Bill Bonner’s latest….
As anticipated, “higher commodities shrink profit margins,” reports Barron’s. Some analysts were justifying high stock prices on the grounds that earnings were at record highs. Of course, if they were at record highs, we commented, they would most likely come down.
What’s bringing them down? Ben Bernanke’s hot money. He juices up the world’s hot money. Commodity prices go up. Commodities – especially oil, which appears to be headed over $110 a barrel — are a major cost for most producers. Higher costs with little pricing power (remember, we’re still in a Great Correction) mean lower profits.
That’s a big weakness in Bernanke’s program. He prints money ($600 billion in the first half of this year). But the money never gets into the consumer economy. Wages don’t rise. But commodity prices do. This raises prices for consumers…and business. Net result: less discretionary spending. The opposite of what Bernanke wanted, in other words.
But that’s what government almost always gets – just what it doesn’t want.