The following chart shows the PPI for all commodities divided by the CPI.
Click to enlarge.
Check out the peaks.
It peaked in 1917.
It peaked 34 years later in 1951.
It peaked 29 years later in 1980.
It has been 32 years since the last peak.
Just something to think about if you are still hoarding hard assets at prices well above their inflation adjusted long-term averages. If this chart has any merit, then there could easily be a few years left though. They might even be the juiciest years. Who can really say?
I should point out that technically speaking the peak in the 1970s was in late 1974. 1980 makes more sense to me as the true peak of that era though. I took some artistic liberty with that data point.
I lean deflationary but I still prefer to own Treasuries with inflation protection. I recently went pretty much all in. I can't say it has been a bad plan for the past two months. The seasonally adjusted CPI-U has risen 0.95%.
Anyone watching the Billion Prices Project could see that inflation was running hot.
March 1, 2011
February's Real-Time Inflation Running Hot
Note the big jump in February. Some of this should trickle into February's CPI report due to be released on March 17th.
March looks to be running hot as well. Yikes.
And lastly, I want to point out something disturbing in the latest CPI report. Look at the last two months.
Consumer Price Index Summary
Food at home: 0.7% + 0.8% = 1.5%
Food away from home: 0.2% + 0.2% = 0.4%
That tells me that restaurants (a vital part of our service economy) have very little pricing power. Now might not be the best time in recorded history to be opening a new restaurant.
March 16, 2011
Restaurant Chains See Growth Despite Economy
The top 500 largest chain restaurants in the United States all showed growth in sales during 2010, with an average annual rise of 1.8%.
The CPI-U is up 2.1% year over year. How can 1.8% be considered growth?
Source Data:
St. Louis Fed: PPI: All Commodities
St. Louis Fed: CPI-U
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