Inflating to Devaluing
Nothing is Certain
We entitled today’s post in a parable fashion because we want our viewers to know that today’s financial construct is certainly a conundrum. Embedded in the definition of the very word is also another word which describes our system “hoax”. How else would you explain the following charts? First up for your viewing pleasure is the newest inflation chart from last week:
Multi-decadal highs aren’t alarming anyone yet, well that’s if you are among the few that don’t have to worry about gas, food, heating or cooling your home, but for the rest of the global non elite, it is truly a real problem. Before we get to the other charts, let’s explore our title of this note today with this chart in mind. Many focus on prices when it comes to inflation. Sure its textbook but rather instead, why don’t we focus on the devaluation side of the coin. What we mean is and this is a simple definition, as it means to “devalue” or “diminish” one’s purchasing power.
What else could it mean?
It could also be looked at as devaluing one’s labor, because let’s be honest the commoner holds very little in regards to income producing assets other than one’s ability or labor. How is labor compensated for? Well with pay in devalued dollars and considering the cost of necessities, this doesn’t bode well for civil constructs of society. Yes governments can issue short term stop gap measures and drive their deficits into chart depths exposed in this next chart:
What is interesting is that in order for governments to do this, they have to continue to buy assets with money they don’t have to support a system that only exacerbates said problem more and more and more. Charlie Bilello is an excellent analyst and well worth the follow on twitter by the way. As for the US Gov’t we hope you see that deficits don’t matter and as long as they control the mechanism by which they discount your labor, i.e. devaluing their currency through fractional reserve lending mechanisms, well expect nothing to change. Remember there is a reason why the US chose this picture for their base currency. The base of the pyramid is labor and the detached elite asset holders above, plain and simple:
The Great George Carlin said it best, “ its one big f&$king club and YOU AINT IN IT!”
This next chart is very interesting
Is it correlation or causation? Does inflation drive real rates lower? Yes, do real lower rates tend to predict market sell offs it seems so. Will this time prove different? Probably not, however the one thing that none of the prior instances had that todays interwoven connected central banking cartels do today is full open autonomy to print and print without having to hide it. In fact we believe that they can continue to defy all odds when it comes to supporting assets because nothing can stop them from doing so. We know ultimately it leads to a crash, but trying to predict that is a fools game a no win situation, so we don’t bother.
Ok let’s move to the tech side of the markets here:
US 10yr yields continuing to take advantage of the FEDs rhetoric and call their bluff as they know any real hikes will be small and short lived. 1.58 to 1.43 is the value area.
The Ultrabond, continues to get support as the shorter end sells off, the ultra long end gains support as sellers in the front (2s,3s,5s buy 30s) spills over to spread product long end buying:
The SP500 looks poised to take out new highs at 4712:
The Nasdaq looks strong as it trades above the median long term line, but will be hampered a bit by Musk’s continued taunting of the overall markets by selling his Tesla stock and taunting of Bernie Sanders to boot:
Speaking of Musk, let’s look at Tesla, where $900 will bring in value long termers in droves:
The Euro has faltered but has good technical support below at 113-22 area:
Finally Silver where the down trend has been solidly broken and we would suspect today’s brief respite just that, before it continues to march onto new highs:
Alright stay quick, nimble and adaptable and know that nothing is certain!
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