Wednesday, May 18, 2005


Inflation Tame, Stop Yuaning, Economic Data Misinterpreted, Flint's Non-denial Denial

The BLS released the inflation report and it showed what was expected for April. The rate was up 0.5%, but was no change excluding energy. Nothing we buy excludes energy, so it's not always realistic to ignore it. In this case though, May's oil prices are lower than April, and may yet head lower, so upcoming CPI data are likely to be quite good, and may even show deflation.

Despite a year of increasing interest rates, long bonds really have not budged. The gold price is well off its highs. Inflation is probably dead. The dollar is rising in value compared to other currencies. The Fed will keep raising rates, though they can probably stop now. Beware: a 2001-like slowdown is still unlikely, but the risk of one is increasing.

The Chinese yuan may be allowed to float, which may be a bad idea. It reminds me of my blog recently how Sen. Schumer, knowing the Treasury was negotiating this, made Secy. Snow look really bad, when Snow played this close to the vest. Now the story is out.
Snow statement
Treasury report to Congress
New York Sun editorial

Alan Reynolds disputes recent reports about how much slower social economic mobility has become, with a good statistical discussion. It can be found at . Economist Bruce Bartlett will be doing the same and I will link to that as well.

I don't comment about companies (unless they make bad software, I guess) but the funniest news story today was about Flint Ink. The company denied it was being auctioned, but it said "The company is not for sale" and at the same time it said to a reporter "We have been and are currently involved in a number of discussions; takes time to find the right complement and the right fit." The non-denial denial. Rumors have been around about this for months. Remember, Flint is a privately held company, and it's huge ($1.47 billion) in printing supplier terms. I wonder if the word "auction" was just misinterpreted or mistranslated. "Auction" is a word often used in conjunction with stories about bankruptcies. Flint is no bankrupt company. I would hope that people realize that "auction" in this case means "highest bidder" buying a successful industry legend that is still successful and market-moving. It's not embarrassing to be in a successful privately held company where the owner wants to cash out for any reason. Obviously market conditions have changed, and a new owner is one way among many of bringing new eyes to unfamiliar circumstances. Private companies, though, are not used to public scrutiny in business dealings, and that may be what we have going on here. Negotiations, especially those in early stages, are by their nature delicate, and even potential buyers like confidentiality so as to not tip a competitive hand, or to let other suitors know who else in in the running. But then again, companies have "leaked" situations "accidentally on purpose" to attract bidders and intensify negotiations. It will be interesting to watch this play out, that is, if it actually does. Many companies go up for sale, and are then withdrawn for any variety of reasons.

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