Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
CHIA Coins After 1st Week of Plotting 140 Plot 14tb Farm. Crunching the Numbers How to Win - 15th May 21
Tips to Create the Best Cross-Functional Teams - 15th May 21
Gold: Lose a Battle to Win the War - 14th May 21
Are You Invested in America’s “Two-Hour Boom” Fast Shipping Stocks? - 14th May 21
Gold to Benefit from Mounting US Debt Pile - 14th May 21
6 Solid Signs You Should Have Your Smart Device Repaired Right Away - 14th May 21
Ways to Finance Your Business Growth - 14th May 21
Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
How Much CHIA Coins Profit from 100 Plot 10tb Farm? Hard Drive Space Mining - 13th May 21
Stock Market Bulls Getting Caught in the Whirlwind - 13th May 21
Legoland Windsor Mini land and Sky Train Virtual Tour in VR 360 - UK London Holidays 2021 - 13th May 21
Peak Growth and Inflation - 13th May 21
Where’s The Fed? Watch Precious Metals For Signs Of Inflation Panic - 13th May 21
Coronavius Covid-19 in Italy in August 2019! - 13th May 21
India Covid Apocalypse Heralds Catastrophe for Pakistan and Bangladesh - 13th May 21
TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
Gold Price During Hyperinflation - 12th May 21
Stock Market Extending Phase Two? - 12th May 21
Crypto 101 for new traders – ETH or BTC? - 12th May 21
Stock Market Enters Early Summer Correction Trend Forecast Time Window - 11th May 21
GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
Cathy Wood Bubble Bursts as ARK Funds CRASH! Enter into a Severe Bear Market - 11th May 21
Apply This Technique to Stop Rushing into Trades - 10th May 21
Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
CHIA Getting Started SSD Crypto Mining by Plotting and Farming on Your Hard Drives Guide - 9th May 21
Yaheetech Mesh Best Cheap Computer /. Gaming Chairs on Amazon Review - 9th May 21
Breaking US Trade Embargo with Cuba - Build 7 Computers in 14 Hours Before Ship Sales Challenge - 9th May 21
Dripcoin Applies New Technology That Provides Faster Order Execution - 9th May 21
Capital Gains Tax Hike News: Was It REALLY to Blame for Sell-off? - 7th May 21
Stock Market Transportation Index Continues To Grind Higher - 7th May 21
SPX Stock Market Correction Arriving or Not? - 7th May 21
How to Invest in an Online Casino? - 7th May 21
Gold & Silver Begin New Advancing Cycle Phase - 6th May 21
Vaccine Economic Boom and Bust - 6th May 21
USDX, Gold Miners: The Lion and the Jackals - 6th May 21
What If You Turn Off Your PC During Windows Update? Stuck on Automatic Repair Nightmare! - 6th May 21
4 Insurance Policies You Should Consider Buying - 6th May 21
Fed Taper Smoke and Mirrors - 5th May 21
Global Economic Recovery 2021 and the Dark Legacies of Smoot-Hawley - 5th May 21
Utility Stocks Continue To Rally – Sending A Warning Signal Yet? - 5th May 21
ROIMAX Trading Platform Review - 5th May 21
Gas and Electricity Price Trends so far in 2021 for the United Kingdom - 5th May 21
Crypto Bubble Mania Free Money GPU Mining With NiceHash Continues... - 4th May 21
Stock Market SPX Short-term Correction - 4th May 21
Gold & Silver Wait Their Turn to Ride the Inflationary Wave - 4th May 21
Gold Can’t Wait to Fall – Even Without USDX’s Help - 4th May 21
Stock Market Investor Psychology: Here are 2 Rare Traits Now on Display - 4th May 21
Sheffield Peoples Referendum May 6th Local Elections 2021 - Vote for Committee Decision's or Dictatorship - 4th May 21
AlphaLive Brings Out Latest Trading App for Android - 4th May 21
India Covid-19 Apocalypse Heralds Catastrophe for Pakistan & Bangladesh, Covid in Italy August 2019! - 3rd May 21
Why Ryzen PBO Overclock is Better than ALL Core Under Volting - 5950x, 5900x, 5800x, 5600x Despite Benchmarks - 3rd May 21
MMT: Medieval Monetary Theory - 3rd May 21
Magical Flowering Budgies Bird of Paradise Indoor Grape Vine Flying Fun in VR 3D 180 UK - 3rd May 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stocks and Bonds Inflationary Slingshot

Stock-Markets / Financial Markets 2021 Apr 17, 2021 - 01:30 PM GMT

By: Gary_Tanashian

Stock-Markets

Cost-push inflation could break out (and a note on gold)

Before beginning the post a little context is in order. We (NFTRH) anticipated the current pause in long-term Treasury yields (one indicator of inflation) because pro-inflation sentiment became over-done in March and was due for a cool down; so said a contrarian view. This post discussing the likelihood of more inflation to come is not written by a one-way bias booster. It’s important for credibility to make these distinctions from the herds running with the daily news cycle.

The short-term contrary sentiment situation against the inflation view began with the Bond King’s media-touted short of long-term Treasuries (i.e. expectation of higher yields), per one of our best macro tools…


…and continued with news of 77% of Americans’ fear of inflation…

…as Ma & Pa were given a prime time view of the inflation problem. See Peter Schiff Scares Ma & Pa, Inflation Gets Tuckered Out…

…and importantly, with ISM’s latest release showing a booming manufacturing sector right along with booming costs paid by said manufacturers. See A Decidedly Different Look at the ISM RoB.

\

Above is the funny graphic (funny to me, anyway) I created for that post. Here are the hard numbers included in the ISM report, a fabulous headline reading of US manufacturing data for March.

But here is the key component of the report, from the standpoint of an oncoming inflation problem.

All well and good. Inflation is not that bad yet, now is it? The CPI is on its perma-trend upward as usual. Producer prices (PPI) are rising but still in a manageable (sideways) trend.

PPI (St. Louis Fed) shows that flat trend, a product of the Goldilocks years of post-2011 (kicked off by Operation Twist and it’s expressed goal of “sanitizing” inflation signals right out of the macro). The Bernanke Fed literally painted the macro to behave a certain (non-inflationary) way.

But here we may want to think about slingshots and counter-reactions if we believe that man made signals will not, cannot overpower natural market forces forever. In 2008 a climax to the commodity bubble (and logically, PPI) immediately preceded a massive liquidation of the whole inflated mess. It’s as if the consumer can get screwed slowly over the decades, but when manufacturing and its raw materials costs get out of hand, then it’s serious business.

This is the gateway to an inflation problem that will be readily recognized as damaging to the economy and to peoples’ everyday lives as rising input costs start to eclipse economic activity. But will the disaster be in the form of liquidation this time? Will PPI break out to new all time highs? It has actually already ticked a slight new high and it appears the Fed has no inclination to put its foot on the break. At least that is the card they are showing right now.

One reason to believe that maybe it will be different this time is because the Fed has already released the hounds, the inflationary hounds into the global macro playing field. In Q4 2008 NFTRH’s very first subscriber, the late Jonathan Auerbach (then managing partner of Auerbach Grayson) sent me one of his many memorable quotes as we had been discussing the oncoming inflationary operations by the Fed, simply writing “It’s inflation all the way, baby!”. For context, recall that in the Armageddon ’08 liquidation that was a most unpopular sentiment.

But back then the Fed had not released nearly the number of inflationary hounds as they did in 2020. M2 money supply has been cranked to an epic – genie out of the bottle – degree.

Considering the idea that Bernanke’s maniacal Operation Twist macro manipulation may just have helped kick the inflation can down the road for a decade in tandem with the strenuous increase in money supply today vs. all other instances, with manufacturing costs PUSHING into the economy, it could well be different this time as the Wizard finally loses control of the monetary/economic condition he has used for decades since gold was removed (as an official monetary instrument) from the equation in 1971.

Refer again to the CPI/PPI graph above. When exactly did consumer and producer prices start to rise persistently? Yup, after 1971.

As implied above, the PPI is the cost set that matters most where economic health is concerned. Consumers have been fed cheap credit on which to deal with their slowly but persistently rising costs. But when manufacturers get slammed with impulsively rising costs they either pass them along or go out of business.* When input costs get passed through supply chains economic activity starts to become more volatile, at best or starts to grind to a halt, at worst. Enter the battle with the Stag…

Gold got one little mention in the article above and that is because I cringe when inflation touts obsess on gold. It has so many other monetary and financial utilities, fairly pedestrian inflation protection among them. But if Stagflation (the more economically damaging form of inflation) enters the economy I would bet that gold’s utility vs. economically sensitive commodities will again come to the forefront.

Gold is providing an opportunity for would-be buyers to enter the bull market that officially began in 2019 as its massive Cup (monthly chart) makes a painfully constructed Handle. This is a good thing. This is the period where the hangers-on are weeded out. Even better, the correction is nearer its end than its beginning if recent sentiment is a good guide, which for gold it usually is.

In NFTRH we have plotted the longer-term upside target and each week manage the ongoing short-term correction. But taking this big picture at face value, realize that gold actually led the macro out of the 2020 deflationary disaster and into the inflationary phase that everyone became so hysterical about by March, 2021.

It may or may not lead the next phase, a would-be transition to more virulent inflation, but it will certainly have valuable utility. And if somehow it is not different this time? If it’s another deflationary liquidation along the Continuum (1st chart above)? Well, history speaks for itself as gold led in 2001, 2008 and again in 2020 out of those deflationary episodes.

* Or continue to innovate through automation, which as a manufacturer I noted in my second ever public article in 2004. But against an inflationary firestorm, there are limits to the progress of productivity.

Subscribe to NFTRH Premium (monthly at USD $33.50 or a 14% discounted yearly at USD $345.00) for an in-depth weekly market report, interim market updates and NFTRH+ chart and trade setup ideas, all archived/posted at the site and delivered to your inbox.

You can also keep up to date with plenty of actionable public content at NFTRH.com by using the email form on the right sidebar and get even more by joining our free eLetter. Or follow via Twitter ;@BiiwiiNFTRH, StockTwits or RSS. Also check out the quality market writers at Biiwii.com.

By Gary Tanashian

http://biiwii.com

© 2021 Copyright  Gary Tanashian - All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Gary Tanashian Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in