from today's gartman newsletter, an interesting observation that may affect bonds for personal financial planning
We turn then to a price indicator that we think of somewhat greater value than the US government's figures. We turn then to the JOC-ECI Industrial Price Index compiled by the Journal of Commerce and predicated upon work done by Prof. Geoffey Moore over the past several decades at the Economic Research Institute. We note then that the JoC-ECRI Price Index one year ago was 129 and at mid-month it stands now at 139. That is 7.8% higher than it was a year ago, and we think that is much, much closer to the level of inflation we are seeing in day-to-day costs of living. If true, then bonds are very expensive; interest rates at the long end are very low; the Fed's propensity shall be to tighten not ease and share prices can either rise or fall, depending upon one's belief that stocks are bad investment during periods of inflation (the US in the early 70's comes swiftly to mind) or that stocks merely another hedge against inflation and can rise even more swiftly than inflationary pressures (Zimbabwe this year, for example). All we know for certain is that the inflation we are experiencing is far different from that which the Departments of Labor and Commerce are; of that we are absolutely certain.
It has taken the long end of the US bond market a year of consolidation to find its way, but its way looks rather decisively lower given that the reasonably long uptrend line extending back into April of '06 has been broken. This has happened even as the even longer term downtrendline extending back into the mid-summer of '05 has triumphed. Strength then is to be sold, not weakness bought... for the long term and for the short.