{"id":22493,"date":"2013-09-24T09:16:05","date_gmt":"2013-09-24T13:16:05","guid":{"rendered":"http:\/\/www.ino.com\/blog\/?p=22493"},"modified":"2013-09-24T09:16:05","modified_gmt":"2013-09-24T13:16:05","slug":"the-feds-great-adventure-in-inflation","status":"publish","type":"post","link":"https:\/\/wwwtest.ino.com\/blog\/2013\/09\/the-feds-great-adventure-in-inflation\/","title":{"rendered":"The Fed's Great Adventure in Inflation"},"content":{"rendered":"<p style=\"text-align: justify;\">In the current policy and media stoked market environment, anything is possible.\u00a0 It's\u00a0 the wonderful, magical world of hands-on policy making.\u00a0 5 years after the financial crisis, but still not enjoying a ramping economy like the good old (and long gone) days of the last great secular bull market (RIP 2000)?\u00a0 Just sit back, relax and let the man in charge control the image.<\/p>\n<p style=\"text-align: justify;\"><span style=\"color: #808080;\"><i>\"For the next hour, sit quietly and we will control all that you see and hear. We repeat: there is nothing wrong with your television set. You are about to participate in a <strong>great adventure<\/strong>. You are about to experience the awe and mystery which reaches from the inner mind to\u00a0\u2013 The Outer Limits.\"<!--more--><\/i><\/span><\/p>\n<p style=\"text-align: justify;\">What has been happening for the last year is that people have been obeying these instructions.\u00a0 Yes, the same herd that reviled \"Helicopter Ben\" (didn\u2019t you just know in your gut that these taunts would come back to bite inflationists, commodity bulls and gold bugs?) in 2011 is now enthralled and awaiting the next chapter in the great adventure.\u00a0 '<em>The stock bull is a reflection of an organic and healthy economy' <\/em>claim the politically biased or mentally challenged.<\/p>\n<p style=\"text-align: justify;\">We have <a href=\"http:\/\/biiwii.com\/wordpress\/2013\/08\/26\/market-shrugging-policy-makers\/\" target=\"_blank\">reviewed graphs in the past<\/a> comparing the S&amp;P 500 to Monetary Base and other measures of monetary inflation.\u00a0 <span style=\"text-decoration: underline;\">The cyclical stock bull out of March, 2009 has risen in lockstep with money suppl<\/span>y.\u00a0 The current leg of the 13 year long (and counting) big picture stock consolidation per the graph above, has been dependent on money supply creation fueled by increases in the public debt.\u00a0 The stock market loves this policy and is dependent upon it.<\/p>\n<p style=\"text-align: justify;\">Why did the FOMC blink on Wednesday?\u00a0 They have smart people who can look at a chart and conclude the same thing; dependency.\u00a0 Many have proclaimed that the S&amp;P 500, at new all time highs, has just begun a new secular bull market.\u00a0 For a grim reminder of how an ATH breakout can fail miserably (I know, because I had bad upside targets based on this breakout), we once again refer to Mr. Huey, the HUI Gold Bugs Index.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify;\"><a href=\"http:\/\/biiwii.com\/wordpress\/wp-content\/uploads\/2013\/09\/hui10.png\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-medium wp-image-13222\" alt=\"hui\" src=\"\/\/biiwii.com\/wordpress\/wp-content\/uploads\/2013\/09\/hui10-500x431.png\" width=\"500\" height=\"431\" \/><\/a><\/p>\n<p style=\"text-align: justify;\">The question remains, how do you project a new secular bull market 4.5 years into a cyclical bull market that is getting long in the tooth?\u00a0 Bulls making such projections are staking claim to a contrarian mantle.\u00a0 In my opinion, they are merely capitalizing on a newly bullish public that is ripe to be sold a 'new secular bull' story as the cyclical bull matures.<\/p>\n<p>&nbsp;<\/p>\n<p style=\"text-align: justify;\"><a href=\"http:\/\/biiwii.com\/wordpress\/wp-content\/uploads\/2013\/09\/au.ag_.cpi_.png\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-medium wp-image-13223\" alt=\"au.ag.cpi\" src=\"\/\/biiwii.com\/wordpress\/wp-content\/uploads\/2013\/09\/au.ag_.cpi_-500x318.png\" width=\"500\" height=\"318\" \/><\/a><\/p>\n<p style=\"text-align: justify;\">Precious metals players have suffered untold ignominy in this great adventure.\u00a0 \"<em>But but but\u2026 precious metals always go up when inflation\u2019s effects (i.e. prices) do!\"<\/em>\u00a0 Well no, they don\u2019t.\u00a0 Over the long term they effectively protect against the price effects of inflation subject to certain err\u2026 adjustments.<\/p>\n<p style=\"text-align: justify;\">Over the last 2 years the gold \"community\" has gotten <em>adjusted<\/em>.\u00a0 It is as simple as that.\u00a0 The steady march of inflation\u2019s embedded effects continues unabated.\u00a0 This brings us back to Biiwii\/NFTRH's biggest picture theme; we are in an era of chronic economic contraction being fought by policy makers in the only way they know how; through inflation.<\/p>\n<p style=\"text-align: justify;\">One day the system is going to puke up all of this debt. That is where the first real deflation since the 1930's could come in (2008 was a liquidation within an ongoing inflationary era).\u00a0 Meanwhile, there are signs that the deflationary pull in play over the last 2 years may be changing.\u00a0 Nobody expects an inflation problem because the <em>effects<\/em> of the current inflation have been so well contained over the last 2 years (post-2011 commodity blow off).<\/p>\n<p style=\"text-align: justify;\">This is not a prediction that inflation's effects are going to rise to the surface soon, but we do note that it is a distinct possibility.\u00a0 We also note that despite this post's Outer Limits shtick (it's getting over played, I know) policy makers are not in total control.\u00a0 Casino patrons merely perceive them that way in the current phase.<\/p>\n<p style=\"text-align: justify;\">The Fed wants inflation and is trying to achieve it, per FOMC's own words.\u00a0 But will they get it?\u00a0 If so, how much of it will they get?\u00a0 The desired amount (that they think they can control) or something more undesirable?<\/p>\n<p style=\"text-align: justify;\">Is it a coincidence that <a href=\"http:\/\/biiwii.com\/wordpress\/2013\/09\/18\/treasury-tic-data-japan-china-net-t-bond-buyers-july\/\" target=\"_blank\">China and Japan were net buyers of T bonds in July<\/a>?\u00a0 They were net sellers in June and then we were served Huey, Dooey &amp; Louie (Fed talking heads in the media) and a 24\/7 \"taper\" hype job.\u00a0 Now, global supply and demand has taken a \u2018tic\u2019 toward favorable for T bonds (for July, anyway) and suddenly the Fed surprises with NO TAPER.<\/p>\n<p style=\"text-align: justify;\">Are you kidding me?\u00a0 Who is really in control here?<\/p>\n<p style=\"text-align: justify;\"><em>Charts courtesy of <a href=\"http:\/\/slopeofhope.com\/socialtrade\/chart\/editor\" target=\"_blank\">SlopeCharts<\/a>.<\/em><\/p>\n<p style=\"text-align: justify;\"><a href=\"http:\/\/www.biiwii.com\">Biiwii.com<\/a>, <a href=\"http:\/\/biiwii.com\/wordpress\/about-nftrh\/\">Notes From the Rabbit Hole<\/a>, <a href=\"https:\/\/twitter.com\/intent\/follow?original_referer=http%3A%2F%2Fplatform.twitter.com%2Fwidgets%2Ffollow_button.1379634856.html&amp;region=follow_link&amp;screen_name=BiiwiiNFTRH&amp;tw_p=followbutton&amp;variant=2.0\">Twitter<\/a>, <a href=\"http:\/\/biiwii.com\/wordpress\/free-eletter\/\">Free eLetter<\/a><\/p>\n<!-- AddThis Advanced Settings generic via filter on the_content --><!-- AddThis Share Buttons generic via filter on the_content -->","protected":false},"excerpt":{"rendered":"<p>In the current policy and media stoked market environment, anything is possible.\u00a0 It's\u00a0 the wonderful, magical world of hands-on policy making.\u00a0 5 years after the financial crisis, but still not enjoying a ramping economy like the good old (and long gone) days of the last great secular bull market (RIP 2000)?\u00a0 Just sit back, relax [&hellip;]<!-- AddThis Advanced Settings generic via filter on get_the_excerpt --><!-- AddThis Share Buttons generic via filter on get_the_excerpt --><\/p>\n","protected":false},"author":41,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[1247,1840,5642,425,5470,4273,7948,5641,4785,5217,5442,5640],"class_list":["post-22493","post","type-post","status-publish","format-standard","hentry","category-general","tag-ben-bernanke","tag-biiwiicom","tag-commodity-bulls-and-gold-bugs","tag-fed","tag-fed-taper","tag-gary-tanashian","tag-guest-bloggers","tag-helicopter-ben","tag-notes-from-the-rabbit-hole","tag-taper","tag-the-federal-reserve","tag-the-outer-limits"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v23.4 (Yoast SEO v23.6) - 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