Inflation: Going Stag

Stagflation in the offing, unless it's not different this time…

As corporations continue to raise wages, market participants fear the Fed is wrong about supposedly “transitory” inflation, long-term Treasury bond yields resume the rally (bonds decline) manufacturers’ (ISM) costs keep rising, the Fed’s inflationary operation – a desperate monetary kick save if ever there was one – labors on.

The Fed has manipulated bonds and flooded the markets and economy with funny munny created out of nowhere, as if by magic. As if by MMT (modern monetary theory) TMM (total market manipulation). So far, so good. Jerome Powell stands to be the first non-Bernanke winner of the Ben Bernanke Award for Heroism in the line of inflating a debt ridden economy.

Since becoming bullish on the inflation trades last summer after the worst of the deflation scare had played out (notice the spike down on the chart that jerked Powell 100% unequivocally dovish), the expectation has been for this ‘good’ inflation to eventually be replaced by one of two things (using the 30yr Treasury Yield Continuum of dis-inflationary macro signaling as a guide)…

tyx 30 year yield

1) another logical deflationary liquidation of the excess as per the Continuum’s history or 2) a ramp up in inflationary pressure on the economy from which the Fed does not back off, an all-in double down on the inflation trades, which would instigate yields to do what they have not done in the history of my handy chart above. That would be to go Stag in the next phase of the ‘flation’.

From Trading Economics, here is the graphical picture as inflation’s cost effects launched in April (despite April’s suspect Payrolls Report) and wigged the markets out pretty good (but has not yet broken them).

inflation

Bonds manipulated → (funny) munny printed → government taxing and spending (as if the munny is free) → costs rising → manufacturers and services PUSHING those costs into the economy → get ready for our combative antlered friends above to make the scene if the Continuum disregards the monthly EMA 100 & 120 limits this time.

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I have been asked by a subscriber (of note, due to his experience in professional fund management) to consider not highlighting my macro tools in public, and I usually don’t give away the fine ...

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