A GLANCE AT THE NEWSSTANDS
Magazine covers must be one of the best contrarian indicators out there...
The text at the bottom of the cover says, "Never mind superstar fund manager Cathie Wood’s recent slump. She wants to sell you a future so fantastic you’ll beg her to take your money."
As the saying goes, history never repeats, but it often rhymes. Recall 2003 when we saw this.
To jog your memory, oil had dropped to between $20 and $30 a barrel and nobody in the industry was making any money. Fast forward to 2008, and oil had rocketed to $141 a barrel.
Or the famous “death of equities” cover, just before stocks more than tripled in the following years.
And more recently, in April of 2019 we had a pretty decent indicator that something was afoot. Why? Because nobody was positioned for inflation.
Which brings us to the next topic of the week...
"DON’T YOU WORRY, IT’S ALL TRANSITORY"
If you were with us when the above "is inflation dead?" cover came out, you’ll recall we began highlighting the fact that supply shortages were building. Even more importantly, we warned that inflation can come not only from demand-led-growth but also from supply constraints.
Fast forward to today...
Now, popular opinion and "experts" would have us believe this is only a "temporary" thing (or as they would say, "transitory").
But the reality is, you can’t shut down the world, create the greatest levels of uncertainty, unemployment, and economic hardship in our lifetimes and think that all that was produced in terms of goods and services prior will magically continue to be produced. It’s called supply destruction.
Couple that with fiscal policy ($6 trillion is the Biden administration's new number, though we’re sure it’s probably going to change yet again soon).
The probability that this is "transitory" is, in our humble opinion, bollocks.
COMMODITIES ARE RIPPING
Meanwhile, the Bloomberg Commodity Index just soared to the highest level since 2015.
Though the market is starting to wake up to the realities, we’re still just in the first inning in what is setting up to be a commodity supercycle that will surprise even the biggest resource bulls.
Here, take a look at this long-term chart from Crescat Capital:
And here’s another thing to ponder...
What happens when the reality of rising commodity prices hits this narrative-driven social media hysterical world we live in?
That narrative will be all about inflation, and it won't take much for it to gain traction. For starters, it will be grounded in reality, and secondly, it will be painful. Expect the narrative along the lines of "central banks will never tame inflation again so commodities are cheap at any valuation" to take hold.
As crazy as the valuation of "growth" stocks has become, we can easily see the same for "inflation hedges" over the coming years.
SIGN OF THE TIMES
The following tweet perfectly captures the zeitgeist of today’s markets. By the way, shares of AMC, a struggling movie theatre chain, are up 2,454% just this year (not a typo!).
Ah, what a time to be alive! Folks are going to look back on this era and marvel at how the combination of TikTok, stimulus cheques, and Robinhood accounts created some of the most asymmetric setups ever seen in financial markets.
Disclaimer: This is not intended to render investment advice. None of the principles of Capex Administrative Ltd or Chris MacIntosh are licensed as financial professionals, brokers, bankers or even ...
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Disclaimer: This is not intended to render investment advice. None of the principles of Capex Administrative Ltd or Chris MacIntosh are licensed as financial professionals, brokers, bankers or even candlestick makers in any jurisdiction, anywhere on this big ball of dirt.We do NOT know your individual situation, and you should always consult with your attorneys, accountants, financial planners, and those that are sanctioned to provide you with advice. DO YOUR OWN DUE DILIGENCE.
But seriously, all investments carry risk. Some of what I discuss arguably carries great risk. Investments which can lead to you losing 100% of your capital and maybe more if you are stupid and use margin.If you invest more than you can afford to lose, or borrow money from Joey down at the tavern, Master Card or Visa to make your investments, then you need to go and read a different website.
But really seriously…
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Certainly the one item that is in over-supply is gullibility. Instant mass communication devoid of any fact checking. and hysterical emotion driven actions.
Combining those conditions with a federal reserve bank that evidently has a serious agenda aimed to benefit only one population segment, and that short term, and it has become an exciting ride. Amazing predictions, like those listed, that do not happen, and yet the sources are seldom adequately de-bunked.
Presently the large monster is climate change, and the agenda is removing personal freedoms. But the actual cause is an increased solar heat output. The sun is getting just a bit warmer, as suns very distant have been doing all along. Thus we need to learn to adapt and live with it.
And as for this inflation being "transitory", life itself is "transitory", but that does not mean short. Many of those who are clueless are still skilled orators, the fed are no exception.