Oil Climbing, but No Inflation?

oil prices and inflationThat's right,. Ignore the financial burden that you and I have felt over the past couple years of rising commodity prices, because analysts say there is no inflation...Rubbish.

Anyone who has lived in the United States the past two years has noticed a strong climb in commodities. The latest release on inflationary numbers from our so called analysts is that core commodities are only rising at a 1-2% rate. This number would shun any ideas that indeed inflation is an immediate concern, but the real question is are the analysts correct?

In regards to oil, we of course know this is not the case. The cause of the most recent ascent in oil prices above $100 per barrel is largely due to the recent turmoil throughout the region. Honestly, is this new? The Middle East has been in turmoil since the beginning of time. However, anytime any new threat is known globally, there becomes a rush into oil prices. As this tends to be the trend, I would expect oil to start peaking shortly.

Oil is not the only thing rising at this point. We have seen increases in phone costs, utilities, health care, food, and construction. I just received a letter from my health insurance telling me that my monthly premium was being increased 25% next month due to inflationary reasons! However, Wall Street is telling me that we are moving at a 1-2% rate.

Hopefully, no one reading this site is naive to think that this is true. Our government has just spent trillions of dollars in borrowed stimulus money in hopes to jump start the market. For the time being, it seems that indeed the market is running, but this injection will come with consequences. That is of course years of massive inflation. We are already beginning to see early seeds.

At this point, I have to believe oil is not going much higher. In fact, within the next couple weeks, I will be taking positions in DUG or even consider purchasing some September expiring DIG put options. Oil is going for a roller coaster ride once again, and I believe we are nearing the top soon.

For those non-believers thinking that indeed inflation is not in our midst. I thought I would share an interesting study Jeff Cox, CNBC analyst, did illustrating commodities recent moves. The following are prices he found in products showing first their month/month change (December to January) and then year over year change (2009/2010). The results are scary.

* Ground beef up 6.8 percent month over month, and 11.1 pct year over year.
* Butter, up 3.2 percent monthly and a stunning 27 percent over the past year.
* Coffee, up 6.5 percent and 16 percent.
* Potatoes, up 3.6 percent and 7.1 percent.
* Lettuce actually fell 5 percent monthly after a spike higher in December, but is up 5 percent over the past year.
* Bread up 1 percent and 3 percent.
* Chicken up 0.8 percent. and 4.3 percent .
* Egg prices have been fairly steady.
* Milk, down slightly month over month, but up 2 percent year over year.

Now you decide...Are we experiencing inflation?

4 comments:

  1. Stock Tips Says:

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  2. Stock Tips Says:

    I absolutely adore reading your blog posts, the variety of writing is smashing.This blog as usual was educational, I have had to bookmark your site and subscribe to your feed in ifeed. Your theme looks lovely.Thanks for sharing.
    Regards
    Stock Tips

  3. QUALITY STOCKS UNDER 5 DOLLARS Says:

    Inflation will show its ugly neck sooner or later.

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