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“This Is All About Stagflation… The U.S. Is Walking Into The Early Stages Of The Fourth Turning”

May 15, 2021

“This Is All About Stagflation… The U.S. Is Walking Into The Early Stages Of The Fourth Turning”

We believe the U.S. is walking into the early stages of the Fourth Turning, a subject entertained below. In this note we break down the ideal 2020-2030 portfolio and why it is so different from the 2010-2020 vintage. Above all, by now it should be clear to a five year old; Global Central Banks are working together in a dollar containment regime. With conviction, we laid out this thesis a year ago (April 2020) in our “Lessons from Omaha” and it became the foundation under our overweight positioning in commodities, global large cap value, and emerging markets.

The good news is, the commodity cycle is still in the early innings.

There are trillions of U.S. dollars married to deflation bets (fixed income bonds and tech stocks) and the lawyers are writing up the divorce papers as we speak. Unintended consequences are popping up weekly, the latest variety points to a significant labor shortage developing in the U.S. with colossal side effects moving our way.

It’s going to be hilarious. Just when the last economist threw in the Phillips Curve towel, wrote the long winded obituary it will come roaring back to life. Wage inflation is about to explode, and this sword is swinging in the direction of profit margins.

Above all, the Fed is staring down the barrel of  runaway inequality, inequality that the Fed itself has created. The American Dream just isn’t the 1950s-2000s bright blue, a touch of grey has moved in forging left wing populism. If you listen carefully to U.S. Treasury Secretary Janet Yellen and Fed Chair Jay Powell, they are focused on U 6 unemployment near 11% and the 9 million Americans who have left the Non Farm Payrolls since January 2020.

…click on the above link to read the rest of the article…

No inflation? Even used car prices are soaring

May 15, 2021

No inflation? Even used car prices are soaring

We’ve reached a point now where anyone who can’t see inflation is clearly not paying attention.

Inflation has now become so ridiculous that, according to the Wall Street Journal, even the price of a USED car is increasing… by a lot.

Since January 2020, NEW car prices have increased 9.6%. But USED car prices are up 16.7% over the same period.

This is pretty extraordinary given that used cars are supposed to depreciate. According to one used car dealer, “What is normally a depreciable asset has been appreciating. It’s certainly surreal. . .”

It’s not just used cars, of course. Prices across the economy are rising rapidly. NielsenIQ retail price data sets show that consumer goods have been rising in excess of 10% over the last year on everything from beauty products to seafood prices (which have risen by 18.7% over the past three months).

There are lots of reasons for inflation.

For example, there’s plenty of pent-up consumer demand from people having been locked down for more than a year, at a time when many businesses are still closed or operating at below normal capacity.

This combination of high demand and tight supply is causing prices to rise. And in theory that’s a temporary phenomenon.

But there are other, more permanent factors that could continue pushing prices up for a long time.

For starters, governments around the world are proposing higher taxes– carbon taxes, Value-Added Taxes, higher corporate income taxes. This is all inflationary, because eventually these tax costs are passed on to consumers.

The more important contributor to inflation, though, is astonishing quantity of new money in the financial system, thanks in large part to massive government spending.

In the US alone, the federal government is trying to pass spending bills totaling $11+ trillion this year.

…click on the above link to read the rest of the article…

It’s Getting Serious: Dollar’s Purchasing Power Plunges Most since 2007. But it’s a Lot Worse than it Appears

May 13, 2021

It’s Getting Serious: Dollar’s Purchasing Power Plunges Most since 2007. But it’s a Lot Worse than it Appears

Fed officials, economists “surprised” by surge in CPI inflation, but we’ve seen it for months, including “scary-crazy” inflation in some corners.

The Consumer Price Index jumped 0.8% in April from March, after having jumped 0.6% in March from February – both the sharpest month-to-month jumps since 2009 – and after having jumped 0.4% in February, according to the Bureau of Labor Statistics today. For the three months combined, CPI has jumped by 1.7%, or by 7.0% “annualized.” So that’s what we’re looking at: 7% CPI inflation and accelerating.

Consumer price inflation is the politically correct way of saying the consumer dollar – everything denominated in dollars for consumers, such as their labor – is losing purchasing power. And the purchasing power of the “consumer dollar” plunged by 1.1% in April from March, or 12% “annualized,” according to BLS data. From record low to record low. Over the past three months, the purchasing power of the consumer dollars has plunged by 2.1%, the biggest three-month drop since 2007. “Annualized,” over those three months, the purchasing power of the dollar dropped at an annual rate of 8.4%:

Folks in the business of dealing with inflation, such as economists and Fed officials, such as Fed Vice Chairman Richard Clarida, came out this morning in droves and said they were “surprised” by the red-hot CPI inflation.

There was nothing to be surprised about. We have been documenting red-hot inflation boiling beneath the surface for months, with “scary-crazy inflation” in used vehicles and in commodities, such as lumber, and surging factory input costs that are getting passed on because the entire inflation mindset has now changed.

…click on the above link to read the rest of the article…

Rabo: Please Don’t Make Us Look At The Inflation

May 12, 2021

Rabo: Please Don’t Make Us Look At The Inflation

Markets continue to reel: “Risk crumbles”, says Bloomberg. Why? Because there is a plaintive plea from everyone from the Fed and the Treasury down to simple peddlers of exotic derivatives: please don’t make us look at the inflation! Yes, it’s US inflation-data day – and nobody wants to see any. If there is an upside surprise in CPI, to reflect the surges in the prices of so much around us, it will embarrass the Fed, and the US Dollar, and Yellen, and many others. Some pre-emptive positioning may already be underway: the White House said Tuesday it takes “the possibility of inflation seriously”, or should that have been “serious inflation is possible?”; and the Fed’s Bullard added the US will see inflation in 2021 and some will “hang on” in 2022. Is that still transitory?

China’s PPI surprised to the upside, which may prove a worrying harbinger: and, anecdotally, prices for shipping between to the US this summer is now up to seven times what it was a year ago on some routes. Of course, the delayed 2020 census was a harbinger too – of mercantilism. (See “A Midwife Crisis”: and thinking Fudd not Fed, this should have been titled “A Midwife Cwisis”, with the subtitle “Be Vewy, Vewy Quiet. I’m hunting positive demogwaphics. Huh huh huh.”

The German ZEW survey (of analysts, so irrelevant) perked up too, while the US NFIB survey (of businesses, so relevant) showed that despite the weak payrolls number on Friday, it is now the most difficult to find workers ever. Crucially, “owners are raising compensation, [and] offering bonuses and benefits to attract the right employees,” the survey added…

…click on the above link to read the rest of the article…

Why Is Billionaire Investor & Former Gold Skeptic Sam Zell Buying Gold?

May 12, 2021

Why Is Billionaire Investor & Former Gold Skeptic Sam Zell Buying Gold?

Billionaire Investor & Former Gold Skeptic Sam Zell Buys Gold

Brian Sorg for Barron’s

This week, Your News to Know rounds up the latest top stories involving gold and the overall economy. Stories include: Another billionaire turns to gold, Arkansas no longer to tax sales of gold and silver, and Minnesota as a possible source of abundant gold ore.

Billionaire investor and gold skeptic Sam Zell buys gold ‑ here’s why

There has been no shortage of stories of big-name investors touting or turning to gold over the past few years, and especially over the course of last year as the Federal Reserve sparked widespread inflation concerns with its multi-trillion-dollar stimulus. Sam Zell, chairman of Equity Group Investments and a billionaire investor whose portfolio spans across a wide range of industries, recently shared that he, too, has embraced gold primarily over inflation fears.

Speaking to Bloomberg, Zell noted that he previously counted himself among investors who viewed gold as a suboptimal investment compared to higher-yielding assets. But now?

Obviously one of the natural reactions is to buy gold. It feels very funny because I’ve spent my career talking about why would you want to own gold? It has no income, it costs to store. And yet, when you see the debasement of the currency, you say, what am I going to hold on to?

Zell now finds gold to be a safer option to hold over unbacked currencies, with governments around the world experimenting with aggressively-loose monetary policies.

Indeed, Zell said that the Fed is far from the only central bank causing commotion in the global economy, and that all sovereign fiat currencies should be met with a watchful eye…

…click on the above link to read the rest of the article…

Jim Grant: The Fed Can’t Control Inflation

May 11, 2021

Jim Grant: The Fed Can’t Control Inflation

Federal Reserve Chairman Jerome Powell insists inflation is “transitory.” As prices have spiked throughout the economy, Powell’s messaging has essentially been, “Move along. Nothing to see here.”

Peter Schiff has been saying the central bankers at the Fed can’t actually tell the truth about inflation because even if they acknowledge it’s a problem (and it is) they can’t do anything about it.

In a recent talk, Jim Grant, investment guru and founder of Grant’s Interest Rate Observer, echoed Peter, saying the Fed can’t control inflation.

During a webcast sponsored by State Street SPDR ETFs, Grant said he thinks “there’s a gale of inflation of all kinds in progress,” adding that he believes it will take the Fed by surprise and “overwhelm our monetary masters.” Grant said, inflation is “clear and present and will manifest itself in our everyday lives.”

That sounds like the exact opposite of Powell’s “transitory” mantra.

Peter has said that once the Fed is forced to admit that inflation isn’t transitory, it will be too late to take action. Grant made a similar prediction, saying inflation will “catch the Fed flatfooted. In response it will “prevaricate” – meaning speak or act in an evasive way. In fact, that already seems to be the central bank’s strategy.

The question is can the Fed actually control inflation. Grant doesn’t think so.

I think the Fed is under the misconception that it controls events. Sometimes, events control the Fed, and I wouldn’t be surprised if this was one of those times. The Fed thinks that not only can it control events, but it can measure them. It believes it can pinpoint the rate of inflation.”

…click on the above link to read the rest of the article…

Consumers Expect Surging Inflation to Crush the Purchasing Power of their Labor: Fed’s Survey

May 11, 2021

Consumers Expect Surging Inflation to Crush the Purchasing Power of their Labor: Fed’s Survey

And there are some whoppers.

Consumers are picking up on the rise of inflation, and the Fed, which has been trying to heat up inflation, is pleased. The Fed watches “inflation expectations” carefully. The minutes from the March FOMC meeting mention “inflation expectations” 12 times.

The New York Fed’s Survey of Consumer Expectations for April, released today, showed that median inflation expectations for one year from now rose to 3.4%, matching the prior highs in 2013 (the surveys began in June 2013).

But wait… the median earnings growth expectations 12 months from now was only 2.1%, and remains near the low end of the spectrum, a sign that consumers are grappling with consumer price inflation outrunning earnings growth. The whoppers were in the major specific categories.

The whoppers.

So even as consumers expect their earnings to grow by only 2.1% over the next 12 months, and their total household income by only 2.4%, according to the survey, they expect to face these whoppers of price increases:

  • Home prices: +5.5%, a new high in the data series
  • Rent: +9.5%, fifth month in a row of increases and new high in the data series
  • Food prices: +5.8%
  • Gasoline prices: +9.2%
  • Healthcare costs: +9.1%
  • College education: +5.9%.

Sadly, the Fed doesn’t ask consumers about their expectations for new and used vehicle prices, which are now in the process of spiraling into the stratosphere. It would have been amusing to see what consumers expect those prices to do over the next 12 months.

So consumers expect to pay for these price increases with their earnings that they expect to increase at only a fraction of those price increases. In other words, consumers expect that the purchasing power of their labor will be crushed over the next 12 months.

…click on the above link to read the rest of the article…

Keep It Simple: Gold vs. a Mad World

May 11, 2021

Keep It Simple: Gold vs. a Mad World

Psychologists, poets and philosophers have written for centuries that many who have eyes refuse to see, and many who can think, refuse to think clearly–all for the simple reason that some truths, like the sun, are just too hard to look straight into.

Or as others have said more bluntly: “Truth is like poetry—everyone [fricking] hates it.”

When it comes to bloated markets, debt orgies and helicopter money, the rising fun of such “stimulus” is embraced, yet the template for its equally market-tanking, social-destroying and currency-debasing consequences are simply ignored.

The same is true when it comes to the “great inflation debate,” which is simply no longer a debate but a neon-screaming reality playing out in real time and growing more pernicious before eyes otherwise blinded by calming Fed-speak and bogus inflation scales.

Each passing day, the evidence of the inflationary cancer beneath the smiling surface of our still rising markets and “recovering/opening” economy increases, and thus, like it or not, the inflation topic just won’t and can’t be over-stated enough.

In short: Here I go again with the inflation thing…

From the Grocer to Buffet: Inflation is Obvious

Extreme US “stimulus,” vaccine rollouts, Europe’s eventual reopening, and rising commodity costs are accelerating the inflationary tailwinds which everyone from grocery store clerks and home builders to Warren Buffet can no longer deny or ignore.

As facts rather than theories confirm, commodity prices have surged from steel to copper, or corn to lumber while precious metals steadily rise against COMEX price fixers, CPI lies and other unsustainable boots to the neck of a coiled gold market positioned for big moves into late 2021 and beyond.

…click on the above link to read the rest of the article…

Weekly Commentary: Generational Turning Point

May 11, 2021

Weekly Commentary: Generational Turning Point

There is an overarching issue I haven’t been able to get off my mind: Are we at the beginning of something new or in the waning days of the previous multi-decade cycle?

May 5 – Wall Street Journal (James Mackintosh): “We could be at a generational turning point for finance. Politics, economics, international relations, demography and labor are all shifting to supporting inflation. After more than 40 years of policies that gave priority to the fight against rising prices, investor- and consumer-friendly solutions are becoming less fashionable, not only in the U.S. but in much of the world. Investors are woefully unprepared for such a shift, perhaps because such historic turning points have proven remarkably hard to spot. This may be another false alarm, and it will take many years to play out, but the evidence for a general shift is strong across five fronts.”

The “five fronts” underscored in Mr. Mackintosh’s insightful piece are as follows: 1) “Central banks, led by the Federal Reserve, are now less concerned about inflation.” 2) “Politics has shifted to spend even more now, pay even less later.” 3) “Globalization is out of fashion.” 4) “Demographics worsen the situation.” 5) “Empowered labor puts upward pressure on wages and prices.”

The analysis is well-founded, as is the article’s headline: “Everything Screams Inflation.” After surging another 3.7% this week (lumber up 12%, copper 6%, corn 9%), the Bloomberg Commodities Index has already gained 20% this year. Lumber enjoys a y-t-d gain of 93% – WTI Crude 34%, Gasoline 51%, Copper 35%, Aluminum 26%, Steel Rebar 32%, Corn 51%, Soybeans 22%, Wheat 19%, Coffee 18%, Sugar 13%, Cotton 15%, Lean Hogs 59%… The focus on inflation is clearly justified. Yet Mackintosh began his article suggesting a “Generational Turning Point for finance” – rather than inflation. Let’s explore…

I mark the mid-eighties as the beginning of the current super-cycle. A major collapse in market yields (following the reversal of Paul Volcker’s tightening cycle) promoted financial innovation and the expansion of non-bank Credit expansion.

…click on the above link to read the rest of the article…

The Inflation Monster Has Been Unleashed

May 10, 2021

The Inflation Monster Has Been Unleashed

The monster known as inflation has been unleashed upon the world and will not easily retreat into the night. This is reflected in soaring commodity and housing prices. Due to the stupid and self-serving policies of the Fed, we are about to experience a massive shift in the way we live. Bubbling up to the surface is also the recognition the Fed has played a major role in pushing inequality higher. This means that inflation is about to devour the purchasing power of our income and the savings of those that have worked hard and saved over the years.

Over the months we have watched Fed Chairman Jerome Powell time and time again cut rates and increase the Fed’s balance sheet. This has hurt savers, forced investors into risky investments in search of yield, damaged the dollar, encouraged politicians to spend like drunken sailors, and increased inequality. The greatest wealth transfer in history has already begun and the next crisis will only accelerate the process. Sadly, the same policies that dump huge money into larger businesses because it is an easier and faster way to bolster the economy give these concerns a huge advantage over their smaller competitors.For decades the American people have watched their incomes lag behind the cost of living. To make matters worse, the official numbers of the so-called Consumer Price Index (CPI) have been rigged to understate inflation and not to reflect the true impact it was having on our lives. Want to know where the real cost of things is going, just look at the replacement cost from recent storms and natural disasters. Currently, the government understates inflation by using a formula based on the concept of a “constant level of satisfaction” that evolved during the first half of the 20th century in academia..

…click on the above link to read the rest of the article…

Existential Economic Threats: How U.S. States Can Survive Without Federal Money

May 8, 2021

Existential Economic Threats: How U.S. States Can Survive Without Federal Money

We all knew it was coming; the alternative economic media has been warning about it for years. Eventually, monetary intervention and bailout after bailout by central banks always leads to devaluation of the currency and inflation in prices. Helicopter money always ends in disaster and at no point in history has it ever produced positive long-term results for a society.

The federal reserve has generated trillions in fiat dollars over the course of a single year (on top of the tens of trillions created in the past decade), all in the name of offsetting deflation. This deflation was NOT caused by the pandemic, it was caused by the government response to the pandemic.  On top of that, the shutdowns of “non-essential businesses” and the lockdowns in general ended up being useless in slowing the spread of COVID-19.

All the information, all the facts and all the science supports the anti-lockdown crowd. Conservative run states that removed lockdowns and mandates months ago are seeing falling infection and death numbers and local businesses are on the mend. The problem is, government authorities don’t seem to care about this. It appears that their intention is to double down and continue demanding restrictions stay in place for the long haul.

In other words, they are going to FIND an excuse to keep the mandates going. If no reason exists, they will create a reason. Consider for a moment the fact that COVID-19 is mutating constantly, and like any other virus there are new strains that pop up every year. Just as we have a seasonal flu, we will probably now have seasonal COVID.

…click on the above link to read the rest of the article…

Dangers Of Programmable Money Explained 

May 5, 2021

Dangers Of Programmable Money Explained 

Dominic Frisby with Money, Markets & Other Matters talks about the war on cash and central bank digital currency, known as CBDC. He questions if CBDCs are “the final step into the brave new world – Orwellian great reset dystopia – we seem to be heading towards” or are they “the onramp to the Bitcoin motorway.” He said the answer is “both.” 

Frisby points out the biggest issue with CBDCs is that digital money is “programmable,” which means the issuer, such as the Federal Reserve or the Bank of England, can build specific rules into it. He said cash grants users freedom and power.

Programmable money, such as CBDCs, means the user has even less control over their money. Frisby said almost any kind of rule could be coded into CBDCs. He provides an example of China mulling over the idea of expiry dates for its digital money. This means those holding the programmable money have to spend the money by a specific time or it disappears from their account.

For those who aren’t familiar with Chuck Palahniuk’s 2018 “Adjustment Day” book, a similar concept of expiring money was detailed. Palahniuk is also the writer behind “Flight Club.”

Back to Frisby, who said issuers could manipulate money velocity by changing expiry dates. He said the money could be programmed to work only in certain areas or jurisdictions. He then warned:

“Every transaction ever made will be visible to the all-seeing government.” 

Governments will know your whereabouts and habits at all times simply by tracking your use of funds through the CBDC payment system. This can already be done, to some extent, by tracking credit card transactions, but the CBDC system will make state surveillance more pervasive.

CBDCs also allow the government to have direct access to a person’s wallet to remove taxes and other fines. 

…click on the above link to read the rest of the article…

Investors Do Not See “Transitory” Inflation

May 4, 2021

Investors Do Not See “Transitory” Inflation

The Federal Reserve and European Central Bank repeat that the recent inflationary spike is “transitory”. The problem is that investors do not buy it.

Inflation is always a monetary phenomenon, and this time is not different. What central banks call transitory effects, and the impact of supply chains are not the real drivers of inflationary pressures. No one can deny certain supply shock impacts, but the correlation and extent of the increase in prices of agricultural and industrial commodities to five-year highs as well as the abrupt rise of non-replicable goods and services to decade-highs have monetary policy to blame.  Injecting trillions of liquidity makes more funds chase fewer goods and the rise in the real inflation perceived by citizens is much larger than the official CPI.

Take food prices. The United Nations Food Price Index is up 30% in the past five years and up 10% year-to-date (April 2021). The rise in food prices already caused protests all over the world in 2018 and it continues to reach new highs. The correlation in the price increase of most agricultural goods also shows that it is a monetary effect.

The same can be said about the Bloomberg Commodity Index which is also at five-year highs and up 15% year-to-date.

Yes, there have been some supply disruptions in a few commodities, but it is not widespread let alone the norm. If anything can be said is that the rise in agricultural and industrial commodities is happening despite the persistent overcapacity that many of these had already before the pandemic. We should also remember that one of the unintended consequences of massive monetary expansion is perpetuation of overcapacity. Excess capacity is refinanced and maintained even in crisis times…

…click on the above link to read the rest of the article…

Inflation, real interest rates revisited

April 17, 2021

I Now Track the Most Important Measure of the Fed’s Economy: the “Wealth Effect” and How it Impacts Americans Individually

April 13, 2021

I Now Track the Most Important Measure of the Fed’s Economy: the “Wealth Effect” and How it Impacts Americans Individually

The Fed provides the data quarterly, I dissect it at the stunning per-capita level.

The Federal Reserve is pursuing monetary policies that are explicitly designed to inflate asset prices. The rationalization is that ballooning asset prices will create the “wealth effect.” This is a concept Janet Yellen, when she was still president of the San Francisco Fed, propagated in a paper. In 2010, Fed Chair Ben Bernanke explained the wealth effect to the American people in a Washington Post editorial. And in early 2020, Fed Chair Jerome Powell pushed the wealth effect all the way to miracle levels.

Today we will see the per-capita progress of that wealth effect – what it means and what it accomplishes – based on the Fed’s wealth distribution datathrough Q4 2020, and based on Census Bureau estimates for the US population over the years. Here are some key results. At the end of 2020, the per-capita wealth (assets minus debts) of:

  • The 1% = $11.7 million per person (green);
  • The next 9% = $1.6 million per person (blue);
  • The 50% to 90% = $263,016 per person (red line at the bottom).
  • The bottom 50% = $15,027 per person. That amount of wealth is so small it doesn’t show up on this per-capita chart that is on a scale of wealth that accommodates the 1%.

The total population in 2020, according to the Census Bureau, was 330 million people. The 1% amount to 3.3 million people. Back in 2000, the population was 283 million people, and the 1% amounted to 2.8 million people. So the 1% has grown by 473,000 people because the population has gotten larger. And the 50% – the have-nots, as we’ll see in a moment – have grown by 24 million people.

…click on the above link to read the rest of the article…

 

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