Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
USDT Ponzi Scheme FINAL WARNING To EXIT Before Tether Collapses Crypto Exchange Markets - 22nd Jun 21
Stock Market Correction Starting - 22nd Jun 21
This Green SuperFuel Could Change Everything For the $14 Trillion Shipping Industry - 22nd Jun 21
Virgin Media Fibre Broadband Installation - What to Expect, Quality of Wiring, Service etc. - 21st Jun 21
Feel the Inflationary Heartbeat - 21st Jun 21
The Green Superfuel That Could Disrupt Global Energy Markers - 21st Jun 21
How Binance SCAMs Crypto Traders with UP DOWN Coins, Futures, Options and Leverage - Don't Get Bogdanoffed! - 20th Jun 21
Smart Money Accumulating Physical Silver Ahead Of New Basel III Regulations And Price Explosion To $44 - 20th Jun 21
Rambling Fed Triggers Gold/Silver Correction: Are Investors Being Duped? - 20th Jun 21
Gold: The Fed Wreaked Havoc on the Precious Metals - 20th Jun 21
Investing in the Tulip Crypto Mania 2021 - 19th Jun 21
Here’s Why Historic US Housing Market Boom Can Continue - 19th Jun 21
Cryptos: What the "Bizarre" World of Non-Fungible Tokens May Be Signaling - 19th Jun 21
Hyperinflationary Expectations: Reflections on Cryptocurrency and the Markets - 19th Jun 21
Gold Prices Investors beat Central Banks and Jewelry, as having the most Impact - 18th Jun 21
Has the Dust Settled After Fed Day? Not Just Yet - 18th Jun 21
Gold Asks: Will the Economic Boom Continue? - 18th Jun 21
STABLE COINS PONZI Crypto SCAM WARNING! Iron Titan CRASH to ZERO! Exit USDT While You Can! - 18th Jun 21
FOMC Surprise Takeaways - 18th Jun 21
Youtube Upload Stuck at 0% QUICK FIXES Solutions Tutorial - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations Video - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations and Trend Analysis into Market Correction - 17th Jun 21
Stocks, Gold, Silver Markets Inflation Tipping Point - 17th Jun 21
Letting Yourself Relax with Activities That You Might Not Have Considered - 17th Jun 21
The Federal Reserve and Inflation - 16th Jun 21
Inflation Soars 5%! Will Gold Skyrocket? - 16th Jun 21
Stock Market Sentiment Speaks: Inflation Is For Fools - 16th Jun 21
Four News Events That Could Drive Gold Bullion Demand - 16th Jun 21
5 ways that crypto is changing the face of online casinos - 16th Jun 21
Transitory Inflation Debate - 15th Jun 21
USDX: The Cleanest Shirt Among the Dirty Laundry - 15th Jun 21
Inflation and Stock Market SPX Record Highs. PPI, FOMC Meeting in Focus - 15th Jun 21
Stock Market SPX 4310 Right Around the Corner! - 15th Jun 21
AI Stocks Strength vs Weakness - Why Selling Google or Facebook is a Big Mistake! - 14th Jun 21
The Bitcoin Crime Wave Hits - 14th Jun 21
Gold Time for Consolidation and Lower Volatility - 14th Jun 21
More Banks & Investors Are NOT Believing Fed Propaganda - 14th Jun 21
Market Inflation Bets – Squaring or Not - 14th Jun 21
Is Gold Really an Inflation Hedge? - 14th Jun 21
The FED Holds the Market. How Long Will It Last? - 14th Jun 21
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Inflation Hits Google, Share Price Falls 14%

Companies / Google Apr 16, 2011 - 12:21 PM GMT

By: PhilStockWorld

Companies Best Financial Markets Analysis ArticleWell who'd have thunk it? 

The cost of doing business is rising and GOOG happens to be one of those businesses that lacks pricing power as their rates are generally set through an auction process and their users have to VOLUNTEER to pay more money to advertise.  Most advertisers on Google are on fixed budgets, like MSM advertisers and Google has done a great job of replicating that model.  Why then, should it be surprising if a maturing Google begins to look more like a traditional media outlet than a dot com company with exploding growth?

Don't get me wrong, we love Google long-term but we did short them as well as BIDU into Google earnings as we felt Google would disappoint enough to spook BIDU investors as well.  We're taking the short money and running and looking for some bullish plays now - the drop from $630 last month to $545 today is plenty of froth blown off the top for us to get long-term interested again.  As you can see from the tag cloud of the Conference Call, growth is still there, especially in mobile display ads (Android a bit disappointing) and no major negatives.  I'm not going to write a whole thing about GOOG though, there are thousands of people doing that and our Members know well enough where I stand.  I'm more interested in examining the bigger picture.  

We expected Q1 earnings to be rough and we've already seen FDX, NKE, ORCL, RIMM, FAST, FCS and AA struggle so hopefully you don't have to be hit on the head with another whole week of earnings before you get a little more cautious.  Next week we hear from C, HAL, LLY, TXN, BK, GS, INTC, IBM, SYK, USB, VMW and YHOO on Monday and Tuesday and then we're off to the races with hundreds of companies reporting each week for the rest of the month.  Our job in the first few weeks of earnings season is to get a feel for the quarter and, so far, that feeling is rough.  

It's all about inflation, of course and don't say we didn't warn you about that one!  We went more  bearish up at those 100% lines we've been watching and now the question really is - how bad was it? Inflation is, after all, our long-term BULLISH premise. We don't think corporations are performing better - they are simply benefiting from a weak dollar, a loose labor market, cheap money and a lack of competition (because the weaker ones are going bankrupt). To say this indicates a strong economy is like saying the last few surviving Bald Eagles benefit from having their pick of the best nests now that the rest are dead....

I mentioned yesterday that the major indexes are barely keeping up with inflation and we're being led higher by XLE (energy), XME (metals and mining) and, recently, XME (health care) as inflation is the only real growth story we have. Since wages are static, jobs are not increasing and stimulus is absent (in fact austerity is in vogue at the moment), the success of these sectors merely sucks money away from the others.  Everyone can't do well at the same time yet the Trade Bots have relentlessly pumped up pretty much all 9,000 publicly traded stocks as if every single one was a gem to be treasured.  We began to get bearish when we determined that the physics no longer worked and the cost of propping up the markets was becoming prohibitive - even for blatant, criminal (allegedly) market manipulators like GS (who were handed $800Bn by the Fed to jam up the markets) and the rest of the Gang of 12.  

But we ARE Long-Term bullish.  The pattern of inflation is to come first through the commodities, then that puts pressure on margins (this Q) then that forces producers to pass on price increases to the consumers.  At that point (Q2), one of 2 things can happen - either commodity prices come back down and there is a large increase in margin (this is what the bulls are betting on, that the commodity spike won't last but low wages will) or the prices will be rejected by consumers who will turn around and demand higher wages and either those will get paid and we begin an inflationary cycle or the wage demands can be rejected and consumers are forced to cut back - leading to yet another recessionary cycle and possibly stagflation if prices don't follow down.  

So there are many ways this can end badly and only a few it can end well but the overriding fact of the moment is that the Fed is flooding us with money and that money is, for the most part, sitting in bank vaults and on corporate balance sheets so there is plenty of it to hire people and raise wages to pay for all the higher prices and that's the long-term hyper-inflationary premise we're working on at the moment.  So far, Q1 earnings have given us no reason to doubt that we are on that path.  

A short-term correction would be nice and we'll see what happens now that tax day is passing and the Government has held up the markets long enough to get paid for their efforts.  In this morning's Member Chat (at the end of yesterday's comments), we already (again) shorted the oil futures at $108.50  - that's become our little cash machine as they goose that sucker every night and then it sells off once trading begins.  Silver is also fun as it crosses below the $42 line as is gold, now crossing under $1,475 but stops are super-important as they jammed everything up yesterday by ditching the Dollar early yesterday.  

Once again USO puts should be interesting at the open - we're still waiting for that blow-off sale of the May contracts.  Copper continues to weaken as China shows more signs of inflation this morning with March CPI up 5.4% and the PPI up 7.3%, both accelerating over February's reading. This is coming despite a considerable overall economic slowdown as hyperinflation is not a genie that goes easily back in the bottle once you let it out!  

We'll see how things play out but caution is the key going forward until (if) we finally break our overhead resistance levels (if earnings do turn around). Meanwhile, we're watching:

  1. Greek debt is trading over 13%
  2. Portugal may be much worse, with the IFO calling it a "Bottomless Pit" that is likely to cost Germany "several hundreds of Billions of Euros." 
  3. Moody's cut Ireland 2 more notches
  4. Fitch cut GE's 2005 Commercial Mortgage Bonds 8 full classes yesterday, which paves the way to many CRE reviews.  
  5. Cash is still flying out of Muni Bonds (and into the market casino)  
  6. The World Bank says food prices "have entered the Danger Zone."
  7. India's inflation hit 9% in March

Our own CPI came in hot at 0.5% for March, 25% ahead of expectations but core CPI (no food, no energy) was only 0.1% as falling home prices trump the few other items that are left in the core (owner's equivalent rent is 42% of the CPI and pretty much all of the Core CPI - a total joke!). Empire Manufacturing once again gave us a strong report at 21.7, led by a 30% increase in the price index so yipee, I guess. March industrial production was solid at 0.8%, much better than last month, so the markets are rallying on that basis just ahead of the bell - which should make for a nice shorting opportunity and give us good covers on our FAS calls!  

Have a great weekend, 


Philip R. Davis is a founder of Phil's Stock World (, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders. Mr. Davis is a serial entrepreneur, having founded software company Accu-Title, a real estate title insurance software solution, and is also the President of the Delphi Consulting Corp., an M&A consulting firm that helps large and small companies obtain funding and close deals. He was also the founder of Accu-Search, a property data corporation that was sold to DataTrace in 2004 and Personality Plus, a precursor to Phil was a former editor of a UMass/Amherst humor magazine and it shows in his writing -- which is filled with colorful commentary along with very specific ideas on stock option purchases (Phil rarely holds actual stocks). Visit: Phil's Stock World (

© 2011 Copyright  PhilStockWorld - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in