Inflationary chickens will come home to roost eventually, either in the form of heightened inflation expectations within a bull environment or in the form of a failed inflation (i.e. deflationary reckoning). Things like crude oil prices and base metals – as discussed in this week’s letter – are poised for potential bull signals and today the US Oil Fund is on the verge of a breakout.
Relax, it’s not confirmed by any means, but the pattern looks good and there are patterns in T bonds implying the same thing as commodities.
I do not know a lot of things but one thing I do know is that admiration or at least subservience is near universal toward our great and dear monetary leader with regard to how he is able to inflate without inflating; ha ha ha. I also know it will not last because he uses dishonesty (i.e. officially sanctioned interest rate manipulation) as a means to what should be a natural ends.
Other than that I have not strong feelings about the matter.
Are we convinced yet that there is no inflation? Well, if not every last player then most seem to be convinced. But I wonder if the TIP-TLT ratio is making a bottom here? I also wonder if just maybe the Fed’s exit strategy noise is timed with a bottom in inflation expectations?
TIP-TLT ratio, weekly
Could the stock market bubble they are blowing be indicating more undesirable guests (like commodities) are going to join the party and they want to tamp things down a bit? Just asking questions here.
We have not looked at the Continuum (TYX monthly view) in a while. The long term structure of the 30 year bond’s yield is a massive but gentle downtrend. That is all it has ever been for decades, in a downtrend since Volcker whipped inflation in the early 80′s.
Last week yields got a bump and it will be interesting to see if TYX can get back up into the channel and indicate is was not a bear flag. The Parabolic SAR (green dots) indicates that the trend is still up. Could we have an uptrend yet?
It would be a long way up to the 4% area where the next financial accident could be indicated as the monthly EMA 100 (red line) halts the party once again. Nobody’s expecting inflation, right? Beuller?
The inflatables are snapping back, Prechter is being closeted for now and perhaps stock markets are readying for their final hurrah. Then, maybe in May or June we’ll have to get back down to the inflation/deflation debate. The monetary base data are an argument for the iBoys. But the dBoys have plenty of ammo until such time as technical damage in things like silver and copper is repaired.
Monetary Base, courtesy St. Louis Fed
The Monetary Base never stopped saying inflation. Yet the dBoys will point to the velocity of M2 among other things to claim there is no inflation.
M2 Velocity, courtesy St. Louis Fed
Fun market; keeps you on your toes. We’ll let the market decide.
US Consumer Prices Rise .7% in February
CPI rises, from MarketWatch
From ammo to zuchs… too funny.
Let’s remember that inflation is not this headline about prices. This is a result of the inflation that has been systematically administered by Dear (Monetary) Leader since well, 2009 and most recently and intensely, since the dawn of 2013 (post-Twist). Let’s remember that the current expected economic bump (and this site expected it dear bull apologists) was not going to come without a cost. Let’s remember that Bernanke is the same buffoon he was perceived to be in 2011.
Let’s remember that you do not just create vibrant ‘organic’ economies out of thin air even if you create money out of thin air.
So, at the risk of getting too excited about one headline I’ll just continue to look forward to the end of the Goldilocks fantasy and toward an investment theme that continues to anticipate a rotation toward lagging sectors, like commodities and resources for example? We’ll also look forward to the deflationary day that this all resolves once again.
Yes, I wrote deflationary. But that could be out a ways after an inflation cycles whips up.
So they are inflating but there is no inflation… that’s a good one.
Monetary Base updated 3.7.13
Updated just 7 whole minutes ago by the St. Louis Fed. The money supply measure that actually matters just ticked up again, painting any stock market correction (pretty please?) to come as a potentially healthy one, if anything in this circus can be called healthy anymore.
I dunno, it looks like the consolidation is broken doesn’t it? Behold the picture that will bring on the next bust. Because it will one day.