Even though the official US CPI and PPI Inflation Indexes currently show negligible inflation rates... I simply just don't buy it... as many of the inflation indicators I look at are flashing "bright red" warning signals.

For example, Light Sweet Crude is up approximately an astonishing 170% in only approx. 2 years... this is serious people... petroleum based products play a very wide role in the American economy, effecting just about everything we use in our daily lives... from our automobiles, to our mass transportation systems... from our food, to our clothes, petroleum plays a role in just about every product at some stage in its cycle. And what about those high gas-pump prices that act as a hidden tax on an already debt laden consumer? (Ouch!)...

Light Sweet Crude from July 2003 to Present.

Another important inflation indicator is Natural Gas... currently up just over 100% in approx. 2 years.  Natural Gas has been touted as one of the most important energy sources of the future... however, with increases averaging over 50% per year for the past 2 years, I'm beginning to think Natural Gas will start loosing some of it's luster soon, if it hasn't already. Solar, Wind, and Hydrogen power are all going to start looking much more appealing soon...

Henry Hub Natural Gas from July 2003 to Present.

Another very important inflation indicator is the CRB Index... in case you didn't know... the CRB Index is made up of approximately 17 different commodities... and because of the wide ranging make-up of commodities in the CRB Index, a fast rising CRB Index is a sure sign of rising inflation... and as you can see from the chart below... the CRB Index is up approx. 35% in the past 2 years (or approx. 17% per year avg. over the past 2 years)...

CRB Index from July 2003 to Present.

So what's all this inflation doing anyways?????... well for one thing, it makes the cost of doing business much more expensive (and risky). You might even be able to see the effects of inflation on Wall Street... because rising inflation increases the cost of doing business, and that puts pressure on profits, making stocks less appealling...  you can see from the 10 Year DJIA Chart below, the DJIA has basically been stuck between a trading range of 10,000 - 11,000 for the past 18 months (which also happens to correspond to the same approx. period of accelerating price increases in Energy and Commodities)... you can see in the years prior to Jan 2004 that the price action in the DJIA was much more viral (notice the wider spaces between the red bars). Clearly, one can see the trading pattern in the DJIA since Jan 2004 is not normal, especially noticeable when compared over the 10 year chart...

DOW JONES Industrial Avg. - 10 year Chart from Present.

Currently the DJIA is in a "loss position" for 2005 Y.T.D. as can be seen on the DJIA Year-to-Date chart below...

DOW JONES Industrial Avg. - Year to Date

Personally, I feel inflation is much higher than currently reflected in the official CPI or PPI Indexes... the evidence seems to suggest that Inflation has been understated (probably for political purposes - here's a good audio article that explains why inflation figures are understated for political reasons)... as Economist John Williams basically says... if the current Bush Admin. tracked inflation using the same benchmarks as the Clinton Admin., inflation as currently reported would be substantially higher.