Gold Great? Or Sedate?

"So the Economic Barometer is now sensing some stagflation, eh mmb?"

Squire, 'tis a bit startling that little if any mention is made of stagflation (yet) through most of the "rah-rah" media. "Oh the economic boom is coming!", they say. "Oh we'll get the money to turn the world green!", they say. "Oh international taxation shall point the way!", they say.

Ok. Looking at this past week's incoming metrics for the Econ Baro, here's what we say: Q1's Gross Domestic Product Chain Deflator was revised upward: that's inflation. April's Core Personal Consumption Expenditures Index -- the Federal Reserve's favored gauge of inflation -- increased 75% over that from March to an annualized rate of +8.4%, quadruple the Fed's target rate: say it again, that's inflation. The month's Personal Spending practically dried up whilst Personal Income fell 13.1%. Growth in April's New Home Sales markedly slowed and the month's Pending Home Sales fell 4.4%. And Durable Orders fell 1.3%. As well, The Conference Board's read on May's Consumer Confidence fell. That's shrinkage. Back to math class once again:

Inflation + Shrinkage = Stagflation

Oh and from the "Has The Market Crashed Yet? Dept.", the "live" price/earnings ratio of the S&P 500 is now 52.5x (Bob Shiller pegs it at 44.7x): recall contextually from business school that 15x is "expensive" and over 20x is "stooopid". And as we oft remind: mind the website's MoneyFlow page, its quarterly measure for the S&P citing it as 277 points "high", (which is modest given a 50% "correction" would still find the Index overvalued). And by the Baro, the suggested "massive top" for the S&P (red line) continues to broaden:

"But mmb, we're still told that people have a lot of money to go into the market..."

A valid observation there, Squire. So if "it" is there, why isn't "it" going into the market? The S&P one month ago (29 April) was 4211. Today 'tis essentially the same at 4204. And yet the monthly MoneyFlow (as regressed into S&P points) is 130 points lower. (You won't see that on CNBS). That's a "stealth drain" of dough out of the S&P. Which throughout history we know leaves Joe Blow holding the bag when it all goes wrong. And yet, 'tis as if the entire equities investing community is a bloated fat ostrich with its head inextricably buried in quicksand along the banks of da Nile.

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