The PPI was up by +1.0 pct for July. Excluding food and energy, the index increased +0.4 pct for the month.

Once again Wall Street economists missed the mark. PPI Consensus Forecast for July had been much lower, at up +0.5 pct, based on the much higher energy costs.

And the PPI ex food & energy Consensus Forecast for July had been up +0.1 pct, but the actual number was up +0.4 pct, which was higher than even the highest Wall Street estimate.

These are the same firms, btw, that are estimating corporate earnings. I truly believe most readers can do just as good a job as Wall Street. In any case, you ought not be surprised if you have been reading this blog.

The Lehman economist just this minute told the CNBC audience to ignore the PPI number as just being "a seasonal adjustment". Well, tell that to Wal-Mart shoppers.

Besides one look at the chart shows that July-04 PPI was DOWN for the month, and July-03 PPI was barely up. So, what seasonal factor, pray tell?

As of yesterday, here is the chart for PPI.

U.S. equity futures had been pumped up this morning, based on unreasonable expectations of the HP situation. I advised against reading too much into the Wall Street hype coming out regarding HPQ.

But this PPI report forces you to face truth or consequences.

I expect the broad market will be down again in the U.S. today, and bond yields up. Dow futures are now down -13, which indicates a moderately soft opening.

Yesterday, btw, the yield on the 10-year Treasury note was 4.22 pct, which is less than what the Fed is expected to set for the Fed Rate at within five months. So, if 3-month T-Bills are going to be yielding say 4.25 pct at that point, in order to arrest the inflation cycle that is in process, then where will the 10-year Treasury yield be at that point?

If it doesn't rise significantly, there will be a recession in all likelihood. But, if it does rise correspondingly to say 4.90 pct, or higher, where then will the real estate market be? I say popped".

Anyway, the PPI report today was expected by me, and I continue to say that you need to protect your portfolio, which means cash is not a bad alternative. There will be bargains in the weeks and months ahead in both stocks and bonds, and, within 18 months, in real estate.