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John Lounsbury
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Jeff - - - A week ago Steve Hansen posted an article about the latest PPI data: He has been following the decline in PPI over recent months. There are two relevant factors to your discussion: 1. PPI has been declining toward the CPI number. It's still higher (ca. 4%) but was much higher several months ago. 2. The Crude goods PPI has been very much higher than the finished goods number for the past year but has now come down almost to the same level. These two events are indicating less margin pressure for finished goods producers and should help earnings improve in those sectors. I am a mean reversion advocate, simply because I do not believe the business cycle has been overturned. However, there are some things happening right now which may mean that the next business cycle dip may not be quite here yet, ECRI's stubborn prediction notwithstanding (and John Hussman and others as well). I believe your discussion is very timely.
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Feb 25, 2012