Don't Believe the Inflation Headlines

June 17, 2009

This morning, the government reported on consumer inflation for May. The Labor Department said that consumer prices rose just 0.1% last month which was less than the 0.3% expected by Wall Street economists.

So that means inflation is under control? Not at all.

This represents what has happened not what we're going to see. In my opinion, inflation will steadily climb as the economy recovers. Expect to see higher commodity prices.

The news that's being reported is that the year-over-year inflation rate is at the lowest level in 60 years. That's correct but it's not what's important for investors. Instead, investors should be looking at the long-end of the Treasury bond market.

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