 Regarding social indications, I was wondering what you and your staff feel about the "Forever" stamp that the US Post Office is selling. Once you buy it at 41 cents, you can use it for a first-class letter even if the rate goes up. Fifteen years from now, when postage may have deflated along with everything else, will we realize that it was another indication of a top?
--Jim Modecki
We cannot say for sure because there’s never been another “Forever” stamp. But it does seem like the perfect timing. The story at left might be another sign that inflation is approaching a breaking point. A skeptic will probably note that the headline doesn’t necessarily mean that drivers are spending less. They’re actually spending more because gas prices are up. The word on the street is that $4 a gallon is inevitable. Of course, the whole point of The Economy & Deflation section of The Elliott Wave Financial Forecast is that this won’t happen. One sublte sign of the deflation EWI has been forecasting is the discrepancy between the new highs in pump prices and crude oil prices which peaked last July. Which one is right, higher pump prices or the net downtrend in crude? We think its crude for all the reasons cited in The Elliott Wave Theorist’s “Peak oil” analysis of July 2006 (also see the follow up analysis in the December 2006 issue of EWFF).
Another key piece of evidence is a second feature in today's USA Today: “Detroit Meltdown Seeps Into Nearby Suburbs.” The article is mostly about real estate, which is the most relevant deflationary fact, but it adds that a new sense of fnancial conservatism is sifting into the larger economy as well. For the first time in its five year history, a Gross Point, Mich., restaurant has experienced flat revenues as “‘People are cutting back spending. They eat lunch out once a week, not three times a week,’ says Ed Firestine. It’s time, he says for big changes. ‘We have to redefine ourselves,’ he says.”
It's doesn't necessarily happen all at once, as last October’s EWFF explained:
Big peaks can be frustratingly diffuse, and the hair loss experienced by your editors from this one is definitely approaching Grand Supercycle dimensions. Instead The turn is taking a saw tooth form in which some markets such as oil cut sharply lower while others follow more slowly and a few drift slightly higher as seeming safe havens. It is not unusual for investors to narrow their focus before they cut and run. Eventually, they always give in.
Obviously, they have yet to give in on stocks, but at the pump and the post office the breaking point appears at hand.
POSTSCRIPT:Southwest Airlines has just extended their "Fare Sale" for the second time. Originally, it was to have ended on May 10. Then, it was extended to May 17, and now it's supposed to end on May 24. I monitor their site regularly, and this is the first time I can remember that they've extended any kind of sale, especially for two iterations. I wonder if this is indicative of the economy. If no one is signing up to buy something, a company will have a "sale" to get things rolling. BTW, I liked the article about the stamp.--J.M. |
