This is What the ‘Inflation Trade’ Looks Like

Our theme is that Trump and the Republicans took over with fiscally driven inflation policy from Obama and the Fed’s monetarily driven inflation policy. Within this, the Fed makes its “sloth-like” withdrawal from QE’s bloated balance sheet business as fiscal policy sinks into the economy.

The not so good?

Producer prices for 2017 were up 2.6% for the year, but lagged in December

producer prices

The good?

Look, I cannot even stand to hear Trump speak because of the tone in his voice, let alone listen to the stupid things he usually says. But fiscally driven inflation does at least stand a chance of doing more good for the little guy than monetarily driven inflation, which mainlined right into the greedy veins of the mega rich and mega powerful (AKA the 1st users and abusers of newly printed money).

Walmart is Raising its Minimum Wage to $11 an Hour After Sweeping Tax Reform

So let’s keep it real here. Fiscal inflation is better than Monetary inflation until that is, the lid blows off the thing (von Mises Crack Up Boom) or more likely, it goes pfffft!!! in yet another deflationary liquidation.

But for now inflation it is and in this case it is the ‘cost-push’ kind as opposed to the ‘direct money supply manipulation’ kind that appears to be brewing. The little ruckus I displayed yesterday here, here and here about interest rates and inflation is well founded and we need to be on top of this macro Amigo, along with the other two (stocks vs. gold & yield curve).

December aside, producers’ pricing power is starting to exert. Consumer prices will follow suit. The little guy is getting the benefit of a tax policy trickle down and here we go, fully on plan for an ‘inflation trade’ now and limitations later. It is a time to make some money, but it will come a time to get very defensive when the indicators, 10yr yields @ 2.9% and 30yr yields @ 3.3% among them, instruct.

Meanwhile, party on Garth. But Garth, party with an inflationary bias now and go easy on the punch.

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