How can the dastard mention silver & junk bonds in the same sentence?
And what might “Peak Interventionist Economics” imply?
The Bubble Seems To Have Reached Its Gossamer Limit
Independent of the disaster in Japan, the last few weeks’ animated spirits in the financial markets have changed from robust confidence to uncertainty.
After soaring nicely, Consumer Confidence, on the latest report by the University of Michigan, plunged from 77.5 to 68.2. This was reported as a “stunning reversal” and the survey pre-dated the earthquake.
We have been thinking that financial speculation and consumer confidence would top within the time window as targeted by our Momentum Peak Forecaster. With fascinating implications, perhaps interventionist economics has peaked as well.
To be serious, a strong surge into around March has been essential to set the reversal to the down side. And the turn began well before the catastrophic earthquake close to Japan.
The focus, then, is the financial markets rather than repercussions from natural disasters. Ross reviewed stock market action subsequent to non-financial disasters and for traders the initial objective is a Downside Exhaustion. A relief rally for the still popular sectors would follow. It could be brief and should be considered as a technical test of exuberance.
Part of the exuberance is focused on the likelihood of the Fed being successful in its desperation to depreciate the dollar. This week’s emergency, according to alarmists, will drive the rate of inflation to exceptional levels. Usually, just what the inflation will be in seems not to be specific.
Since the panic ended in March 2009 there has been outstanding price inflation in, for example, base metal price mining stocks that soared 800 percent. Silver prices have inflated by 325 percent. Junk bond prices have also enjoyed an outstanding price gain.
The Shadow Government Statistics reading on consumer price inflation is up to 9 percent, which compares to the blow-out high of 14.7 percent in 1981. The more contrived reading is at 2 percent, but that is rigged by the relentless improvement in computer efficiency. The CPI should be limited to a basket of groceries, gasoline and the cost of a home.
Conventional wisdom expects this CPI surge to exceed the old highs.
History suggests that this is unlikely.