BusinessWeek is Bracing for Inflation. Let's take a look at an article written by John K. Castle, CEO of Castle Harlan, a New York private equity firm.



Growing evidence suggests American consumers, businesspeople, and political leaders should all be bracing for double-digit inflation, probably as early as 2009.



The relative price stability of the past 15 years is giving way to worsening inflation, despite the recent softening of oil prices. The Consumer Price Index for all items shows the inflation rate averaged 2.6% a year from 1992 through 2007 but has doubled since January, reaching an annual rate of 5.6% in July. By next year, the monthly figure could hit double digits, and the inflation rate for 2009 overall could triple 2007's 2.85%.



I say this not only because I have looked at a broad range of statistics that point in this direction. I also run a private equity investment firm that owns companies in a number of industries—including restaurants, the manufacture of gardening tools, oil and gas exploration services, and distribution of entertainment products such as books and videos—that are already being forced to pass price increases on to the consumer.



The skyrocketing price of oil is obviously a central element in the accelerating price spiral. But a sea change in China's role is beginning to have a huge impact as well. ....

What's Hot

Walking Away

The Frugality Reality

Raising Capital At Any Price

Writedowns

Deleveraging

Lawsuits

Regulation

Small Cars and Driving less

Camping Close To Home

Collapsed Trade Talks

Tightening Lending Standards and Peak Credit



Home Cooking

Rising Corporate Bond Yields



Rising Risk Spreads vs. Treasuries



Layoffs And Rising Unemployment



Rising Savings Rate



What's Not

Alt-A

Subprime

Leverage Buyouts

IPOs

Toggle Bonds

Covenant Lite Agreements

The Securitization Model

The Shopping Center Economic Model

Hummers, Trucks, And SUVs

Private Jets

Flaunting Wealth

The Idea That Housing Always Goes Up

Whole Foods

Eating Out

Expensive Vacations

SIVs

Magazine Cover Stories As Contrarian Indicators

When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing. "The depth of the pools of liquidity is so much larger than it used to be that a disruptive event now needs to be much more disruptive than it used to be. At some point, the disruptive event will be so significant that, instead of liquidity filling in, the liquidity will go the other way. I don't think we're at that point."

Oil And Magazine Covers

For those of us who believe in such things as contrary indicators, this suggests a short term top in Oil to me. I would bet we don't see new highs in Oil for the next 6 months, and perhaps even 12 months.



Excerpt:



Thirty-five years on, oil prices have quadrupled again, briefly soaring to a peak of just over $135 a barrel. But, so far, this has been a slow-motion oil shock. If the Arab oil-weapon felt like a hammer-blow, this time stagnant oil output and growing emerging-market demand have squeezed the oil market like a vice. For almost five years a growing world shrugged it off. Only now is it recoiling in pain.