Tuesday, July 17, 2007


WASHINGTON (MarketWatch) - Wholesale prices fell 0.2% in June as food and energy prices declined after four months of hefty increases, the Labor Department reported Tuesday. The producer price index fell for the first time since January, confounding economists' expectations for a 0.2% increase in prices for goods at the wholesale level. The PPI is up 3.3% in the past 12 months. Food prices sank 0.8%. Energy prices fell 1.1%. Excluding volatile food and energy prices, the core PPI rose 0.3%, a tenth higher than the 0.2% gain expected. The larger-than-expected gain in core prices was largely due to large increases in car and truck prices.

The spin is dizzying. PPI supposedly fell in June as food and energy prices declined, but "core" PPI, which excludes volatile food and energy prices, rose. I thought "core" prices were the "real" measure of inflation? I guess that's only true when "core" prices fall. This goes beyond being a joke now. How can you use food and energy prices to explain the fall in wholesale prices one month and then use them as an excuse the next month when prices rise. This folks is what we call bull shit where I come from.

TIC flows reported today should have been Dollar positive...they were not. Foreigners seem to be buying a lot of corporate debt over here, and stocks. Guess they gotta spend all those Dollars somewhere.

Oil prices were screaming higher out of the box this morning and knocked down $75. A nice round number. Oil prices are clearly overbought now, and the quick retreat this afternoon could legitimately be attributed to "profit taking". The speculators are running wild right now in the Oil futures market. Of course, let us not forget that tomorrow is our weekly visit from the "crude oil supplies" statisticians. Oil would do well to consolidate some here and take off some of the froth there.

Despite the dizzying spin of the PPI numbers the US Dollar remained adrift on the edge of a waterfall. This, of course held Gold and Silver at bay...stuck in neutral. The longer the metals remain running in place the more likely dem Rat Bastids will pull a bear raid on us and try and scare out the weak bulls. I doubt their success should they attempt such folly. Support for Gold remains at 664 and 658. Support for Silver remains at 12.92 and 12.78. I expect little explosive action in the metals until the Gold/Silver ratio breaks below 49.

Perhaps Wednesday's CPI numbers will be a bit more telling and dramatic. Strangely both CPI and Core CPI are pegged at 0.2% as consensus. I guess we'll expect the core number to be up and ignored...LOL, that would be too much. We also get Building Permits and Housing Starts today...how they can be anything but anemic escapes me, but it is 1984. And don't forget! Capt. Bernanke testifies before Congress todayand Thursday. How much longer can this man's nose grow?

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