Technicals and Inflation
A rising tide lifts all boats
We had an interesting conversation this week with one of our colleagues and of course the topic of discussion was inflation. We were discussing the possible gamut of scenarios and impacts on various asset classes and to the global economy in general. The standard theme dealt with monetary printing and the obvious beneficiaries, Equities and Real Estate. The biggest and most obvious theme was that no matter what the global central banks try to do, their end net result will be to always print more and more money. It is the apparent design flaw of the fractional reserve system, or is it a flaw at all? We believe that the very nature of central banking exists on a two fold hemisphere, one hemisphere that structures policies to assist global governments to accomplish their hegemony goals and the other hemisphere to consistently concentrate wealth into fewer and fewer hands. The totality of it all is control, plain and simple. When it comes to inflation its something that many notice but can’t really explain. We here at this blog like to keep things simple and inflation is fiat money printing, devaluing current dollars and dollar holders nothing less, nothing more.
A rising inflation tide lifts all asset prices, plain and simple, more dollars chasing a somewhat fixed supply of assets (that is until new bonds are issued, new equities issued, new real estate built etc.) One consistent theme we also state is that inflation should not be looked at solely from the nominal pricing side, but rather from the devaluating and often debilitating side of LABOR DEVALUATION. If the general economies labor income isn’t comparable to the inflation of real assets, goods or services then this is when the economies start to become vulnerable. Credit gets stretched just to keep up the same pace of living, i.e. Alice in Wonderland, running just to stand still…you get the picture. We don’t believe we are there yet, but its close, there are signs of cracks and fissures, yet printing trillions goes a long way, it has to filter through the appropriate channels and then ultimate, it ends up in the coffers of this group:
It shouldn’t be any surprise to any of our readers, we talk about concentration of wealth all the time. We also get the consistent question of “It has to come down some time, markets can’t keep going up” which of course we always posit with another question, are central banks still printing money every day, every month? Well this chart can answer that from our own Central Banks purview:
So when we see the latest CPI figures showing 6.2%:
We know the real inflation is 16.2% given to us from the FEDs balance sheet increase in total assets. Only a fool would expect anything to fall with this kind of monetary inflation. Yes, but how long can it last? Well that’s simple…indefinitely, that is until there is a regime change, a global paradigm shift, a new way of looking at money. We do think that revolution is upon us and its a digital peer to peer system, one which the central banks do not want to see, centralized control is anathema to a pure trustless peer to peer system and its the last thing any power structure wants, zero control…
With that said let’s lead the technical way with a Bitcoin chart here:
We put highlighted the liquidation level of $57k last week and we also had our line in the sand level of $42k both of which have proven significant thus far. We look at that $42k area as a gift…whoever had to dump because of whatever levered margin call game they were playing, should have been a gift to many looking to get into this before the next up move resumes.
The next chart we want to look at is the US 10YR which has seen yields plunge again below 1.4% where’s that talk of this taper again???
Looking at the equities, we see the Nasdaq chart trying to build a case for bulls here:
For players looking for some value, we can see that that SP500 vs Nasdaq trade is starting to make the case for a rotation to ensue:
Moving to metals, Gold has been a sideways player most of the year and this area in the $1760s to $1770s area has seen buyers come in all year long:
Silver is trading at an area we believe should hold for a bit and buyers to continue to test the waters here:
Moving on to the energies where Nat Gas has been a volatile trade and a warmer December forecast has seen the futures contract drop some 42% off the highs. This level was the prior breakout point from June and August and we would suspect some levered players to take some shots here:
Crude Oil has also hit an area that should see buyers and bulls could find some footing if it trades back and closes above $67.75. The omicron was the reason for this drop and it looks overdone as Lord Fauci said in an interview today that:
“Though it’s too early to really make any definitive statements about it, thus far, it does not look like there’s a great degree of severity to it” (CNN interview)
Finally we wanted to highlight Goldmans Rubner’s recent comments in the tactical flow of funds letter for December, a nice Red, Yellow Green Light insight to where things stand for the market forces right now:
So a little bit of something for everyone…ok that’s it for today we hope you had a great weekend and we look forward to continuing this journey with you. Our goal is simple, to add a different perspective to your main stream thinking, to force you to contemplate the markets and their forces from various angles. We hope you share and enjoy our work and we hope you consider supporting what we are doing here. Good luck this week.
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