A Buy Climax Is Coming…

“In the United States problems of economic understanding have been compounded by the effect of economic prosperity. The Japanese in World War II spike ruefully of shoribyo or “victory disease.” The Greeks called it hubris, and thought that it always ended in the intervention of the goddess Nemesis. That lady makes her appearance when wave-riders begin to believe that they are wave-makers, at the moment when the great wave breaks and begins to gather its energy again.” ~ David Fischer, “The Great Wave”

Good morning!

In this week’s Dirty Dozen [CHART PACK]  we look at some more signs of budding inflationary pressures, make the case for a coming bottom in gold, talk about the positioning reset in the dollar, discuss the possibility that maybe too much good has been priced in, and then pitch a swing trade on a liquidation play, plus more…

Let’s dive in.

***click charts to enlarge***

  1. Credit Suisse published a chartbook this past week making the case for increasing and enduring inflationary pressures. CS writes “CPI expectations & oil prices are closely correlated; Commodities are in total (directly and indirectly 7% of CPI) and are in a bull market. Much of the shock from the price discovery process of disruptive technology has been seen.”

  1. Meanwhile, other deflationary pressures are reversing… CS points out that “80% of global trade is in industrial goods and we now have global trade being 100% of global IP”. Also, Chinese labor costs are no longer as cheap, reversing a tailwind for DMs offshoring production. CS notes that the “BIS claim globalization has taken 1% off CPI each year… and trade has lowered prices of household goods by a quarter to two thirds – ‘huge effect’.

  1. While these charts from BofA show rocketing global food prices and a slight turn up in union membership, which could be the start of a broader trend.
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Disclaimer: All statements are solely opinions and are for educational purposes only.

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