I just got done with an extensive multi-market subscriber update over at NFTRH.com, concluding with this…
“Very generally, for a real (as opposed to a day trader’s) positive view we’d look forward to the prospect of gold topping out vs. silver and the gold-silver ratio’s fellow Horseman, the USD capping its mega rally for a correction. I think these things are coming but too many people have been calling for a commodity rally and inflation. The deflation story is very long in the tooth, but it could end in some fireworks as opposed to just gently expiring in favor of a new inflationary backdrop.”
So being on watch for the end of the deflation backdrop that has held sway since 2011’s ingenious inflation sanitizer, Operation Twist, this article at Bloomberg caught my eye.
As a point of reference, they provided this chart.
I noted this effect some time ago after having my garbage hauler increase prices despite utterly bombed out oil prices. He cited rising administrative costs, fees, etc. in the chain. We note each month the firm upward trend in healthcare services and increasingly now, other services, like the oh so vital hospitality and leisure. From Bloomberg…
“The carnage in the commodities complex is putting a large amount of downward pressure on the headline inflation rate. Other measures of inflation that remove outliers or food and energy prices are considerably higher, thanks to the pace of price increases in medical care services and shelter.”
They include a graphic of some rising prices to make the point. With each employment report, we review and break down the Payrolls data to see an economy servicing itself now. Strong dollars buy a hell of a lot of energy and food right now. But there is an elephant in the room and his name is Services. Here again is the most recent payrolls (by industry) breakdown from the wonderful Floatingpath.com.
As much as I poke fun at them, the Fed is not stupid. Its various members know full well that there is a price to pay for the 24/7, 365 inflationary fire hose routine. Sophisticated market players see this as well, but sometimes their brains work more efficiently than the markets, which are chugging along at their own pace.
Watch the Gold-Silver ratio folks. It still has upside likely, which means it does not yet look like time to go into an inflation trade. But when the GSR blows out, put your thinking caps on.