Reality Check: Inflation

A crucial economic report is due Wednesday. Will it reveal that 70’s style inflation is back in fashion?

On Tuesday we learned that inflation at the wholesale level soared in March at nearly triple the rate that had been expected as the costs of energy and food both climbed rapidly, explains Dylan Ratigan.

On Wednesday the CPI number comes out, which many economists expect will reveal a similar story. Is inflation about to become the next big problem to vex the stock market?

Zachary Karabell President of River Twice Research joins the panel for the conversation. Following is a summary of his main points.

Is this the 1970’s all over again?

I don’t think so, replies Karabell. People on Main Street think there's inflation because food and energy prices are going up and it costs them more to put gas in their cars. However, non-food and non-energy prices appear to be contained. In other words, the price for manufactured stuff doesn’t really appear to be changing a lot, and that’s very different from the 1970’s.

How about earnings?

I think profits will be challenging for corporations that can’t pass along food and energy costs. I expect food companies and restaurant companies to have a hard time.

Traders are you concerned about margins?

If companies can’t pass along any more increases to the consumer, says Karen Finerman then their margins have to go down. I’m a little concerned.

The consumer might be drifting downward and I like Wal-Mart

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[WMT  Loading...      ()   ] on this trend, adds Jeff Macke.

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Trader disclosure: On Apr. 15, 2008, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Macke Owns (YHOO), (INTC), (MSFT); Finerman Owns (GS); Finerman's Firm And Finerman Own (HD); Finerman's Firm Owns (MO), (MSFT), (PM), (SUN), (TSO), (VLO), (YHOO, (UFS); Finerman's Firm Is Short (SPG), (COF); Najarian Owns (AAPL), (AMR), (BIIB), (CSCO), (MSFT), (TSO), (XLF), (YHOO); Najarian Owns (LEH) Puts; Najarian Owns (WLT) Calls; Najarian Owns A Call Spread In (IBM); Najarian Owns A Call Spread In (INTC); Charles Schwab Is A Sponsor Of "Fast Money"