-market bear-market lasting 1 � to 3 years�.and it will become a cancerous event that will suck down a whole host of different investment vehicles, not to mention the housing-market, job creation and consumer confidence which will of course impact their discretionary spending ability and this could quickly bleed into the stock market and corporate profit out look, and the slow-bleed could turn into a major arterial hemorrhage.

The FOMC meets this week, and their bias statement will be critical folks as they will surely need to step in and cut rates if the housing sector pushes the economy into recession�and they may be able to orchestrate this maneuver if they can get the Labor Department to manipulate their numbers showing a huge surge in unemployment�I have seen this type of direct economic data manipulation before. With the Fed meeting this week traders will be also be quite cautious as all indications suggest the FOMC is getting nervous here, and that they may not be able to manage the economy/stock-market as once thought. The markets are stuck in the proverbial mud despite the recent relief-rally and subsequent sell-off that started late Thursday last week and bleed over into Friday�s market the bulls are stuck in neutral on a slippery sloped hill and the can't get any traction as we have continue to see money flowing out of the major-indexes

We have seen throughout this bull-market-rally that we continue to see the giddy-bulls buy-buy-buy every dip and at ever junction; and if this was a resumption of another mega-leg-upward of a secular bullish trend, I would certainly expect to see consumer/investor sentiment readings off the charts, but from the recent data we are not seeing that at all. It appears that the hyping talking-butt-heads have brain washed Joe/Jane Doe into believing that uncertain global and domestic geopolitical and economic conditions do not matter, and that the historically overvalued equity prices do not matter (take out energy, brokerage/bank earnings along with the few commodity players in the SPX and the P/E jumps significantly to 32-35.

Earning or should I say lackluster real organic earning do not matter as earning will eventually catch up to prices�seems I heard that in 1999-2000, when they have convinced folks to ignore the looming credit bubble as they have stated time and time again. The new fuzzy-math of wall-street due to the Fed-heads cheap & easy money policies, the carry trade and huge global liquidity�is the stock buy-back announcement as we have seen U.S. companies have bought back nearly $1 trillion in stock over the past 2�, the largest buyback boom in history. Now is this a good thing or a smoke-screen to mask real growth issues? (I will write abut this on Wednesday.) Meanwhile the media continues to assert that the current administration has our economy completely under-control, they have convinced the same folks that they need to Spend-Spend-Spend. I must say that they have done a remarkable job of selling this so-called HUGe bullish scenario. We shall soon see if the numerous bearish ascending wedges and the deeply overbought conditions on the longer-term charts put up a wall and STOP "this irrational madness" in the days/weeks ahead. If you listen to any of the financial media this weekend you probably heard them declare the a new bull market is born again and the Bear market is officially Dead�.I totally disagree as it once again appears to me as the markets are setting up for an other exhaustion topping event.

Despite the continued pinching of the consumer, as nationwide gas prices soar this week is full of economic data that could easily be manipulated to the bullish-front to help keep a floor under the markets in this mine-field of mega-contagions; and due to manipulation from the PPT (who steps in after every 2-3% sell-off) we could easily see tradable bounce in the very near future, (most-likely it could start this week after the FED-meeting **That could last until the end-of-the month/quarter** �and I believe the impetus for the bounce will be the reversal in the bond-market (near-term) and a huge wave of buyers , that will prompt the last buying exhaustion move most likely in the high-beta heavily shorted stocks. Fund manager could buy this so-called dip and especially focus on the winners like MA, CROX, GOOG CAT, DE, OIH/XLE SLB and the oil-service sector, INTC/MU and the Semi/Chip-patch (the Chinese ADR's) etc, and look like heroes when they mail their quarterly statements out to existing fund holders along with their attempt to entice new-monies into the system. There is little risk in buying winners in a down market and those losers from last week will start to look even more attractive for new $$$ infusions. When the markets were near their respective highs early last week it would have been difficulty to see them investing new money one week ahead of the quarter; now that they have got a dip they once again have a chance to buy the dip one more time to paint the tape and fluff up their books.

We are as I have said several times approaching the end of the quarter and I believe mutual funds and hedge funds that have been embroiled in chasing commodities, stocks and the ETF's higher will be securing their profits and pushing the indexes higher (My guess is that they will play the mega-rotational tape-paining game-flowing out of one sector into another) and liquid stocks and ETF's; such as the SOX, and large-cap technology players will see some increased volatility in anticipation of the window-dressing period associated with fluffing up their 2nd quarter statements. Remember the greed principle folks, money-manager�s along with hedge-fund manager bonuses are paid quarterly, and the propensity for them to prop-up the markets with other people's money to secure their own bonuses has always been significant. Earnings are only two weeks away and earnings warnings have been almost nonexistent (a strange occurrence folks). The markets are expecting to see SPX earnings growth in excess of 5-6% and the whisper numbers are over 10%; hence not a very-bearish development just yet The subprime problem is likely to keep the Fed on hold for the rest of the year even though inflation is rapidly accelerating and in need of a rate hike.

I have written about before about watching for the increase of distinct intraday manipulation�.off-setting buy/sell programs (with corresponding volume spikes when (program traders) attempt to squeeze money out of the markets these manipulative players (or should I say leaches) can easily cause the market (due to light volume and low volatility) to move one way while they position themselves in a counter-trend move scenario **(example, selling off semi-chip-stocks while subsequently buying cheap calls/selling puts after the initial move�then out of no-where the upgrades begin, along with manipulated Gap-Runs which squeeze the shorts forcing them to cover, then the sell the calls and buy back their puts�I have seen this so many times during the past several months where we see out of the clear blue a buying rocket spike that is immediately reversed later in the day�.created by several �black-box� trading systems to induce buying and a short squeeze�it’s the only way that they can spark liquidity in this dismal market environment that is severely lacking in real underlying liquidity�this is part of their manipulative distribution process as they spark a bullish move so that they can then sell their positions into the induced ramp�.without causing a significant purge. The holds true folks when we have been seeing huge disconnected selling sprees�were buying by funds hoping to paint their books into the end-of-the quarter near the intraday bottoms once to find a manipulated rally starts after the next day�s open�.we usually experience a sudden selling event where the underlying bids are quickly pulled creating a manipulated vacuum effect. Hence I'm taking a wait and see approach to Friday�s late day selling and I'm not ready yet to say that this market is toast quite yet�as I do not want to be trapped as much of the recent rally has been built of bears to quick to act and then they get burned and are forced to cover�I have seen so much manipulation due to pairs trading in energy and stocks (buy energy futures short the markets�or sell-energy futures and buy the markets) lately. So folks though my positions were bolstered by yesterday's selling�and I am expecting a significant correction as I have written many times I must caution all new bears that one selling day does not may a trend-reversal so careful and enter shorts cautiously, and stand ready to take profits as presented, as we could see some further end-of-quarter manipulation.

The contagions to the bullish tone as I see it; long-term are multifaceted; the recent rising bond yields are also created some significant headwinds for equities to overcome. I still see inflationary pressures building (we will get another round of data to support my conclusions or not next week) and so far according to the pro forma earnings reports that have been released we haven't seen any real significant results. We still have a slew of economic data/news releases to be released on Friday and especially next week. We will soon see which market emotion �Greed� or �Fear� will win out. Please remember there are usually 5-bulls (participants) to every bearish investor, so the propensity for bullishness is almost always stronger! However the reason that the market drops 4-times faster then it goes up is that liquidity and lack of buyers due to fear, which can feed on itself very quickly like a plague or a quick acting cancer. So prepare yourselves for a rollercoaster ride during the next several days as the battle ensures. Trade with caution and please protect your profits!

M&A or LBO reports on Monday could take center stage along with the existing home-housing data.... I still feel the tape action of past several days suggests there was no bullish conviction behind the wild spikes, as the volume suggests selling-into-strength. For this week we have a nearly perfect setup for the bears to short and give the bulls one more chance to trample them a bear-trap....or the bull trade scenario a Gap/Crap on Monday and all dips are sold into. There more significant economics to cloud the landscape and the Fed meeting on the 27th/28th will start becoming a major focus. I will continue to trade whatever the market gives us and I do expect some triple digit whipsawing days on the Dow and possible 1% surges/drops this week and as such volatility could return in force. A successful reversal at this level could lead to another dramatic drop but if the bears become entrenched, then again any concentrated bull-ramp and/or a mega short-squeeze could produce a false breakout rally over the prior highs as we embark into the end of the second quarter...the question that remains to be answered is whether the greedy-bulls will try to press this rally further or start to book profits as the Dow is up 7.2%, the Nasdog 7.2%, the SPX up 5.9% and the Russell-2000 up 6.0% on the year...after last weeks selling and will greed-induced fund-managers press the markets higher and risk these profits or bookem and start to roll into bonds??? I would not hesitate to buy the breakout or short any failure. Friday's close was a nearly perfect setup for a big move in either direction...so instead of flipping a coin lets wait for the set-up...as we head into the end-of the second quarter.

Even as the widely-watched us indices advance hesitatingly and skittishly into uncharted price territory, this past week we could see that the market participants were becoming quite skittish as the systemic stresses affecting global financial markets continue�.albeit they are being widely ignored; especially by the hyping talking butt-heads that proliferate the bubblevision airwaves. Since we have entered a new-world-paradigm of investing global investors need to have a bias toward reviewing and interpreting global economic data and maintain their insight of global events. As even the most conservative trader/investors need to hear this message loud and clear, "Ignore the rest of the world and their underlying contagions and you can be scorched by a thunderous thunderbolt." I have been repeating this for more than 6-months now and I sound a little like chicken-little at times�.our global markets are a big place and growing very fast. and more and more are facing the kind of investment decisions we face every day; the looming question is which way will the turn. We can rest assured that many individuals in every country and culture with high intelligence, good education and a mega strong desire to achieve are out there every day competing with us in this so called global-market-place/economy. Hence it’s this globalization adhesive that has helped fund our ballooning current account; which I believe is starting to become due; as these intelligent foreigners want/desire and they are starting to demand higher returns and as such this contagion to our economy could be unraveling at the edges. If this is the case, then the market could become embroiled in a painful scenario of a weaker USD, a weaker bond market, higher inflation and a FED unable to step in an ease. I'm not going to get up on my so called soapbox as you are probably glad to hear and rant and rave about "How Deficits Do Matter, How valuations are extremely stretched in reality, How over-extended this bull-rally is etc."... I think you've all heard these tunes before from me...hell you can even-down load them to your iPod (just kidding). I just think that sooner or later, traders and investors are going to have moment when they have to confront reality�and it will be bittersweet if not downright sour.

Folks, I hate to sound like a proverbial chicken little; but as I have written about the potential for a mega-major correction for many weeks now and since we are only a few-days/week from the start of the heart of pre-announce earnings season; what I call the �confessional-period� I have been issuing warning for several weeks now, that I believe the analysts have it dead wrong. As I have stated before, and now the empirical data is confirming, I believe many firms will be hard pressed (despite having their accountants working overtime using all the fuzzy math known to them�just to meet their restated, and downward leveraged objectives never-mind beat-them, and for many the tasks will just be overwhelming and impossible) I have mentioned many times that I believe corporations have all but exhausted their cost cutting (outside of mergers and acquisitions, where so-called �synergies� a fancy name for cost-cuts which usually come in the form of significant lay-offs), organic growth is for the most part is almost non-existent, hence the current wave of acquisitions and mergers to take out additional so-called costs�the guidance that they have been giving during this past earning season has been lackluster at best, outside of the energy, commodity and financial patch the earnings guidance has been mundane, and everyday that the dollar slips, and crude rises, and bonds continue to rise will impact adversely the bottom lines of many companies. Lets face it folks year/year and quarter/quarter, comparisons will be extremely difficult to meet/beat; coupled with the current flow of economic data which is also suggesting that corporations are having a hard time passing increased costs associated with business expenses (especially commodity costs) not to mention that I believe that we saw a significant pull-forward in demand/inventories that were created by a weak dollar and various incentive programs. Hence I believe we will soon start to see a horde of companies lining up at the confessionals and the results will not be pretty for their underlying stocks (many of which are bloated at these nose bleed levels despite the recent retracement) and the indexes/sectors wherein they reside. If this was not enough to be concerned about�please do not forget about the following contagions as well.

This Weeks Stock market malaise

The massive contagion as Bear Stearns helped to tank & spook the markets on Thursday-Friday�.as they held out hope this past week of rescuing their two hedge funds which were bleeding significantly from collapsing into the abyss and cesspool worries are certainly increasing over the possibility of more forced liquidations and this significant negative was surely reverberating with a �hit-the-sell-button� on Friday. At first blush the risks seem contained, but the fallout was suspect and as such many ran for cover�.most are dreadfully fearfully that the negative fall-out could be felt everywhere from leveraged buyouts, investment bank earnings and sales of collateralized debt obligations, as these are the very pieces of speculative pieces of paper that we have seen propelling those markets (housing) and related debt to record highs in the past several years.

Merrill Lynch sold only $100 million of the $850 million of highly rated collateral assets seized from the Bear Stearns funds, according to a person familiar with the auction�.the other banks GS, JPM, and BAC have closed out their positions with the funds according to the reports.

High-grade CDOs are usually very-illiquid as they trade infrequently because of their perceived safety relative to lower-rated securities that provide higher yield for investors; and as such it would be very difficult to sell and the prices could be $0.10 on the greenback�.this is a huge issue as the mega contagion is that a generalized markdown of CDO positions could be inevitable lead toward a tsunami wave of selling. This is an inherent issues folks as marking down the assets to where the market will bid for then could be a �tell� no one wants to unveil. CDOs group debt based on credit quality which is utilized to help diversify risk, is accomplished by placing the strongest debt at the top of the capital structure; as in theory, the repackaged debt helps absorb weaker performance from riskier debt such as subprime loans which take up a smaller space in the package. It seems like credit risk premiums will be now re-priced to reflect greater risk and volatility

Who are the bag holders in this potential mega �tsunami� CDO contagion!! One thing that has yet to publicly acknowledged by those on bubblevision or those who deal in what I call mega quantities of venomous and potentially crippling derivatives crap which has been stealthily filtered into the financial system during the past 6+/- years is the question of who really owns this often poorly hedged crap.

One likely bag-holder, of course, is the mom& pop small investor, the historic lemming of choice for getting stuck with the highly hyped and often worthless crap that Wall Street pawns off on the proverbial sheep, which they of course produce in massive quantities.

Worldwide sales of CDOs -- which are packages of securities backed by bonds, mortgages and other loans -- have soared since 2003, reaching $559 billion last year, a fivefold increase in three years. And many pension funds have bought these CDO portions in efforts to boost returns to provide benefits to their constituents. Because CDO contents are usually very secretive, fund managers can't easily track the value of the components that go into these bundles; so I have to ask why the hell did they buy-into-such an blind-investment. Common sense states that you must be able to monitor the collateral in your investment and make sure you're comfortable with the premise behind it. Worse yet most CDO managers can change the contents of a CDO after it's sold�this should wave a mega yellow/red flag if nothing else folks.

The ability of these Wall Street hypsters to slap-lipstick on the proverbial pig and turn it into a beauty queen amazes me. They sucked Fund managers who were desperate for higher yield, so Wall Street sold them a story/idea that promised the moon and delivered a piece-of-crap. From what I have read �Public Pension Funds� have bought more than $750-800 million in CDO�s in the past five years�now this could be very dangerous.

The murky nature of the CDO market (like the back-room of a sleazy drug-room) presents a huge dangerous and so often unknown contagion for the numb nut investor who bought into this Ponzi scheme. Thos on bubblevision have continued to underestimate the contagions as when you look at and attempt to see what is truly beneath the CDO market you can�t; as the environments is so murky you really can't see enough to enable you to make a rational investment decision. This mega derivatives market just simply (when placed in the hands of wall-street hypsters) simply shifts risk from those who don't want it to those who do not understand the consequences�a common practice by these shills.

WHEN WILL THEY Acknowledge Inflation

The 800-pound Gorilla

What will it take for the fed-heads, talking butt-heads on the various bubblevision channels and most of all the markets to understand that inflation is running rampant in our economy; we recently saw that in May that the BLS report showed.

Remember folks that Inflation: is a persistent increase in the level of consumer prices or a persistent decline in the purchasing power of the dollar, caused by an increase in available currency and credit beyond the proportion of available goods and services. In this definition, inflation is the consequences of or result of (rising prices) rather than the cause. Then we have the much maligned sometimes expressed as the overall general upward price movement of goods and services in an economy, usually as measured by the CPI and the PPI. Simply put, if I utilize the pro forma reported inflation numbers as presented in the governments report what cost $100 in 1999 would cost $120.25 in 2006. Also, if you were to buy exactly the same products in 2006 and 1999, they would cost you $100 and $83.16 respectively.

Now getting back to issue at hand this year so far the annual rate of inflation has been running if we follow the headline numbers between 6.7% to 10.50% on an annualized basis; from the data that I have reviewed (pro forma as it is) we have seen that since January prices have risen at a 7.1% clip on the consumer level and at a brisk 10.9-11.21% pace at the producer level. By contrast, last year consumer prices rose 2.4-2.5%, while producer prices posted a mere increase of just 1.0-1.2%.

The bulls have totally disregarded these numbers and their looming negative ramifications and implications as they continue to surge ahead immune to negative economic news in their giddy-euphoric manner that has been totally their during this continuation rally, as they display little concern about the data as presented, since they are being lured by the incessant hype to look beneath the surface to the highly hyped "core" rate of inflation number that backs out the sustaining necessities of life (food and energy). They continue to assert that the headline inflation is due mainly to rising prices of food and energy, they are somewhat right�so why should we just focus on core consumer and producer prices. As you know, these are arrived at by removing food and energy from the totals. There is little doubt that prices excluding food and energy are going up more slowly than the headline numbers hell prices of electronics are always coming down as the commodities get cheaper, also the negative contagions in housing have started to positively influence the inflation numbers as well. But for the life of me these talking butt-heads must be living in wonderland with Alice and the mad-hatter, as they are not living in the real-world, they need to get free from Rod Sterling�s the twilight-zone as anyone in the real world needs to consume food, utilize energy to go back and forth to work, heat their homes etc. and these commodities have been soaring. I have written many time about how overleveraged in debt that most households are and how many families are getting squeezed tightly in a choke hold by soaring prices of necessities needed to live and function day to day. That's why consumer sentiment has turned south, as according to the latest reading of consumer sentiment taken by the University of Michigan showed that the sentiment index declined more than expected in the early part of this month. The index dropped to 83.7, compared to May�s reading of 88.3 as both components of the index posted large declines. The giddy bulls and taking butt-heads on bubblevision just need to get their respective heads out of the sand as both energy consumption and food are needed on a daily basis hence if we were not seeing a manipulated fuzzy-math calculation (based on keeping cost of living adjustments artificially low etc) we should see these components more heavily weighted as they certainly have a real-life impact on people's ability to live. So if we were as logical a society as Mr. Spock was on Star Trek it would be sensible to reason that as priced increase life sustaining commodities like food and energy then there should be adjustments made as far as I am concerned as a logical economists. We have seen that crude has steadily (some time by leaps and bounds) risen from $13.00-15.00 a barrel in 1999 to approximately $65-70.00 (see chart) today a huge increase of 350-370% in just 8-years.

Yes indeed rising energy prices especially gasoline prices have been getting all the attention by the bubblevision media, but the cost of the real life sustaining components of necessities of life �FOOD� is actually rising even more: as during the past year, food prices have increased 3.7-5.2% depending on which set of pro forma numbers you want to use and are on track to rise as much as 6.7-7.5% or greater by year's end (and these are conservative numbers). The current increase is more than double the 1.8-2.0% percent increase absorbed last year based on the fuzzy-math experts at the Department of Labor. Only the cost of health care has risen more (average costs) another important staple that way too many Americans can no longer afford�.

From my vantage point many firms up and down the food chain are experiencing significant increases in their input costs along with manufacturing costs (energy, lighting etc) and they're only beginning to pass them on to consumers at these levels as they can not continue to absorb them stealthily.

While we have seen that most food prices are rising steadily (out pacing inflation) across the board, items related to corn have been affected the the primary reason is because increasing demand for ethanol made from corn is driving up corn prices (not to mention speculation in the futures markets but that is an other issue altogether), which farmers use to feed their poultry, pigs and cattle. The high price of corn also affects prices of everything from cereal and other products with corn as a primary ingredient (corn oil, potato chips, snacks, etc.).

We better all pray/hope and pray again that the reports indicating a dismal growing season will not be true as if we do not have a really good growing season this year, prices will continue to climb higher. But not to worry as the fed-heads do not worry about food inflation, hell I bet they do not even do their own grocery shopping as if they did they would see that eggs cost 18.8% more than a year ago, chicken prices have risen 7.4-8.0%, bread is up nearly 6.5% and beef is up almost 5.5%, milk is milk is hovering around $4 a gallon an increase of only 10-11% from last year, and milk prices are expected to rise up to 4.85-$5.00 a gallon by early fall, and this will adversely impact and affect all dairy related products.

And now farmers are chasing corn prices higher as they devote record acreage to corn this leaving some crops in short supply�and as such these prices increase as well due to supply-demand functions; and unfortunately many of these price increases haven't even made their way into the food supply chain and many stores have been attempting too absorb some of the costs rather than passing them on to customers; and as such their margins are simply being squeezed **(hence one reason why I have been mystified why so many food-market stocks have been rallying lately buy once again that is an other issue). I do not have rose colored glasses on folks; hence from my vantage I see no end in sight to food inflation. As I forecast that food inflation will rise this year to rates not seen since 1989-1990. Lets face it folks since food is a category that consumers can't cut from their budget (they can reduce their recreation driving, they can turn down the thermostat and put on a sweater, they can turn out the lights when not in use etc�.they can forgo the D&D cup of coffee, their trips to the movies and their incessant spending on clothes, iTunes, etc can be pared back when times get tough�but families still need to eat!

If you live in the twilight zone, or fed-head wonderland it is statistically possible to isolate food and energy from the price indexes, why I still do not understand as it is very misleading; heck when I was studying economics I was taught that any item can be viewed in isolation but that correlations and inferences from such actions are distinctly flawed; all consumer related items are very interrelated, none more so than food and energy whish are consumed/used daily.

The next big-talking point on CNBC and the other bubblevision cheerleading channels will be wage inflation as workers will be forced to demand bigger raises and cost-of-living adjustments to close the distance due to rising cost of living. And with the labor markets as tight as they are, the likelihood of these demand being realized are very-good and then we will see that the vicious spiral will start where employers/firms will in turn attempt to pass these costs along in turn.

If you think that food inflation is just an American invention think again Food inflation is on the rise all over the world. Meat prices were up 26% last month in China, and this week we heard that McDonald's is planning on raising its prices in Japan, and Dean Foods warned that its earnings will be lower due to record milk prices in the U.S. Once again folks food prices are posting gains that are parabolic and unfortunately it appears for the most part that these price increases seem to be permanent. Surging food prices boosted China's annual consumer price inflation in May to a 27-month high, extending a rising trend and reinforcing expectations that interest rates will go up further to curb these negative implications. Wholesale price of pork a staple in their diet rocketed a whopping 62% in May from a year earlier, according to the People's Bank of China.

© 2007 Stephen Tetreault
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Stephen Tetreault
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Southern Maine, USA
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