inflation is dead ... long live inflation!

One of the key drivers of inflation in recent years has been rising energy prices. Then this summer, they started plunging. That, in turn, helped set the stage for a dramatic decline in both the Consumer Price Index and Producer Price Index and a nice rally in Treasury prices/decline in yields.

But have you noticed something recently? Oil prices have stopped going down ... and are starting to go UP. Today, crude oil futures are up more than $1 to the $62 range. Natural gas futures prices bottomed around the mid $4s in late September. They're up to about $8.50 now. Energy stocks are outperforming as well, suggesting that traders believe more gains are coming. Throw in colder weather ... the potential for a second OPEC output cut ... a declining dollar (which drives up the price of commodities that trade in dollars, like oil) and other forces, and you've got the potential for a re-emergence in energy-based inflation.

This isn't a HUGE force yet. It's just something percolating in the background that could impact interest rates down the road. Stay tuned.