There is No Inflation

Nothing to See Here

Just kidding. The end game is inflation. The path to that endgame is flexible. If you doubt the Fed's desire (obsession) to inflate, consider what real deflation looks like and ask yourself, were we anywhere near the chart below before the panic set in? No, and if we were near it, it was the profit margin of companies that would have suffered most. The people were already fired from their jobs in 2008-2013 as companies prepared for the need to lower prices... But did they? Were corn flakes lowered in price despite all this deflationary fear and  technological advances in production? Not in general. At its worst point, people suffered all the negatives of a depression while corporations shed costs to keep their profits up. Who filled the gap for people? The government through spending and aid. Why? Because corporations did not pass their efficiencies on to the consumer as they could have. They fired you and then cried poverty to the government.

Real Deflation: when market forces drove prices down to compensate for unemployment



Global lnflation Check-Up

It is becoming useful to look at the world as one economy now. To start, the UK is the only country fitting the usual path. Others are admittedly not so easy to decipher. But as a whole, inflation is coming to the US. Last and badly we think.


From Oct 18th- The UK is Ground Zero for Inflation

Nothing has made sense. Fundamentals are useless. Active management is devalued. Stocks go up on bad news, and up on good news. Correlation Lock is on the horizon again. Here is something that finally makes sense.

  • Fact 1:The UK has the best-performing major equity market this year 12.08%
  • Fact 2: In constant-currency terms, it's the worst-performing. GBP/USD=-16.67%

UK Update: Stocks, You still Can't Eat Them

Translation? Stocks are up as a proxy for a weaker GBP. Right now they are offsetting the GBP weakness, but that will not last long. And if you are buying bread in the UK, you are going to be screwed. Inflation will almost quadruple to 2.7 per cent over the course of 2017, according to the Centre for Economics and Business Research.


Chinese Inflation- Jan 9th - Producer price inflation in China rose more-than-expected last month, official data showed on Tuesday.In a report, National Bureau of Statistics of China said that Chinese PPI rose to an annual rate of 5.5%, from 3.3% in the preceding month.Analysts had expected Chinese PPI to rise to 4.5% last month. OOPS!

Japan- Got nothing yet

Admittedly we do not see the signs hoped for here in inflation terms. Perhaps the nations aging, homogenous, population is part of the analytical problem. They were first in, and we thought would be first out. But so far no dice to our criteria.


Germany- Growth Without Inflation... Yet

Reuters Jan 12th "German economy surges at fastest rate in five years"

The German economy expanded at the fastest pace in five years in 2016 and the growth momentum is expected to continue this year as rising private and state spending help Germany cement its position as the locomotive of the euro zone.

Rising inflation fueled mainly by higher oil prices is expected to eat into the purchasing powers of Germans this year, restraining the growth impetus from consumption. State spending could also shrink as refugee arrivals fall. RTRS


The US- Why Bother

There is no inflation. There are only "1 time charges for fuel" and "special fees for usage". There is CPI sans energy and rent. The books are cooked adn it is only our supplication at the Church of Government "Facts" that blinds our inducing the truth. There is a financial press with Pom-Poms at the ready for Dow 20k. No, the US has no "Bad" inflation. Only asset inflation. So when the bad inflation does finally hit, as it will all you have to do is sell your stocks to pay for your food. No stock portfolio you say? You had to sell them all to survive from the time you lost your job?  Then stock up on cat-food. The Government is here to help.



Gold had a horrible year-end. And yet it was up against all major currencies. Right now  self-deluding Fed feels that if inflation gets out of control, they can merely raise rates to slow it. This confidence is based on the 10 years it took for them to stem deflation, mind you. 

We believe this is likely going forward with intervening hiccups (and accerations) from QEs, trade wars,Brexits, Helo Drops etc:

  1. Rates will rise- and the headlines will be "Gold yields nothing, Buy Bonds"
  2. Rates will still rise at the long end as Fed Funds go higher to stem the weakening USD- The yield curve will steepen and Banks will profit
  3. At some point the markets will realize that the Fed is chasing inflation- and Gold will accelerate

In the end, it will be heralded as a good thing that they chased inflation to make sure they did not derail the economy. It will optically look like you should be buying bonds or dividend stocks as Gold yields nothing.

But in the end, real rates will have been negative and your cash will be shrinking in buying power because the Fed chased inflation up.

h/t Frank Holmes for pic

As the USA will leave the poorer countries of the world holding the USD bag, so will the US leave the working class holding the inflation bag. There is nowhere to hide. The US will debase its currency to cheapen its outstanding debt. The populace will bear the brunt of this from domestic inflation. Basically the government will default to the consumer.


Invest Like the Fed- Buy, Debase, Default

Imagine taking all your cash, buy stocks, Gold, and then default on your credit cards. Congratulations, you are now a world power. But do it before the Gov't outlaws cash, CUSIPs Gold, and makes filing chapter 11 impossible. Countries and Corporations have more exercisable rights than us.


Gold Sucks Because CNBC Told Me So.


Gold is doing exactly what it is supposed to do. 


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