June 2 2008 musings.

Bill Gross: Lies, Damn Lies and Government Inflation Data
see complete article below.

Here is what i think is going to work eventhough i am not a big fan of
commodities.

1. Commodities (DBC, DBA, POT ...
2. Cash or Good short term debt
3. Preferreds or bank loans. if economy sours then the bank loans can go south.
4. Equity ( MSFT, ORCL, GE(??))
banks/retail/consumer discretion would be duds till the commodities cool
and consumer spending picks up.


Bill Gross: Lies, Damn Lies and Government Inflation Data
Posted Jun 02, 2008 12:26pm EDT by Aaron Task in Investing, Newsmakers, Recession
Related: PTTAX, ING, ^SPX, SPY, TLT
Pimco's Bill Gross provides detailed analysis on what most Americans already know: The government's "official" data understates inflation.

Gross' treatise focuses on how CPI is compiled -- with hedonic adjustments and "owners' equivalent rents" -- in a way that's unique in the industrialized world. Such adjustments and a focus on "core" inflation -- or "inflation excluding inflation" as Barry Ritholtz calls it -- help explain why the Fed is far less concerned about inflation than central bankers in other parts of the world.

If the financial markets were to "readjust" to actual inflation, the stock market would lose 10% of its value and the bond market 5%, Gross says.

Gross, whose firm manages more than $800 billion in mostly fixed-income assets, fails to explain why stocks (and real estate, for that matter) will suffer more than bonds in this hypothetical "readjustment of investor mentality."