Talk is Cheap

Talk is cheap.

That’s what I thought when I read Governor Trichet’s speech last week. Just when oil prices started to cool, the European Central Bank President commented on inflation, and how the ECB could raise rates at its next meeting. This caused the Euro to rise, and that sparked another round of oil price speculation. We’re now looking at oil in the 130s.

Congratulations, Governor. Our recent stimulus checks are now going into pre-buy programs and gas tanks. This may be enough to slow our economy significantly. If you’re worried about inflation, Jean-Claude, you don’t need to be concerned about European exports to the US now. They’re gonna be dead as a doornail.

But I’ll be watching what the ECB does at its next meeting. Trichet has been fond of noting how the ECB doesn’t pre-announce its decisions. I don’t know the last time that the markets watched a European central bank with such interest. But when markets are fast and times are hard, its best to be skeptical of what bankers say, but watch very carefully what they do.

Douglas R. Tengdin, CFA
Chief Investment Officer
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