Jon Erdner,
Founder & Ceo ITS Asset Management, L.P.
The producer price
index dropped a record-setting 1.9% and the Philadelphia Fed's
[factory] index was... -4.8% in the latest monthly survey. Recent
talk of deflation is... another reason for investors to take pause.
With the rapid run-up in stocks since mid-March and a weakening
economy, there is little reason to chase the market [now]....
Monetary indicators have improved over the past two weeks, but
more liquidity must be pumped into the economy to provide the
lift needed to keep deflation from taking over.... Bonds: Both
short- and long-term interest rates dropped to multi-year lows
last week [May 12-16]. This is an indication that the economy
really is heading toward a period of deflation. [But] the dollar
is declining and oil and gold are rising... signs of inflation.
