Is this heaven?

Wednesday, May 09, 2007 | | 1 comments »

No, it's an excerpt from today's Federal Reserve statement:

"Core inflation remains somewhat elevated. Although inflation pressures seem likely to moderate over time, the high level of resource utilization has the potential to sustain those pressures.

In these circumstances, the Committee's predominant policy concern remains the risk that inflation will fail to moderate as expected."

Pictorial version:

Poetic version:
"But thoughts, are giv'n, for Actions government,
Where Action ceases, thoughts impertinent"

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  1. Will Rahal // 5/15/2007 08:38:00 PM

    Today’s report on CPI came at .4% . PPI(all commodities ) was .9%
    In the last few years ,the PPI has been accelerating more rapidly than CPI.

    The implication is for an overall stock market P/E contraction.

    Ex-Fed Chairman Greenspan’s favorite way of measuring relative valuation
    between Stocks and Bond is the Earnings-Yield to Bond-Yield ratio.
    This ratio oscillates around one.

    When should this ratio be above one?

    The answer is: in an environment of PPI relative out-performance to CPI.
    That is the environment we are in. This is due to the P/E contraction that
    results when the PPI/CPI ratio goes up over time.

    To see this behavior historically go to:

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