Last summer I could do no wrong. Everything was working and making sense. Then about the time that the 10yr yield began the post-September jigsaw consolidation I turned into a Keystone Kop. It was tough to get a handle on whether yields were going to rise and join the other 2 macro Amigos, or ride off on their own trail. If you experienced a whipsaw in your yield-based positioning you were not alone. I had a mostly annoying Q4 until last week, when precious bounced as expected and this week, when other would-be beneficiaries of an inflation bid have gotten in gear.
It does appear that with the clarity of the Corporate Welfare package now behind us the market is getting in gear for what it sees ahead. And if what it sees ahead is the same as what I see ahead, it is bullish – this time led by markets more traditionally geared to inflation – until it is bullish no more.
But I think there is a good case for a little inflation frenzy (you’ll know it when you see the usual touts on “resources!”, “commodities!” and “gold!”. The worst of them will be touting gold as the same type of inflation hedge as said resources and commodities. They’ll lure in readers with greed as the hook, and then one day the macro will likely be limited, and terminate. Garth will fall over drunk. Excellent!
I am not the salesman who will be lathering you up. Just like I was not that guy when getting bullish the Semis 1.5 years ago. I am just the guy telling you what it looks like to me out ahead. If you agree with these prospects, you’d best be positioning by now, not when professional pitch men are pulling at your greedy little heart strings (ref. spring of 2011). I hope to have made my bones (and $) when it is time to start fading the party. Meanwhile, it appears to be ‘party on!’ with an inflationary bias. The limiter for the Amigo pictured above is around 2.9%.
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