JW, finally had some time this AM, to listen to these Puplava interviews. Congrats on hitting about all the "real issues". I was especially pleased to see somebody squarely addressing (for the first time that I've heard) the new Fed debt monetizing trends, and the Fed's actual actions as opposed to their words. The market's today are as far behind the curve on this development as they were on inflation in January.
Some of my random thoughts now:
1. The US is exhausting about all their ammo keeping rates in check. There is both monetization going on,
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PLUS resurrection of the carry trade through permanent injections. I completely disagree with John Mauldin on this, think Reynold is correct about it back on, but wrong about "not worrying" about it:
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I don't think the BOJ is printing yen right now for currency intervention, so the US is alone on the operation. The BOJ is shifting their asset mix selling short bills ,and going longer. That's why the yield curve has flattened. With huge new supply coming on stream, I just don't think they will successfully keep a lid on rates, EVEN WITH A WEAK ECONOMY. I DON'T think there is enough liquidity in the system to support all these bubbles versus the needs of the real economy, well addressed by CI here. Any new liquidity injections will instead be routed directly into higher "real economy" prices: i.e, real economy inflation:
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2. Agree about the USD, cause will be weakening economy. The most important aspect to watch on degree of weakness is the housing market. Key on the purchase index, right now running surprisingly high, hard to shut off. Index goes below 375= trouble.
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3. The US has exhausted their short term MoP "leverage" on commodities, input goods, and energy, and has in a three month process flushed out the specs in numerous commodities: see my COT comments from yesterday.
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That's what caused "the pause". Since the shortage issue is even more acute today than three months ago, watch for a triple whammie: specs reentering the long "pinnochio effect" trade, new specs entering as a "crack-up boom" trade, and industrial users scrambling (train wreck) for the last above ground inventories. The token 25 bps increase on 6-30 will unleash another torrent of inflationary pressures and speculation: may have already started last week. Watch copper and nickel prices and inventories especially, great canary in mine shaft Train Wreck (NOT economic strength, now irrelevant) indicators. |
