Breaking Wall Street Market News & Reports

This morning I noted the 1st signs of Inflation are now rearing its’ ugly head -China- part of the BRIC countries and developing nations. QE tends to shift money into emerging countries first as they produce and manufacture everyday items most competively. It’s here in the emerging economies where you will see inflation figures picking up first. China reported a 4.4% increase inflation, well aboove 4% survey. Read Here  

Let’s fast-forward a few years ahead- where would you be purchasing non perishable items in bulk? We would have to buy bulk and store away for the future because prices will run far higher than current levels. The Costco and Wal-Mart alike’s will be the market driver for bulk items. Wal-mart however has a much larger market share. They have recently launched in the last 5 years adding Grocery items nationwide. To me I believe WMT will be a great investment. No I know your saying are you kidding me this thing hasn’t moved in 10 years. You’re correct however it hasn’t fallen either. But the positive hear is the 5.25% annual Yield!!! I believe WMT will benefit the most once inflation starts picking up pace. Where’s the first place you’ll be able to see food prices rise? At your local supermarket and Wal-Mart. Bernanke and Fed are using a prehistoric model of analyzing food and consumer prices. They should rely more heavily on the data mining that’s available on Google. I first announced it here Read for further details in Financial Times here

A new pricing survey of products sold at the world’s largest retailer (WMT)  54.185 showed a 0.6 percent price increase in just the last two months, according to MKM Partners. At that rate, prices would be close to four percent higher a year from now, double the Fed’s mandate.  The “inaugural price survey shows a small, but meaningful increase on an 86-item grocery basket,” said Patrick McKeever, MKM Partners analyst, in a note. Most of the items McKeever chose to track were every day items like food and detergent and made by national brands.

On November 3, the Fed announced its much-anticipated purchase of $600 billion in Treasury securities. An effort to keep market rates low since the central bank’s benchmark rate is already at zero. The Federal Open Market Committee’s statement said, “Currently, the unemployment rate is elevated, and measures of underlying inflation are somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate.”

But since that statement, interest rates have actually gone up, backfiring on a Fed chief who wants his quantitative easing to spark inflation of 2 percent annually. A moderate amount of inflation would be considered good for the economy. The problem is that inflation is already running well above a healthy level, investors said, Bernanke is just not looking in the right place, like a Walmart.

“I suspect that when the Chairman thinks about reflation he has a difficult time seeing any other asset besides real estate,” said Jim Iuorio of TJM Institutional Services. “Somehow the Fed thinks that if its not ‘wage driven’ inflation that it is somehow unimportant. It’s not unimportant to people who see everything they own (homes) going down in value and everything they need (food and energy) going up in price.”

Next week, the government is expected to say its official measure of inflation, the Consumer Price Index, increased at a 0.3 percent annual rate, according to economists’ consensus estimate. Core CPI, excluding food and energy, is expected to climb just 0.1 percent.

The biggest dollar increase in McKeever’s survey was on a jug of Tide Original laundry detergent, manufactured by Procter & Gamble. Both P&G and Kimberly-Clark gave tentative forecasts for this quarter on concern they won’t be able to pass rising input costs on to the consumer. They may have no choice.

Prices of cotton, silver wheat, soybeans, corn are all up big this year. Cotton futures are up the most, climbing 90 percent so far in 2010. The price of silver is up 63 percent. The purpose of McKeever’s note was actually not to be a commentary on Fed policy. The retail analyst is just trying to find out if Walmart is subtlety-increasing prices without decreasing foot traffic. A process he would deem bullish the stock. “If the pricing dynamic is shifting, as our survey suggests, this would lend some upside bias to our sales and earnings expectations,” said McKeever.

Bernanke keeping interest rates artificially low is sparking outrage among central bank chiefs around the world, who feel the U.S. is essentially exporting inflation. China’s CPI surged 4.4% in October, according to figures released Thursday, higher than economists’ expected and up from a 3.6 percent annual reading in the month prior.

Tags: BRIC, Bulk, China inflation; BRIC, Costco, cpi, food prices, Google Index, Google Price Index, GPI, hyper inflation, inflation, wal-mart, wmt

This entry was posted on Thursday, November 11th, 2010 at 4:29 pm and is filed under Commodities, Contributors, Debt, Economics, Large Cap Stocks. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.