Inflation emerges as early summer scare

Inflation clearly was the keyword of the week, as fears of rising prices sent stocks tumbling and forced pundits to try to explain it all.

Inflation clearly was the keyword of the week, as fears of rising prices sent stocks tumbling and forced pundits to try to explain it all.
Federal Reserve Chairman Ben Bernanke helped get the ball rolling last Tuesday when he addressed an international monetary conference in Cape Town, South Africa, and said that core inflation “remains somewhat elevated.”
Addressing theFamily Office Forum in Chicago that same day, Mark Yusko, president and chief investment officer for Chapel Hill, N.C.-based Morgan Creek Capital Management LLC, said that, in fact, “inflation may be significantly higher than reported,” noting that such staples as energy and food prices are not included in the federal government’s core inflation figures.
Later in the week, the Department of Labor released figures that revealed rising labor costs and a slowdown in productivity for the first quarter, which fanned inflation worries even more.
The Federal Reserve also piled on, signaling that it wouldn’t cut short-term rates, leaving investors to worry that borrowing costs would rise as price pressures continued to build.
But the resulting stock dip actually was “long overdue,” according to Douglas Pyle, a managing director at New York-based U.S. Trust Co.
“I think the longer-term picture for equities in the U.S. is quite positive,” he told the Chicago Tribune.

Required reading
What are wealth managers reading these days? Investment types at the Family Office Forum in Chicago last week were buzzing about “The Black Swan: The Impact of the Highly Improbable” by Nassim Nicholas Taleb (Random House, 2007).
In the book, which was published in April, Mr. Taleb argues that the majority of major historical events are rare and unpredictable, and although trying to generalize stories to explain them is emotionally satisfying, it is practically useless.“History does not crawl, it jumps,” Mr. Taleb writes, citing 9/11 and stock market crashes as examples. Although assumptions tend to grow out of bell curve predictability, he argues, the world really is shaped by wild, unpredictable swings.
The title refers to the fact that for centuries, Europeans assumed there were no black swans, because no one had ever seen one until explorers found the species in Australia in 1697.

Candid camera
The Smoking Gun website, which specializes in unearthing legal documents, reported last week that the “John Doe” who filed a suit in U.S. District Court in New York earlier this month is Jeffrey Lemerond, a former New York-based analyst for The Carlyle Group in Washington and JPMorgan Chase & Co. of New York.
In the suit, Mr. Lemerond claims that his civil rights had been violated by comedian Sacha Baron Cohen in the film “Borat: Cultural Learnings of America for Make Benefit Glorious Nation of Kazakhstan.”
In the film, Mr. Cohen is seen chasing Mr. Lemerond down a street in Manhattan while “the plaintiff is seen fleeing in apparent terror, screaming for Mr. Cohen to ‘go away,’” according to the suit.
The defendant in the suit, Los Angeles-based Twentieth Century Fox Film Corp., did not obtain Mr. Lemerond’s consent to use his image in the film, according to the complaint. What’s more, it alleges, “the depiction of [the] plaintiff was not newsworthy.” The suit doesn’t specify monetary damages but does note that “Borat” has grossed more than $320 million to date.

Citigroup coughs up
It wasn’t a good week for Citigroup Global Markets Inc., a unit of New York-based Citigroup Inc.
Citigroup agreed to pay $15.2 million to settle charges that a team of its financial advisers misled more than 200 employees of Atlanta-based BellSouth Corp. from 1994 to 2002. Citigroup will pay $3 million to settle civil allegations by Washington-based NASD and $12.2 million in restitution to the former employees.
Like our spin? E-mail comments or suggestions to Charles Paikert at [email protected].