Cue up the great inflation debate.  As much as we all complain about prices rising on everything, and as much as we always feel and assume prices are rising (even when it was in sharp decline, all you heard was the price for a gallon of milk was going through the roof), we need a degree of inflation in our economy.  Bunk you say?

Do you like when your paycheck inflates?

Do you like it when the value of your home inflates?

Therefore, today’s Consumer Price Index (CPI) news is alarming.  It’s the fifth month of CPI coming in below consensus.  The pace of growth is lurching toward deflation, which is a cautionary condition for our economy. 

Looking under the hood, the report is perhaps not as alarming as the headlines.  To be sure, there is significant pricing pressure in things like medical commodities +3.7% y/y and shelter +3.2% y/y.

Energy cost is lower month to month and so, too, are airfares; but, I don’t think the report counts fees on luggage and reservations changes.

Today’s CPI news probably puts the Fed off a little longer on its next rate hike, although, it’s unclear if it will have any influence on allowing toxic assets to run off their balance sheet.  Yellen & Co seems anxious to start dumping this stuff, although, it’s unclear whom the buyers might be. 

Market Action

Interesting action thus far today, as big tech names are higher, and some of the week’s biggest losers are also attracting some nibbles.  The point is, there isn’t a lot of conviction.  With that in mind, it would be a moral victory to maintain thin gains into the closing bell. 

Make sure you have gone over the Portfolio Approach report, as there have been major shifts in the model portfolio, especially for new subscribers looking to fill in positions.  If you need help, reach out to the research desk research@wstreet.com or contact your personal representative.  If you are not on our service email us at info@wstreet.com  

Have a great weekend.