Friday, August 7, 2009

How about the Bernstein bear?

How about this beauty:

The outperformance of late-cycle commodity-related stocks, however, is disconcerting. Rising commodity prices act as a tax on the corporate and household sectors. Recent optimism regarding corporate profits is based on cost cutting and productivity, yet rising commodity prices imply increased margin pressures. Employment growth certainly seems unlikely if profit margins remain squeezed. The household sector’s income has barely improved let alone improved enough to negate the tax increase effect associated with rising commodity prices. If the US consumer had trouble with rising gasoline prices when employment was robust, then they are surely going to have trouble with rising commodity prices when employment is still weak.

Talk about being afraid of your own shadow!

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