Heisenberg and Einstein Take On Inflation

Have you ever tried reading a newspaper when it is pressed up against the tip of your nose? It is pretty much impossible to do without straining your eyes. That is how I view inflation, it is constantly in front of our face, and it is also constantly in motion. Also, prices tend to move so slowly that it is difficult to even see that they are moving at all. Whoever thought that Einstein's theory of relativity could be useful to economics?

It is kind of like seeing an old friend that you have not seen for a few years. Sometimes they will look drastically different, maybe they gained weight, grew a beard, or even had plastic surgery.

Imagine if you were able to transport yourself back 8 years and come back today. Would you perceive prices differently as they are now? Lets find out

Cost of gasoline in 1999: 1.33 per gallon (12 month average sampled 4 times per month)


2007: 2.95 per gallon

That is a 121% increase in the cost of gasoline over an 8 year period

Well, lets be honest. We all know that crude oil prices have skyrocketed because of increasing demand. I'm sure that prices for other things have not gone up. After all, the fed keeps telling us that inflation is under control.

Product	1999 Price	Price Today	% Increase
Electricity per 500 KWH	45.375	61.457	35.44
White Bread	0.899	1.212	34.81
Eggs Grade A	0.92	1.825	98.36
Orange juice	1.822	2.59	42.15

It is comforting to know that according to the federal reserve, people do not need to eat or use energy. Don't you feel better now that you moved that newspaper away from your nose :) ?

Welcome

Thanks for stopping by my blog. This is the first post, in what will be a series of daily postings on the economy and financial markets. The super brilliant people at the federal reserve continually say that inflation is not a problem. It is good to know that they do not have to eat or use energy. Whether it be in the form of crude oil (closed at a record 83.69/bbl) gasoline, heating oil, electricity, or natural gas.

Gold is now basing in the 740-750 range with short term support at 742.50 (where I would try to buy on a break). There is even better support at the 732 level. Don't listen to the people telling you that gold shouldn't be that high. It has been consolidating for over a year and creating an ascending pennant ( a strong chart pattern I follow). Gold is in an early breakout stage right now. Remember when AAPL just cracked 90-100 a share and people said that was too much? Well that is where I think gold is right now.


Listen to the market. The market is voting all the time with billions of dollars and it is saying that gold deserves to be at this level. This is an early trend, and it is solidly up for gold.

Thanks for reading,

Michael