Massive buildup in inflation pressure in the commodity front and stagnating productivity – the first signal of long term bear market in stock market
Sam Adelton
Aug. 6, 2007

The commodity inflation is the sign of bear market in equities. The rise in CRB index in recent weeks confirms that the stock market is headed for a long-term bear market.P> When corporations have lost pricing power, the only way to increase the profitability of the enterprise is in cost control. While wage deflation is intact, commodity inflation causes massive problems. The rise in productivity compensated for the commodity inflation in the last three years. However, in recent months the productivity has stagnated while the commodity inflation has accelerated.

The net effect is explicit inflation in the economy. Gold price is reacting to the same. Bonds are also trading higher pushing yield lower.

The net effect on the stock market is severely bearish. The last thing stock market bulls can tolerate is explicit inflation. Lower dollar, lower stock prices, and higher gold prices lay ahead of us.

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