Looking over those BSC commentaries you'd think it was the end of the world as we know it, but I feel fine.
Here's Real Time Economics from yesterday:
Morgan Stanley: Odds of Dollar Intervention Are “Rising”
First, the lower dollar is driving up commodity prices. “There is a vicious circle between (i) the falling dollar, (ii) rising commodity prices, (iii) the impression that inflation is high and rising in the world, (iv) the world having to remain vigilant on inflation by keeping interest rates high and currencies strong, and (v) the dollar falling as a result of this and a hyper-proactive Fed,” Mr. Jen writes. Perceptions of high inflation because of rising energy and food prices “also undermine the credibility of the Fed … further hurting the dollar.”>>>MOREWe've got the academic links around here somewhere, I'll dig them up.
For now, here's Crestmont Research on the behavior of equities under various inflation regimes:
- Contrary To Conventional Wisdom, P/E Ratios Are Not Driven By Interest Rates: P/E Ratios Are Driven By Inflation
- Rising Inflation Decreases P/E’s; Deflation Decreases P/E’s
I'm gonna listen to R.E.M. (short version with slide-show)