I know everyone is obsessing about the overly hyped Democratic primaries, but there is actually a world out there that is trundling along regardless of this monumental, all encompassing spectacle. The major news is inflation. Just as we go into a recession caused by the bursting of the housing bubble, we are going to suffer the misery of serious commodity inflation. And if you are like, and enjoy food and being able to drive to work, you won't be a happy camper in 2008. Chances are, though, if you're reading this, you aren't one of the very poor who will be hit hardest.
To start off the day, we had Citigroup announce more bad sub-rpime news
Citigroup, the largest U.S. bank, reported a larger-than-expected fourth-quarter loss of $9.83 billion. Citi also announced a steep cut to its dividend and plans to raise $14.5 billion from outside investors.
Oh... and maybe shedding up to 24,000 jobs. That's gonna hurt. Employment is already weak.
This triggered a sell-off on Wall Street, and the Dow saw a 200-point loss. Even Macworld couldn't save Apple from sagging below $170 a share. Enthusiasm among investors has been spotty with a lot of volatility in the market. One day, a bit of good news pushes the market up a little, and a couple of days later we get some bad news and down it goes. Eventually, investors get tired of this and put money in cash.
But the big news, for me, was the the lurking commodity inflation finally got its day in the Sun as the NYT put the story Page 1 of its Business section. The news ain't good. As China continues its ferocious industrial revolution, it has been driving up the price of just about every raw material you can name. Zinc, copper, Aluminum, have all seen upwards of 10% increases in the last year.
Oil, of course, is the big one. With a fairly fixed supply and a growing demand, prices aren't coming down. That oil is driving the growth of corn-to-ethanol, which is pushing up the price of animal feed. This is where the chicken come home to roost - literally. The price of eggs has gone up 28% in the last 12 months. We are now, as The Economist pointed out a few weeks back, seeing the end of cheap food.
The country is facing the beginning of a crisis, a new more virulent form of stagflation driven not so much by the price of oil but by the price of all raw materials