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Stocks Ignore Growing Inflation Concerns

February 16, 2011

by Jerry Robinson

Good morning friends! In the news this morning: more inflation concerns, growing tensions in the Middle East, corporations open their wallets, and more.

But first… Asian markets were up in overnight trading with the Shanghai Composite up 0.86%… China cut Treasury holdings for second straight month in December… Bank of England downplays potential rate hike… U.S. PPI up, even without food/energy… Earnings lift European stocks as the Stoxx Europe 600 index closes at its highest level since September 2008…

Inflation Concerns… The core Producer Price Index (PPI), which excludes food and energy prices, rose 0.5% in January according to the U.S. Labor Department. Many economists expected a 0.2% increase…

PIMCO’s $240 billion Total Return Fund, led by Bill Gross, has been making moves to prepare for inflation… In August 2010, the fund held 51% of its funds in U.S. Treasurys… In January 2011, holdings in Treasurys have been cut drastically to 12%…

As we have been reporting for some time, inflation is showing up in many areas… We continue to hedge ourselves with precious metals and commodities, and some select energy positions… What are you doing to prepare for inflation if it becomes out-of-control?

Corporations Cough Up the Cash… After sitting on record piles of cash, corporations appear to be opening their wallets. Capital spending increased $22.3 billion, the biggest quarter-to-quarter jump since the end of 2004, to $142.8 billion, the highest level in two years…

The financial markets are soaring now due to artificially induced demand created through massive liquidity pumps from the Fed, coupled with excellent corporate earnings due to massive cost-cutting… What happens when QE2 ends and corporations have nothing left to cut? QE3, QE4, etc…

More Mideast Turmoil… More protests in Egypt, this time over low pay and new lawsuits over government corruption… CBS News reporter sexually assaulted in the streets of Cairo… Protests spread to LibyaBahrain protests keeps pressure on leaders… Yemen protests continue…

And “hundreds of thousands” of protesters marched in the streets of Iran in solidarity with Egypt… “Death to dictator…” Iranian government responds… tear gas, protesters jailed, calls for execution of those involved in opposition movement.

Also in the news…

1) Turn to Chapter 11: After years of sharp sales declines, crushing debt loads, and a weak online strategy, Borders Books files for bankruptcy

2) Invest Like Buffett: Here’s Berkshire Hathaway’s 15 biggest stock holdings

3) The End of America? An interview with Porter Stansberry…

4) Oil prices rise for first day in four on signs of declining supplies…

5) Why Fannie and Freddie may never die…

Finally… In 1965, the U.S. Federal government’s entire annual budget… $118 billion.

In 2011, the White House is projecting to spend $909.7 billion on just one department… the Department of Health and Human Services…

Why So Serious?… It’s time to laugh a little.

“Egyptian officials say that Hosni Mubarak is going through a ‘severe psychological condition.’ It’s called ‘getting dumped a week before Valentine’s Day.” –Jimmy Fallon

(And let’s try this one again, but this time with the right link…) For fair and balanced paranoia, delivered on demand, see the new Glenn Beck Conspiracy Generator

Until tomorrow,

Jerry Robinson –


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Jerry Robinson is an economist, published author, columnist, international conference speaker, and the editor of the financial website, In addition, Robinson hosts a weekly radio program entitled Follow the Money Weekly, an hour long radio show dedicated to deciphering the week’s economic news.

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