"The Era of Moflation"
Inflation, Hyperinflation, Stagflation and Deflation.
They are all - always and everywhere, a central banking
phenomenea.
Pick your "flation."
Inflation?
You'll find it at a 7.1% rate in China, 5.7% in the U.K.
and nearing double digits here in the U.S. when you strip
away the hedonic adjustments.
Hyperinflation?
Defined as inflation above 10% - you'll find it in nearly
all commodities, in global money supply, and in food prices.
China's food prices have risen 18.2% year over year. South
Korea's import prices are up +21% year over year, and they
stand at +15% in the U.K. and +12 in Russia.
Commodities? Oil and Gold at record highs. Platinum going
parabolic and cocoa at 34 year highs. Food stuffs from
corn, to wheat, to soybeans - all soaring thanks to
"phenomenal" central bankers...
18 of the 20 largest Central Banks have increased money
supply at double digit rates. Australian money supply has
surged +20%, China's +18%, and Canada's +12.3%.
Stagflation?
For stagnant growth + inflation - just look to the USA
for the newest version of Stagflation 2.0.
Deflation?
Mortgage paper selling for pennies on the dollar, money
markets frozen, and billions of dollars of write-offs and
recapitalization injections from souvereign wealth funds.
Derivative debt bombs everywhere you look + cratering
housing prices - again, led by the good ole US of A.
Pick your "flation" - they're all here.
Yesterday, the markets reached a crucial turning point.
Flation - be it in, stag, hyper, or de, flation - has
now been not just accepted - but, embraced by the media.
The media just capitulated on the "flation" story and the
public will soon follow.
Welcome to the era of -- "Mo-Flation."
Momentum + pick your favorite "flation" = "Moflation."
The momentum traders are now rushing into the "flation-trades."
The two things this gold market has been missing all through
this entire cycle are - capitulation by the media and the
general public on inflation, and the broad entry of the
momentum crowd into gold and commodities.
I believe that yesterday, we saw an actual turning point
and capitulation by the mass media on the "flation-trade."
There is a massive amount of cash on the sidelines and
the commodity sector stands nearly alone as the primary
beneficiary of the momentum trade.
Now is the time to scoop up small caps and laggards in
your favorite "flation" sector.
We saw what just happened in PAL and in Palladium. JP
Morgan just upgraded Stillwater (SWC) and raised it's
price target to $26 a share. SWC closed yesterday at $17.39,
so that leaves another 50% upside to JPM's target in SWC.
For those taking profits on the doubling of PAL, don't
dump everything. Keep a few shares, and look to re-enter
on any pullbacks and keep exposure in SWC and in Palladium
itself, if you play the metals directly - as Palladium
looks to be headed for a quick run through $600.
For gold stocks... the HUI has been basing, and looks to
be a coiled spring that has 550ish written all over it,
and the headline we've all been waiting for...
"Gold soars to $1,000."
...may be just days, or weeks away.
The era of "Moflation" with $100 Oil and $1,000 Gold leading
the parade has arrived. Buckle up, hang tight, and enjoy the ride.
Mo later,
S.O.T.B. |
