confused musings and ramblings...

Fintrend Moore Inflation Predictor works better than I give it credit for. I gave up on it at the beginning of December, and minor inflation pressures have continued throught the end of the month.

Now, the new chart predicts even lower inflation than the last two. It's now predicting inflation at 1.25% in August 2007. (Zero to eight months out is its most accurate time period.) The MIP predicts that right now will be the high point for inflation in a long time. The market, however, has been feeling decidedly more pessimistic about the economy in the past month. Is market sentiment a month early, or is the MIP a month late? Is the pessimism a mistake, with lower inflation coming, or is lower inflation coming as a result of a slowing economy, or both?

Aside: I think that United Airlines (UAUA) will do well either way. Either oil falls on higher supply, or oil falls on a slowing economy. It's not foolproof, but it does make me feel safer.

What will deflation do for currency? In theory, it should strengthen the dollar. Also, lower inflation will raise GDP, making it less likely that the economy will fall into a recession.

Hmmm... lots to think about for the new year.