I just saw a chart from Lehman’s Degraaf (enclosed below) that is both shocking but explains some things – to me anyways. Inflation expectations are extremely low.
Retail stocks are acting giddy. Best Buy, Nordstrom, Abercrombie, American Eagle, Gymboree are all running at or near all-time highs. HUH! Harley Davidson, a favorite of shortsellers for… well forever, is hitting all-time highs.
The American consumer is TEFLON. Make that ZINC. Take a look at the ZINC chart as well. I put it on my huge nose in the summer, but there must be other markets.
Here is my takeaway. I don’t like the inflation chart. I have no real evidence of this chart alone that inflation expectations or the market will give, but I have an inkling that the gap will close.
I hate owning retaill stocks. I avoid them if given a choice. I have plenty of them now (choices). The two that I own, Chipotle and Apple are rock solid stories for ME. Maybe not for you.
Although the goldminers have been shellacked, I am impressed with the actual price of gold considering the huge drop in inflation expectations. I am inclined to add to my long-term positions here as hedge on rising inflation expectations. I started nibbling last week on some beaten up gold stocks. I will let the retail stocks run without me and look through the hundreds of all-time highs for more satisfying longs.
With respect to real inflation – Come on…. airfare, eating out, hotels, porn, Chartreuse’s new site :) . I see inflation everywhere.