If you are shocked that we broke the S&P 500 low today, well you just aren’t paying attention. Every conference call and every CEO has told us this would happen. Every company that has gone bankrupt or laid off 1000s of jobs told us this would happen. And this week….PPI and CPI told us that inflation is dead. As good as it sounds to have lower inflation…it is terrible for stocks. Think about it this way….how would you feel if you’re Best Buy and the $2 million worth of flat screen TVs you purchased over the summer are now worth $1 million. Kind of hurts your bottom line doesn’t it. CPI just told you today that their inventory is worth less today then this summer….so how many shares of Best Buy do you want? I’m thinking NONE!!!
Inflation and deflation is just supply and demand. Inflation is born from demand. If you’re the only person in a desert with a glass of water and 100s of people want that water, let the inflation begin. A bull market demands INFLATION!!! In other words, Inflation is GROWTH. Is it any wonder we broke the lows today? I don’t think so and I think we still have a long ways to go. Support has been broken and it is Dow 6000 is just around the corner. Stay short!!
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