Not inflation friendly

A few inflation unfriendly pictures while everyone huddles on that side of the boat

I don’t know. Maybe they’ve obsoleted contrarian theory. Cancel culture and all. But just in case they haven’t there are these pictures to consider. There are more, but this gives the tenor of the situation from a contrary perspective.

2yr Treasury note is firm and diverging upward by RSI.

Doctor Copper is out of the office.

Doc’s ratio to the old monetary man is breaking down.

The old monetary man continues upward in relation to his impetuous little bro.

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16 thoughts on “Not inflation friendly

  1. Here is someone who totally agrees with the not inflation view….

    How High, Interest Rates?
    Sunday, May 8, 2022 By Rick Ackerman 0 comments

    Last week’s commentary asked how high the dollar can climb before it snuffs inflation and the increasingly shrill hysteria that has accompanied it. Inflation is supposed to cheapen the dollar, but that is not what has been happening. Instead, it has been climbing steeply relative to all other currencies. The experts have not been able to explain this, nor why the rally began well before the Fed was even thinking about tightening. It is simple, though, if you understand deflation and its chief symptom, a rise in the real burden of debt. The dollar has been climbing because it “knows” there are more debts than can ever be repaid. This can only result in massive waves of bankruptcies that are going to make us nostalgic for the consumer inflation that is today’s headline news.
    Sure, the Fed could print enough money to pay off everyone’s debts, including its own: student loans, our collective liabilities for Social Security, Medicare and private pensions, etcetera – but also car loans, mortgages and credit card balances that have ballooned. The resulting hyperinflation would solve nothing, however, even as it destroyed lenders as a class and all institutional conduits of borrowing. The megabanks would be ruined, leaving no one to lend to you, me or anyone else. It could take a generation or longer for credit to sprout roots again. Do we really want to go down that path?

    More Tightening Unneeded
    This week’s question is related to the one about the dollar: How high can interest rates climb before they snuff inflation and the increasingly shrill hysteria that has accompanied it? Economists and pundits seem to think the Fed has only begun to tighten. More likely is that interest rates are already high enough to have tripped the U.S. and global economies into deep recession. It was going to happen anyway because of all those unpayable debts, but the Fed’s hawkishness has unleashed market forces that have already mooted the need to tighten any further.
    My long-term forecast has called for a 3.24% top in the U.S. Ten-Year Note. On Friday the rate hit 3.13%, just an inch from the target. The rally has been so ferocious that I double-checked my math to determine whether an overshoot might occur. I’ll stick with the target for now, but even if it’s exceeded, rates for home buyers in particular have reached levels that froze the economy and crushed real estate in 2007. If you’ve been a scale buyer of long-term Treasurys in order to implement the Gold-versus-T-Bonds ‘barbell’ hedging strategy I’ve advised for the last couple of years, it’s time to move more aggressively into the bond side of the hedge.

      1. Thanks, Gary. When the betting action is so one-sided as it is now, it becomes impossible for “everyone” to win.

  2. Hey Rick, long time! Feel free to comment here any time. I can always use a solid contrary viewpoint.

    1. AAPL is my #1 bellwether, and I have always said that if you get AAPL right, you get the market and the U.S. economy right, psychologically speaking. As I write these words, the stock has just bounced from within a nickel of a seemingly insane (at the time) target at 146.77 that I disseminated to subscribes when AAPL was trading for $173.. A decisive breach of the 146.77 ‘Hidden Pivot’ support would in my estimation open the bloody Gates of Hell. This would be notwithstanding whatever b-s rally might occur in the interim.

      1. Lower low in AAPL is not good at all. Even if it bounces, it’s firming the downtrend.

        1. I expect these targets to work exactly when they are derived from patterns as clear as AAPL’s. The so-far 66-cemt overshoot has left it straddling the bull/bear divide, but my bias is bearish nonetheless. Nor does it seem bullish to me that, at day’s end, the E-Mini S&Ps were in a feeble rally from another Hidden Pivot target that hit a dead-center bullseye: 3921.75, first identified five weeks ago with ES trading around 4450.

        2. If T-Bonds are in fact bottoming, it would correspond very closely to a 112.31 downside target I used for TLT, and my expectation of a very major top in Ten-Yerat rates at 3.24%.

      2. As far as T bonds go, the 30yr yield is thus far just below our decision point, which was 3.5%. A higher high to Nov. 2018 and the long-term trend would have been broken to the upside (downside in bonds). So by a whisker the Treasury bond bull lives. Same goes for 2yr yields on the short end. It stalled below it’s decision point as well. 99.9% are still huddled on the inflation side of the boat.

  3. Gary, inflation bugs just started to run away and gold alreday touched 1830. Do You think we touched the bottom? I can very well imagine we will touch 1680 again if inflation will really puke.

    1. Well, technically you know my best pullback target within a still-bullish big picture. I added more PHYS yesterday. But right now the market crosscurrents and the damage the Fed has done by being late to aggressively try to mop up inflation are wild cards. But with the macro shifting slowly in gold’s favor I think it can bull at any time.

      The inflation bugs may be an unthinking herd, but they don’t control the macro.

  4. I tried to post this earlier re June Gold: An 1825.80 correction target I’ve been using for the last three weeks has effectively been filled with today’s 1830.60. The target seems to have been front-run, so a elapse that gets even closer to 1825.80 is possible. Also, bitcoin ($BRTI) achieved a 29,130 target that has obtained since April 6, when it was trading just above 43,000. This morning’s low at 29,076 gave way to a so-far bounce to 31,196 — substantial enough to suggest a bottom is in. Since it’s bitcoin, though, a screw-with-your-heads relapse could occur. Even if so, I am not expecting a decisive breach.

  5. BTW, anyone notice the action in Treasury bonds today? Hmmm… with all that inflation hysteria. Go figure.

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