Barron’s; Inflation is here and it’s time to worry

Some of my recommendations and predictions under the current monetary policy programmes;

    • Value stocks – These firms can pass on inflation to its customers, and have a diverse customer base. Asset pricing models benefit these equities over other stocks, as their earnings are definite and immediate.
    • Growth stocks will continue to lag. Many of these face fierce competition. The downward pressure on many of these firms has been relentless
    • Commodities will remain strong as demand picks up again. With the willful US Fed on autopilot, it’s difficult to put the toothpaste back in the tube. The supply-chain shocks will persist, and actually may be encouraged by the Western governments themselves. For instance, the Biden regime’s energy policies have resulted in diminished oil/gas output, while restricting energy transport.
    • Residential and warehouse real estate will continue to power ahead under the current set of monetary and fiscal policies. Given the higher levels of inflation, real estate prices will remain remarkably resilient to higher mortgage rate levels. According to the USA Today, the real estate market continued to break historic records in April, as home prices rose 21% YoY and the median home-sale price soared to $348,500. In May, this level rose above $350k. A year ago, we predicted an intermediate-term rise to $385k when it was $315k. We are quickly reaching our target.
    • Residential rents have begun to rise again in earnest as the average renter will get squeezed from all directions. If rents rise higher than expected, this will provide rental investors more confidence in higher property prices. I predict rents will rise much higher than generally expected and the landlords will once again, gain the upper hand.
    • Ranch/farm land – Regardless of interest rate levels, farm and ranch land prices will continue to trend higher. This would mirror our experiences of the late 1970s.
    • Bond investors will increasingly find it more and more difficult to stay ahead, even if prices remained elevated from a loose monetary policy regime.
At some point, I have to conclude that this can’t be an accident

As millions remain out of work and as economic growth remains reliant on extraordinary monetary and fiscal support, the Fed’s concerns about the recovery are well founded. If the Fed is right that the U.S. economy is still weak enough to warrant near-zero interest rates and quantitative easing, while wrong that pricing pressures are temporary, investors are looking at the threat of stagflation. Longer term, some investors and economists warn of a so-called debt jubilee, effectively a default through hyperinflation, and the risk of the U.S. losing its reserve-currency status.

Policy makers are walking a fine line. The costs of not getting it exactly right are high, already affecting bottom lines, wallets, and investment returns, while threatening to unleash economic forces not seen in generations.

Inflation Is Here and Hotter Than It Looks. Why It’s Time to Worry., Barron’s May 14th

I came across an article from this weekend’s edition of Barron’s, and wanted to share it with you. I have attached a link to the web version, and you may be able to read it without a subscription.

Inflation Is Here and Hotter Than It Looks. Why It’s Time to Worry.

I have also attached a pdf version of it below. While the pdf version does not contain a few charts that were available in the web version, everything else is the same.

Inflation Is Here and Hotter Than It Looks
What’s the goal here?

I wanted to end with one final observation that was analyzed by Joel Skousen in his latest edition of the WAB. He makes an interesting conclusion as to why the US Fed is remaining remarkably loose, and while he often refers to sources I do not hold in high regard, it’s nearly impossible to ignore the growing inflation dilemma in the West.

I believe it has to do with the “great reset” the globalists created in the wake of the exaggerated pandemic. Locking down the small business and restaurant economy and then offering periodic stimulus payments got everyone on the dole, and each bailout bill had lots of bad legislation in it furthering government control—one of the goals of the Great Reset.

Creating high inflation allows Democrats to decry the not-so-free markets; blame them, and induce people to demand price controls, which Richard Nixon succumbed to during the high inflation of 1971. If price controls ever get reinstalled, I suspect they will keep them in place and never let us be free from them again—much like these pandemic restrictions. Price controls are a key aspect of Fabian socialist “solutions,” and may well lead to calls for even more government controls in healthcare, housing, and food.

Joel Skousen, World Affairs Brief, May 14th

As with deficit and all forms of social spending, the resulting inflation helps those with the assets, while hurting those who do not own them. If you were acquiring income generating assets over the years, you already have seen how your asset prices have kept pace and even rose higher than the general cost of living.

As asset owners, we will have to eventually confront the growing chorus from those left out of the bull market runs. As prices rise, the risk of facing new punishing taxation policies, ownership restrictions, or outright expropriation will climb as well.

8 thoughts on “Barron’s; Inflation is here and it’s time to worry”

  1. Chris, what is your long-term take on gold and other precious metals? I can’t figure out if there is some long-term plan for them in the new banking system, via Basil 3, or if the totally digital central banks will demonetize and dump it all on the open market.

      1. Was your “Behavioral Economics…” post a response to Kris’ question? Or are you writing another one dealing more with the role of gold in the new banking system?

        1. The article was in response to Kris’s questions. But as Putrid wisely observed previously, we really can’t make any comprehensive long-term market and financial predictions, since the economy and political system are centrally managed and loaded with political input. We can no longer make predictions based on sound economics and what makes sense.

          There certainly is a long-term plan, but there is no way to figure out the precise outcome at this point. I know I really didn’t answer Kris’s questions directly, since I really couldn’t. Nobody can at this point except those who are guiding this. The answers will be obvious when the plan reveals itself. However, I wanted to write the article to show the reader how gold and Bitcoin are related and that rathe than being an escape hatch out of this system, btc is a trapdoor into the next one. With this said I own Bitcoin and could do well for those who own it.

          There was a reason why Bitcoin was invented and why it is so heavily promoted in the media. I cannot believe how strongly Bitcoin is promoted in the mainstream. If the powers that be didn’t want us to own Bitcoin they would never talk about it. We knew the long-range plan was to get people away from gold, so this solves it.

          I don’t know how gold will be able to be used in any new system. I actually find it impossible at this point, given the amount of indebtedness and the fact that it’s tangible. There is too much gold held by private owners . How are they going to get that gold and establishe their new monetary system? Gold has too many drawbacks at this point.

          I suspect they’re going to go to some type of crypto/blockchain solution. Given the recent economic and fiscal developments in the post-covid environment, going to a crypto/blockchain solution makes perfect sense.

          The crypto solution will be the only way that the PTB can solve these dilemmas as the new monetary system will be credit-based and rationed out. Gold just no longer fulfills this role and the gold bugs need to come to this realization. It can be a good store of value, but it’s no longer practical in the New World Order.

          I like gold and I own it. But I can never lose sight of the fact that the engineers of the New World Order have developed a monetary, financial, and economic system that would never be able to operate with a gold backing. Think about some simple problems that gold back monetary system would cause. What do we do with the gold that the private owners possess? Who mines the gold coming out of the ground? The powers that be know that their fiercest adversaries will be the ones owning gold. A blockchain solution would solve all of their Hegelian dialectic problems.

        2. Here is one more thought, and it’s one I have been trying to hit home for quite some time. We don’t need a new monetary system to fall in to our laps; we are already transitioning into one. I believe the desired outcome has been on a slow motion rollout since 2008. By the time 2030 rolls around, the new system will be here and will be fully functional, while the whole time the alt-financial media will be speculating as to what the new system will look like.

          The monetary system of the post quantitative-easing world has been slowly morphing over the years into the desired outcome that these elites desire. So on many levels, trying to speculate on any future monetary system is academic. I believe we have been slowly transitioning into it for over a decade.

          All of the people working on blockchain are working on building our prison cells, and all this blockchain will gradually merge into the current fiat system to produce a credit-based rationing mechanism. I think the vast majority of humanity will actually like it. Only a few people like us will find it execrable.

  2. Chris

    Do you recommend buying commodity shares of DBC and DBA to keep up with the commodity inflation pace?

    1. They are good as trading vehicles, but as the prices of everything continue to rise, the risks from a reversal in any Fed policy will rise as well. My experience tells me that we are getting late into this game and that the easy profits have already been made.

      I worry that the FED may decide to announce an intention to begin tapering bond purchases. They are purchasing a hundred twenty billion dollars a month, and all they have to do is announce a decrease to say 80 billion and prices will begin to fade. We’re not talking about a collapse of any sort, but the bloom would be off the rose and those holding shorter-term trading positions could get whacked.

      I honestly do not understand why the FED is purchasing 40 billion dollars a month in mortgage backs. It’s as if they’re willfully trying to drive prices higher. This is why I included that quote from Joel skousen’s latest release. At some level I have to think that this is all intentional.

      While the mainstream economists will tell us that the FED will have to raise rates eventually, I don’t see it that way. They can easily maintain zero percent, but they could taper the bond purchases. This is how I think they should proceed in the future. The growing concern for me as an observer is simple; I am growing concerned that the FED may lose the confidence of the world and global investor. This may be by intent as well, and if this is the case, anything the FED does won’t matter. Perhaps this is the entree into the new monetary system, as the white man and Trump appointee, Powell, “screws” it up.

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