No plan b: QE4 brewing - have mercy on US all!
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
Policy-makers have gone mad and the general public doesn't quite understand how dire the situation is. Everyone's bullish on the U.S. economy; can you find anyone that isn't saying that "things are looking good, overall," or that doesn't have his money tied to deflationary assets?
Assets, which perform well in deflation, have done the impossible for 40 years, while inflation has plummeted from the 1970s craze.
The entire investment world is OPERATING under the premise that inflation is a thing of the past. Interest rates reflect no concerns with inflation. Bond investors are locking in yields that make no sense for anyone who anticipates 2% inflation or higher in his lifetime, and there's a housing shortage in many desired areas due to lack of construction.
Central banks are throwing everything they've got into the fire, but they can't seem to spark the inflation needed to raise rates higher and normalize. Without relevant interest rates, no one is afraid of leveraging and the default of lousy businesses is gone.
Think about it, since that's the real bubble – the idea that inflation has been solved by what the Davos crowd is referring to as "Disruptive Deflation."
The theory is that there's so much innovation and so many benefits to the breakthroughs we enjoy in technology that prices keep compressing and our lives continue to get more efficient, without tacking on additional costs.
On our smartphones, we browse the web, take photos, calculate, communicate and stay up-to-date on global events. This contraption fits in a pocket and is affordable to most of the world's population. Therefore, the argument goes, the economy has disinflation.
Like all other This Time It's Different concepts, this one will blow up in our faces as well.
Another category that is blowing up in our faces right now – and causing champagne bottles to be opened and poured like kings in Turkey and other manufacturing capitals outside of Southeast Asia – is the coronavirus.
The demand for steel is down 80%. The truth is that we haven't begun to feel the impact from the virus on financials yet, but this indicator just shows you the level of DISRUPTION and the size of the DROP in activity, in the world's second largest economy and its manufacturing DOMINATOR.
Pollution levels have dropped by 50% in China, which also proves just how much of an impact these unfortunate circumstances have on their workforce and on the world, as a whole.
If we don't see signs of relief and progress soon, it won't end as swiftly and neatly as SARS did.
Millennials, who are definitely not in the habit of trusting their elected officials, are pushing the price of Bitcoin above $10,000 yet again and I'm not discounting a 30%-40% move upwards in the next few months.
The chart looks ripe for a BREAKOUT!
Bitcoin is no longer a bet on some obscure idea. It is a calculated investment, based on the fact that it is leading the internet of value. The World Wide Web connected the planet and made the world like one village, but the blockchain will cause unheard-of improvements in lowering the costs of the middle-man, who SUCK UP a fifth of the price of an item in some cases.
The bull market in stocks is truly not over. We keep seeing how ready investors are to bail on equities at the first sign of trouble. This isn’t the way these bull markets end.
On top of that, investors are quite happy with buying bonds. This shows me that they're so cautious that the upside doesn't bother them whatsoever – they seek wealth preservation.
In order to show you just how the mindset of the market has altered, check out the yield that lenders are willing to accept from the Greek government.
Truly, these are unprecedented times for all of us.
When the history books close our chapter, we will all know the real cost of PRINTING CURRENCY out of thin air.
Courtesy: U.S. Global Investors