Nifty Chart

What Will It Take To Control Inflation?

How Inflation Rates are decided……???

Every week Inflation will be calculated on the basis of main usage of regular products. In India Inflation will be decided by calculating over the usage of over 435 products. And it varies from Country to Country ……

In our India Inflation Rate is already at 11.42%, due to this everybody is struggling hard to buy regular commodities which are already at higher price…

And it’s same scenario with many other countries throughout the world. In some countries Inflation Rate is above 15%, 20%, and 40% and even above 50%..... Just think what would be their lifestyle……???

Just believe it…… in Zimbabwe, the Inflation Rate is just unbelievable….. Can you guess …????? It’s above 1000000%!!!!!

A Golf player will order his juice and pays for it before he starts playing the Golf….. Coz by the time he finish his game and come back to juice stall the rate of juice may be doubled due to huge Inflation…… unbelievable !!!!! But it’s true……..

Yes true, if you want to buy 1 kilo Potato, you need to pay Rs 100 Crore (Amount In terms of Zimbabwe Dollar) and all other products will be traded In Terms Of Crore Dollars….. !!!!!


Thinking?????

In our India Rs 40 is equal to 1 USD ….. But in Zimbabwe 48 crores is equal to 1 USD!!!

So what next…….???

Just when you thought reality was setting in at the Fed, you get reminded how silly that idea really is.

I say that because lately the Fed has been talking about how bad inflation is, and how they need to be ‘vigilant’ so that inflation expectations don’t deteriorate.

If you talk to anyone on the street, I bet they have noticed that prices are higher for just about everything. I don’t know about you, but I sure think that inflation expectations are already pretty bad.

So, you would think they’d be really hawkish about inflation at the meeting.
Maybe that’ll happen at another meeting, because it sure didn’t happen at the one on Wednesday.

Sure, they mentioned inflation expectations have increased. But here’s the line I read on Bloomberg that shocked me …

“The Committee expects inflation to moderate later this year and next year”

That’s right – even though gas prices have nearly doubled in the last year… even though the price of wheat has skyrocketed… even though the price of nearly every food you can think of has gone higher… they expect inflation to moderate.

They think that when the U.S. economy slows it will reduce demand and prices will move down to stimulate demand. This makes sense, except for the fact that the world isn’t all about the U.S.

You see, the price of imports into the U.S. has gone up well over 15% in the past year. Yet for the most part, this inflation hasn’t completely hit consumers.

And the sad fact is, the prices we pay for overseas items will continue to move higher. Over in Asia, they are experiencing some wicked-nasty inflation right now. And it won’t stop in the next year, despite a slowdown in U.S. demand.

So long as emerging economies like China continue to grow as fast as they are, inflation will continue to be a threat. And the reason why is simple. Because as these emerging economies modernize, they will need more food, more gas, more wood, more metal, more of everything per capita than what they use today.

That means demand from emerging economies for all these things could double… even triple in the next ten years. That demand should more than offset any reduced demand from the U.S. or other modernized economies.

It’s no wonder that countries in Europe and other parts of the world are actually increasing their interest rates. They’re doing it because inflation is more than a threat, it’s real. It’s there, affecting everybody’s lives.

And it’s affecting everybody here too.

As long as interest rates stay as low as they are in the U.S., inflation will continue to be a problem. We can only hope that Ben Bernanke realizes that he has to push rates higher to control the inflation we see today.

Lets Hope For The Best........ :)

The Long Term Bet in Oil and Gas Is…

In my last article for IDE Unplugged, on May 23rd I called for a correction in the oil market, noting that the “oil is going up” trade has become very crowded and that after setting a record at $135 and surging to $140, the price of crude was due for a breather.
DL in Kansas took it that I was making a call that oil prices have “peaked”:

“I do not agree with you that oil prices are going to go down from here, and certainly not substantially. The fundamentals of supply and demand are still very much in play. The world uses 87 million barrels per day. And we only produce about 85 million. As long as these imbalances exist, how can you expect the price of crude to fall?”

Well, DL, you are correct. There is a supply deficit. That’s why I certainly did not suggest that oil is a “bubble”. I was simply suggesting that a tradable pull-back was imminent. And I suggested the way to play the pull-back was to buy the refiners.
The companies that refine crude oil make a spread between the price of oil (their input) and the price of gasoline (their output). The refiners have been getting killed on their margins for months, as the price of oil has risen faster than the price of gasoline. But the market moves in both directions. And I figured it was time for the refiners to catch a break.

The names I suggested were Tesoro (TSO), Valero (VLO) and Frontier Oil (FTO). We didn’t get much of a pull back in oil… but we got enough to push these stocks up 19%... 9%... and 10% in only seven days from the date of the article. If you purchased options on any of these stocks, you would have been sitting pretty.

So, where are we now? Well, we got a bit of a pull back in oil… enough to make those positions profitable very quickly. But here we are a month later and oil has refused to waver much to the downside. And after a sharp run to the upside, these refiners have now fallen below the price I recommended them last time.

I am still convinced that oil is due for a pull back. And the best way to “trade” it (this is not a “long-term” investment) is to bet on the refiners. If oil softens a bit and the market can stage a rally, the beaten down refining sector should benefit the most.
But don’t be greedy with your profits. In this market, they can disappear in a hurry. And watch your stops. The energy crisis is real… and the long-term trend is up.
And that’s what I’ll talk about the next time: The best long-term play on oil and gas. It’s definitely NOT the oil companies. For many of these companies their reserves and production are shrinking… and their stocks reflect it. The BIG MONEY will be made on the companies that help the petro-giants find and produce their products.

In the meantime, chew on this. The world’s energy companies will spend $10 trillion (Yes, trillion!) in the next 20 years on oil and gas exploration and production. That is a tidal wave of cash you want your money to be riding… and next time I write, I’ll tell you how to play it.

By Jon Herring