Month: May 2021

25
May
2021

Three Charts Every Gold Investor Needs to See Right Now

Yesterday I noted that gold is telling us that the Fed is indeed going to let inflation run hot.

Remember, the Fed can stop inflation at any point by tightening monetary policy. If the Fed were to announce tomorrow that it is hiking rates 3% while ending its QE program, inflation would be DEAD.

With that in mind, the multi-trillion-dollar question over the last few months has been…

WILL the Fed act to stop inflation before it gets out of control?

I believe gold has finally given us the answer. It’s NOPE.

Gold has just broken out of a nine-month consolidation with conviction.

This is an extremely bullish development, particularly when you consider that gold had to break through both its 50-day moving average (DMA) and its 200-DMA to do this.

So, this begs the question… has gold finally bottomed? Because if it has… the upside target for that bull flag is north of $2,400 per ounce.

During major bull runs in gold, gold miners typically outperform the precious metal by a significant margin. The below chart shows the ratio between the VanEck Vectors Gold Miners ETF (GDX) and the price of gold bullion (GDX: $GOLD) 

When GDX outperforms gold, this line rises. And when GDX underperforms gold, this line falls. As you can see, since March of 2021, this line has been rising, which indicates GDX is outperforming gold by a significant margin.

Moreover, we have a clear rounded bottom (blue line in the chart above) forming here. 

That is a VERY bullish sign for this ratio. If it can break above resistance (red line in the chart above) then we have confirmation that THE bottom is in for gold.

When that happens, gold will begin its ascent higher to new all-time highs, eventually hitting north of $2,400 per ounce.

On that note, we just published a Special Investment Report concerning FIVE secret investments you can use to make inflation pay you as it rips through the financial system in the months ahead.

The report is titled Survive the Inflationary Storm. And it explains in very simply terms how to make inflation PAY YOU.

We are making just 100 copies available to the public.

To pick up yours, swing by:

https://phoenixcapitalmarketing.com/inflationstorm.html

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

Posted by Phoenix Capital Research in Inflation
24
May
2021

The Market Just Issued a MAJOR Warning of What’s to Come

Well, it’s confirmed, inflation is no longer just running hot… it is ROARING.

The Markit’s US Manufacturing PMI is a monthly survey that interviews managers in the private sector to see what they are experiencing in terms of business.

It’s widely considered to be one of the best gauges for the real state of the economy.

With that in mind the Markit’s US Manufacturing PMI for the month of May 2021 just revealed that the cost for input prices as well as new business at service providers have hit their highest levels since 2009. 

As one well known economist put it, “average selling prices for goods and services are both rising at unprecedented rates, which will feed through to higher consumer inflation in coming months.”                                                                                                         

Remember, inflation doesn’t just appear overnight. Instead, it slowly works its way into the financial system in phases.

1)    Phase 1: Raw material price spikes

2)    Phase 2: Factory gate prices spikes

3)    Phase 3: Retail prices

The first stage occurs in the manufacturing/ production segment of the economy when you see producers suddenly paying more for the raw goods and commodities they use to manufacture/ produce finished goods.

We first hit this stage several months ago as the below chart illustrates. The price of raw materials such as copper, lumber and even gasoline are all up triple digits in the last 12 months.

Now, one or two months of higher commodities or raw goods is no big deal, but once you’re talking 6-8 months of steadily rising prices it’s significant. At that point manufacturers/ producers are forced to start raising the prices of finished goods or face shrinking profit margins.

The Markit’s US Manufacturing PMI has confirmed that we are now officially at this point, revealing that the prices managers are paying for goods are rising at unprecedented rates.

Put another way, managers at real businesses in the U.S. are seeing the prices they must pay to obtain commodities/ raw goods and services, rise faster than ever before!

Again, NEVER before in the history of this data set have prices exploded this rapidly.

This means inflation is now ROARING.

It also explains why gold has suddenly caught a bid,  exploding out of a nine-month downtrend.

The above chart is telling us that gold was confused as to whether or not the Fed to stop inflation for most of the last year.

No longer.

Gold is now telling us that the Fed is not going to stop inflation. It is telling us that inflation is here and only going to get worse.

On that note, we just published a Special Investment Report concerning FIVE secret investments you can use to make inflation pay you as it rips through the financial system in the months ahead.

The report is titled Survive the Inflationary Storm. And it explains in very simply terms how to make inflation PAY YOU.

We are making just 100 copies available to the public.

To pick up yours, swing by:

https://phoenixcapitalmarketing.com/inflationstorm.html

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

Posted by Phoenix Capital Research in Inflation
21
May
2021
Warning: the Current Crypto Market is Napster and iTunes is Coming, Pt 2.

Warning: the Current Crypto Market is Napster and iTunes is Coming, Pt 2.

Yesterday I outlined why I believe most crypto-currencies will eventually prove worthless.

By way of quick review, crypto is a tech asset. And all technological revolutions follow two phases:

  1. The initial breakthrough phase, which occurs before social/legal frameworks are in place.
  • The “normalization” phase during which social/legal frameworks are implemented giving the technology a societal and financial legitimacy.

If you need a real-world example of this, think of the electronic music file or MP3 revolution. The first phase was Napster, which featured the sharing of music in what was later deemed as illegal activity (the legal framework was not yet ready for the technology).

Then along came iTunes: the normalized version of the technology in which MP3s could be bought and sold in a legally acceptable form.

I believe bitcoin and crypto currencies are currently in the Napster phase of their development. And the Fed will soon introduce “iTunes.”

We know that as far back as 2017, the Fed was already studying this issue:

As the price of the cryptocurrency continues to soar, the Federal Reserve apparently is giving thought to having a product like bitcoin for its own.

William Dudley, president and CEO of the Federal Reserve Bank of New York, said at a conference Wednesday that the Fed is exploring the idea of its own digital currency, according to reports from Dow Jones.

Any product likely would be well off in the future, he said, adding that it would be “very premature” to estimate when the Fed would come up with its own offering, according to Bloomberg.

Source: CNBC

More recently, on February 5th 2020, Lael Brainard who sits on the Federal Reserve’s Board of Governors, which is in charge of establishing Fed policy, stated the following:

In a Bank for International Settlements survey of 66 central banks, more than 80 percent of central banks report being engaged in some type of central bank digital currency (CBDC) work.12 … a few central banks report that they are moving forward with issuing a CBDC. Building on the tremendous reach of its mobile payments platforms, China is reported to be moving ahead rapidly on plans to issue a digital currency.13

Given the dollar’s important role, it is essential that we remain on the frontier of research and policy development regarding CBDC… we are conducting research and experimentation related to distributed ledger technologies and their potential use case for digital currencies, including the potential for a CBDC. We are collaborating with other central banks as we advance our understanding of central bank digital currencies.

https://www.federalreserve.gov/newsevents/speech/brainard20200205a.htm

Here is a senior member of the Fed stating point blank that the Fed needs to introduce a central bank digital currency (CBDC) in order to maintain the geopolitical standing of the U.S. dollar. The fact she mentions this RIGHT after discussing the fact China is moving forward with a sovereign digital currency tells us that this is a matter of national security for the U.S.

And then just this week, Fed Chair Jerome Powell commented that crypto currencies are “not convenient for payment” due to swings in value. He added that the Fed will issue a report on U.S. digital currency this summer.

Look, it’s obvious what the Fed is doing here. China has already launched a pilot version of the digital yuan. Ukraine, Saudi Arabia, Sweden and Thailand are also doing the same.

Do you think the Fed, the single most important central bank in the world, which controls the world’s reserve currency (the $USD) is going to sit back and let the world move into the digital currency space without moving itself?

No chance in hell.

Which means at some point in the not-so-distant future, the Fed will introduce “Fed Coin” or whatever its CBDC will be called

When that happens, 99.9% of crypto currencies will go to zero.

After all once the Fed introduces its own crypto currency, EVERY other crypto currency would then exist in direct competition to the Fed’s CBDC, which opens the door to charges of counterfeiting and other Federal felonies.

Currently crypto does NOT compete with the Fed because the Fed doesn’t have a CBDC yet. Once it does, everything changes.

Let me put it this way… what happened to Napster when iTunes showed up?

Bear in mind, Apple the company is nowhere near as powerful or formidable a competitor as the U.S. government. Someone might win a lawsuit against Apple. Very few people win lawsuits against the U.S. government.

Enjoy crypto in its current form, but know that it’s like Napster, and soon iTunes will come along.

Originally posted on www.gainspainscapital.com

Swing by to pick up three FREE investment reports valued at over $300 today.

Graham Summers

Chief Market Strategist

Phoenix Capital Research

Posted by Phoenix Capital Research in Central Bank Insanity, crypto
21
May
2021
Warning: the Current Crypto Market is Napster and iTunes is Coming, Pt 2.

Warning: the Current Crypto Market is Napster and iTunes is Coming, Pt 2.

Yesterday I outlined why I believe most crypto-currencies will eventually prove worthless.

By way of quick review, crypto is a tech asset. And all technological revolutions follow two phases:

  1. The initial breakthrough phase, which occurs before social/legal frameworks are in place.
  • The “normalization” phase during which social/legal frameworks are implemented giving the technology a societal and financial legitimacy.

If you need a real-world example of this, think of the electronic music file or MP3 revolution. The first phase was Napster, which featured the sharing of music in what was later deemed as illegal activity (the legal framework was not yet ready for the technology).

Then along came iTunes: the normalized version of the technology in which MP3s could be bought and sold in a legally acceptable form.

I believe bitcoin and crypto currencies are currently in the Napster phase of their development. And the Fed will soon introduce “iTunes.”

We know that as far back as 2017, the Fed was already studying this issue:

As the price of the cryptocurrency continues to soar, the Federal Reserve apparently is giving thought to having a product like bitcoin for its own.

William Dudley, president and CEO of the Federal Reserve Bank of New York, said at a conference Wednesday that the Fed is exploring the idea of its own digital currency, according to reports from Dow Jones.

Any product likely would be well off in the future, he said, adding that it would be “very premature” to estimate when the Fed would come up with its own offering, according to Bloomberg.

Source: CNBC

More recently, on February 5th 2020, Lael Brainard who sits on the Federal Reserve’s Board of Governors, which is in charge of establishing Fed policy, stated the following:

In a Bank for International Settlements survey of 66 central banks, more than 80 percent of central banks report being engaged in some type of central bank digital currency (CBDC) work.12 … a few central banks report that they are moving forward with issuing a CBDC. Building on the tremendous reach of its mobile payments platforms, China is reported to be moving ahead rapidly on plans to issue a digital currency.13

Given the dollar’s important role, it is essential that we remain on the frontier of research and policy development regarding CBDC… we are conducting research and experimentation related to distributed ledger technologies and their potential use case for digital currencies, including the potential for a CBDC. We are collaborating with other central banks as we advance our understanding of central bank digital currencies.

https://www.federalreserve.gov/newsevents/speech/brainard20200205a.htm

Here is a senior member of the Fed stating point blank that the Fed needs to introduce a central bank digital currency (CBDC) in order to maintain the geopolitical standing of the U.S. dollar. The fact she mentions this RIGHT after discussing the fact China is moving forward with a sovereign digital currency tells us that this is a matter of national security for the U.S.

And then just this week, Fed Chair Jerome Powell commented that crypto currencies are “not convenient for payment” due to swings in value. He added that the Fed will issue a report on U.S. digital currency this summer.

Look, it’s obvious what the Fed is doing here. China has already launched a pilot version of the digital yuan. Ukraine, Saudi Arabia, Sweden and Thailand are also doing the same.

Do you think the Fed, the single most important central bank in the world, which controls the world’s reserve currency (the $USD) is going to sit back and let the world move into the digital currency space without moving itself?

No chance in hell.

Which means at some point in the not-so-distant future, the Fed will introduce “Fed Coin” or whatever its CBDC will be called

When that happens, 99.9% of crypto currencies will go to zero.

After all once the Fed introduces its own crypto currency, EVERY other crypto currency would then exist in direct competition to the Fed’s CBDC, which opens the door to charges of counterfeiting and other Federal felonies.

Currently crypto does NOT compete with the Fed because the Fed doesn’t have a CBDC yet. Once it does, everything changes.

Let me put it this way… what happened to Napster when iTunes showed up?

Bear in mind, Apple the company is nowhere near as powerful or formidable a competitor as the U.S. government. Someone might win a lawsuit against Apple. Very few people win lawsuits against the U.S. government.

Enjoy crypto in its current form, but know that it’s like Napster, and soon iTunes will come along.

Originally posted on www.gainspainscapital.com

Swing by to pick up three FREE investment reports valued at over $300 today.

Graham Summers

Chief Market Strategist

Phoenix Capital Research

Posted by Phoenix Capital Research in Central Bank Insanity, crypto
20
May
2021

Warning: Crypto is Napster and iTunes is Coming, Pt 1

I’ve received a number of emails from readers asking for my thoughts on crypto currencies.

First and foremost, I must warn you, I am a no-BS type analyst. So, if you want me to write something fluffy because you personally are a big fan of crypto, don’t read another word. 

It’s not that I’m opposed to crypto currency per se, it’s that I know how policymakers think as well as how central banks work.

And I know BOTH groups have BIG plans for crypto currencies.

First let’s address the technology itself.

Crypto is in fact NOT a currency. Prior to 1913, by law, Congress was the only entity in the United States permitted to issue currency. It then handed this responsibility off to the Fed in 1913. And the Fed is the ONLY entity that can legally issue currency.

So crypto currencies are NOT currencies. They are just another asset class. To argue otherwise is to say you are counterfeiting money, which is ILLEGAL.

Now, crypto is a tech asset. And all technological revolutions follow two phases:

1)    The initial breakthrough phase, which occurs before social/legal frameworks are in place.

2)    The “normalization” phase during which social/legal frameworks are implemented giving the technology a societal and financial legitimacy.

If you need a real-world example of this, think of the electronic music file or MP3 revolution. The first phase was Napster, which featured the sharing of music in what was later deemed as illegal activity (the legal framework was not yet ready for the technology).

Then along came iTunes: the normalized version of the technology in which MP3s could be bought and sold in a legally acceptable form. 

Bitcoin and crypto currencies are currently in the Napster phase of their development.

As such I am inherently wary of them. Moreover, we’re in something of a mania for this with over 5,000 currencies in the world. We are seeing crypto currencies that were literally created in TWO HOURS as a joke (Dogecoin as the tweet below shows), being valued at tens of billions of dollars.

I believe over 99% of cryptos are ultimately worthless. 

Why?

Because at some point the US Government is going to do one of two things:

1)    Start taxing cryptos like regular liquid assets (stocks).

2)    Introduce its own “cash-less” means of exchange/ digital currency.

Regarding #1, since 2014 the IRS currently views crypto  as “property” and suggests it should be taxed as such.

Now there is no federal property tax, so this would mean you would have to tax your crypto holdings based on what property taxes are in your local government. As of 2020, this ranged from the lowest state (Hawaii at 0.3%) up to the highest, (New Jersey at 2.2%.)

By law, come tax season you are supposed to value your crypto holdings at market values and pay taxes on them.

If you think that is bad news, you’re not going to want to read the rest of this article. 

The current Secretary of the Treasury, Janet Yellen, has floated the idea of taxing cryptocurrencies as much as 80%, yes EIGHTY percent.

She is not alone, President Biden’s proposed tax increases would see capital gains taxes as high as 43%.

So, you literally have the Commander in Chief and the person in charge of the U.S. Treasury BOTH pushing for taxing cryptos at a minimum of 40%.

You can ignore this or claim its bunk, but if the government has proved one thing over the last 300 years, it’s that if there is money to be made from taxing an asset, they will start taxing it.

On top of this, at some point in the future, the Fed is going to introduce its own digital currency. We’ll address this topic in tomorrow’s article. 

Originally posted on www.gainspainscapital.com

Swing by to pick up three FREE investment reports valued at over $300 today.

Graham Summers

Chief Market Strategist

Phoenix Capital Research

Posted by Phoenix Capital Research in crypto
20
May
2021

Every Gold Investor Needs to See This

In yesterday’s article I noted that while stocks are clearly forming a top, there are, as of right now, ZERO signs that it is THE top.

Remember, the fact that inflation is running hot doesn’t mean stocks have to crash right now. During the last major bout of hot inflation in the 1970s, stocks roared higher for two years before they finally came crashing down. Throughout that time, the Consumer Price Index (CPI) was clocking in over 3% if not 4%.

So, the fact CPI just hit 3% doesn’t mean stocks have to crash right here and now. And as we’ve assessed over the previous two days, unless the S&P 500 breaks below 4,000 on a monthly basis, things are risk-on.

But what about gold? What can we expect of it as inflation gets hotter and hotter?

The precious metal has been forming a clear bull-flag over the last nine months. As I write this, gold has just completed its third test of the top trendline.

This coincides with the 200-day moving average (DMA and red line) so gold faces a major challenged here. But with the 50-DMA turning up (blue line) momentum is building.

During bull runs, gold miners typically lead bullion and the gold miner ETF (GDX), has already broken above its 200-DMA.

If gold can follow, the upside for this breakout of the bull flag is an incredible 65 on GDX and $2450 on gold.

On that note, we just published a Special Investment Report concerning FIVE secret investments you can use to make inflation pay you as it rips through the financial system in the months ahead.

The report is titled Survive the Inflationary Storm. And it explains in very simply terms how to make inflation PAY YOU.

We are making just 100 copies available to the public.

To pick up yours, swing by:

https://phoenixcapitalmarketing.com/inflationstorm.html

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research


Posted by Phoenix Capital Research in Central Bank Insanity, Inflation
13
May
2021
The Fed Just Released Its Blueprint For How to Handle The Coming Inflationary Storm

The Fed Just Released Its Blueprint For How to Handle The Coming Inflationary Storm

Over the last few articles, we’ve outlined the following:

1)    Inflation first appeared in the financial system in August 2020 and has since accelerated.

2)    This has hurt Tech stocks in a big way, which is why they have collapsed. 

3)    The last two times inflation appeared in the financial system (2010-2011 and the 1970s, respectively), the Fed was forced to either engage in stealth tapering or outright monetary tightening. 

4)    Those Fed actions resulted in the broader stock market as represented by the S&P 500, falling 20% and 50% respectively. 

In light of all of this, what is going to happen to stocks this time around? Will inflation force the Fed to do a stealth taper… or will the Fed get aggressive?

Right now, the answer is truly astonishing… it’s NEITHER.

Indeed, going by recent Fed statements, the Fed is not interested in tightening monetary…at all.

In February, Mary Daly, President of the San Francisco Fed said earlier this week that inflationary pressures are now “downward,” meaning inflation is disappearing. She also added it’s “not time to worry about inflation risks right now.” And that doing so would cost the economy jobs.

That same month, Boston Fed President Eric Rosengren commented that inflation is not likely to hit the Fed’s target until 2022. He was followed by NY Fed President John Williams who told CNBC that rising prices are due to “optimism” about the growing economy.

Bear in mind, inflation was well above 3% in February already.

It’s tempting to simply argue that Fed officials are ignorant of the economic realities facing most Americans because they live in a bubble surrounded by other policymakers and bank officials from the top 0.1% of society.

However, we can put that view to rest since the Fed’s Beige Book, which serves as its primary source for what the real economy is doing, had the following statement in its March report, “businesses in most sectors expect fairly widespread increases in the prices they pay in the months ahead…”

That was followed up in April Beige Book with: “Prices accelerated slightly since the last report, with many Districts reporting moderate price increases and some saying prices rose more robustly. Input costs rose across the board, but especially in the manufacturing, construction, retail, and transportation sectors—specifically, metals, lumber, food, and fuel prices.”

So… for the Fed to claim it doesn’t see inflation, would mean it is either willfully ignorant… or simply doesn’t even bother reading its own economic reports. 

Since those Beige Books were published time, one by one Fed officials have taken up the theme that inflation is indeed appearing, but it is “transitory.”

What the Fed means by this is that they don’t need to do anything because the inflation will disappear naturally as the U.S. economy continues to reopen.

A reopening economy means even greater demand being placed on the same supply chain issues/ rising commodity prices. Moreover, even if the economy remains weak, it’s not as though inflation will disappear by itself either (the stagflation of the 1970s proved that you can have both a recession AND high inflation simultaneously).

I cannot claim to read Fed officials’ minds, so I have no idea if they actually believe this nonsense. All I can say is that the Fed is embracing the narrative that inflation has arrived, but it’s too soon to act because said inflation is “transitory” and will disappear by itself. 

Indeed, most recently I’ve seen several Fed Presidents claim that inflation if rises above the Fed’s target of 2% (say to 2.75% or even 3%), it’s not a big deal.

Bear in mind, inflation is already well over 3% now.

So, what does this mean?

The Fed will continue to keep interest rates at zero, while printing $125 billion per month all while ignoring the countless signals that inflation is already spiraling out of control.

Which means… inflation is going to rage and rage.

On that note, we just published a Special Investment Report concerning FIVE secret investments you can use to make inflation pay you as it rips through the financial system in the months ahead.

The report is titled Survive the Inflationary Storm. And it explains in very simply terms how to make inflation PAY YOU.

We are making just 100 copies available to the public.

To pick up yours, swing by:

https://phoenixcapitalmarketing.com/inflationstorm.html

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research


Posted by Phoenix Capital Research in Inflation
13
May
2021
The Inflationary Storm Has Finally Hit… Are You Ready?

The Inflationary Storm Has Finally Hit… Are You Ready?

I’ve been warning for weeks and weeks now that inflation was going to be a major problem for the financial system.

Yesterday we finally got a taste of it. The official inflation measure for the U.S., the Consumer Price Index (CPI), skyrocketed to 4.2% year over year. Core CPI, which is the most essential component, recorded a year over year jump of 3%.

That doesn’t sound much, but you need to consider the ENTIRE reason that CPI exists is so the government can DOWN-play inflation. There are endless gimmicks used to massage this number as low as possible.

For instance, the CPI…

  • Doesn’t include food or energy inflation, despite the fact those are two of the most necessary goods for consumers to survive.
  • Weighs the cost of goods and services geometrically instead of by their actual price.
  • Uses substitution or replaces items that it measures if they become too expensive.

And more!

Bottomline, the CPI is designed to HIDE inflation. And despite all of the gimmicks and games played by the government, the official inflation number still clocked in at 3%.

This is the highest core CPI since 1982.

To put that into perspective, at that time interest rates were at 19% as the Fed was desperately trying to control inflation.

This time around, the Fed has rates at ZERO while printing $125 billion in new money per month.

To make things even worse, the Fed is in complete denial that inflation even exists. Various Fed officials surfaced yesterday to argue that the spike in inflation is transitory i.e. the Fed doesn’t need to do anything about it.

The White House is also in denial about this problem, claiming that if “base effects” were removed, CPI would only be 2.1%. Bear in mind… as I stated a few paragraphs above, CPI has got dozens of gimmicks built into it to HIDE the real inflation levels.

So, we’ve got both the Fed and the White House in complete denial about this problem. Which means…

Inflation is going to rage and rage.

What does this mean for stocks?

I’ll explain all of that in tomorrow’s article.

In the meantime, we just published a Special Investment Report concerning FIVE secret investments you can use to make inflation pay you as it rips through the financial system in the months ahead.

The report is titled Survive the Inflationary Storm. And it explains in very simply terms how to make inflation PAY YOU.

We are making just 100 copies available to the public.

To pick up yours, swing by:

https://phoenixcapitalmarketing.com/inflationstorm.html

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

Posted by Phoenix Capital Research in Inflation
13
May
2021

The Last Two Times This Hit, Stocks Dropped 20% and 50%, Respectively

Yesterday, I outlined how the rise in inflation has slammed Tech stocks lower.

By way of a quick review, Tech, as represented by the NASDAQ is highly sensitive to inflation on an inverse relationship: when inflation rises, Tech stocks collapse and when inflation falls, Tech stocks erupt higher.

The reason for this is that much of Tech investing is based on growth rates. And if bond yields rise as a result of inflation, bonds become more attractive as an investment, taking away from the appeal of Tech.

As I noted yesterday. as inflation entered the financial system in 2020 and began to accelerate in 2021, Tech stocks have struggled. You can see this in the chart below (red rectangle).

So, we know that Tech is going to struggle going forward as inflation heats up. But what about the broader market like the S&P 500? Will it collapse too?

To figure that out, let’s take a look at the last two inflationary scares in the U.S.

The most recent scare occurred in 2010-2011. At that time, the Fed was pretty quick on the uptake and decided to allow its QE 2 program (the cause of the inflationary spike) to end.

The Fed then waited several months before introducing any new monetary programs. And when it did introduce one, it didn’t involve money printing (instead the Fed used the proceeds from Treasury sales to buy long-date Treasuries through a process called Operation Twist). This was a kind of stealth tightening.

Stocks didn’t like this, collapsing nearly 20%.

 Bear in mind, that was a relatively minor inflationary scare. During the last legitimate inflationary storm in the 1970s-1980s.

During that mess, the Fed was forced to be MUCH more aggressive with its tightening, embarking on two aggressive tightening schedules. It’s worth noting that this triggered two SEVERE recessions (shaded areas).

This IMPLODED the stock market, resulting in a roughly 50% decline over the course of 18 months.

So, what will it be this time? Will the Fed engage in a stealth taper as was the case in 2011… or will it tighten monetary policy aggressively as it did in the 1970s and 1980s?

We’ll address that in our next article.

in the meantime, we just published a Special Investment Report concerning FIVE secret investments you can use to make inflation pay you as it rips through the financial system in the months ahead.

The report is titled Survive the Inflationary Storm. And it explains in very simply terms how to make inflation PAY YOU.

We are making just 100 copies available to the public.

To pick up yours, swing by:

https://phoenixcapitalmarketing.com/inflationstorm.html

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

Posted by Phoenix Capital Research in Inflation
10
May
2021

Is Tech the Canary in the Coal-Mine For the Coming Inflationary Crisis?

The Tech Boom appears to be over.

From the March 2020 lows, Tech was a major leader in the markets. This makes a lot of sense as Tech was one of the few areas of the economy that continued to operate on a relatively normal basis during the COVID-19 shutdowns.

From the March 23, 2020 bottom until August, Tech, as represented by the NASDAQ index outperformed the broader S&P 500 by a wide margin.

However, since that time, Tech has struggled, moving roughly in line with the S&P 500 with the occasional bout of underperformance. This situation has worsened in 2021 with the S&P 500 taking the lead, leaving the NASDAQ in the dust.

What’s going on? 

What’s going on is that Tech is HIGHLY sensitive to inflation. And starting in August/ September 2020, inflation began to appear in the financial system courtesy of the Fed printing over $3 trillion while the U.S. government spent over $3 trillion in stimulus.

You can see this in the below chart. As soon as inflation began to accelerate in 2021, the yield on the 30-Year Treasury began to spike higher. And that’s when Tech started to tumble (red rectangle).

I wish that was the worst news, but it’s not. Yields continue to rise on Treasuries as inflation gets stronger in the financial system. By the look of things, the yield on the 30-year Treasury is about to break out to new highs in the next few weeks.

This is going to put a LOT of pressure on Tech, particularly high-beta momentum stocks like Tesla (TSLA), Shopify (SHOP), Square (SQ), and the like.

But what about the broader market? Will it collapse too? I’ll answer that in tomorrow’s article.

In the meantime, we

On that note, we just published a Special Investment Report concerning FIVE secret investments you can use to make inflation pay you as it rips through the financial system in the months ahead.

The report is titled Survive the Inflationary Storm. And it explains in very simply terms how to make inflation PAY YOU.

We are making just 100 copies available to the public.

To pick up yours, swing by:

https://phoenixcapitalmarketing.com/inflationstorm.html

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research


Posted by Phoenix Capital Research in Inflation
05
May
2021

How Will the Fed Deal With This Latest Bout of Inflation?

Yesterday I pointed out how inflation has become deeply embedded in our financial system.

As a quick recap, inflation arrives in stages. It’s not as though it appears overnight and suddenly the cost of everything rises.

Instead, inflation slowly works its way into the financial system in price hikes in the following prices.

  1. Phase 1: The price of raw materials (what producers/ manufactures pay for supplies)
  2. Phase 2: Factory gate prices (what producers charge distributors/retailers).
  3. Phase 3: Retail prices (what consumers pay).

As I noted yesterday, we now have all three of these in place. This tells us that inflation is now deeply embedded in our financial system.

Historically, the only thing that has stopped inflation is for the Fed to tighten monetary policy by either hiking interest rates or tapering its Quantitative Easing (QE) programs.

During the last inflationary scare in 2010-2011, the Fed allowed its QE 2 program to end. It then waited several months before introducing any new monetary programs. And when it did introduce one, it didn’t involve money printing (instead the Fed used the proceeds from Treasury sales to buy long-date Treasuries through a process called Operation Twist). This was a kind of stealth tightening.

Bear in mind, that was a relatively minor inflationary scare. During the last legitimate inflationary storm in the 1970s-1980s, the Fed was forced to be MUCH more aggressive with its tightening, raising interest rates from 4.5% to over 19%! It’s worth noting that this triggered two SEVERE recessions (shaded areas).

Chart, line chart Description automatically generated

So, which will it be this time? A kind of stealth tapering like we saw in 2011… or aggressive tightening like we saw in the late 1970s?

The answer may surprise you… it’s NEITHER.

That’s correct. The Fed doesn’t believe the U.S. is experiencing real inflation yet. According to Fed Chair Jerome Powell the inflation we’re experiencing is “transitory” meaning it won’t last so the Fed doesn’t have to do anything.

Powell is not alone. Fed officials across the board have referred to inflation as “transitory” stating that even if inflation rises above the Fed’s target of 2% (say to 2.75% or even 3%), it’s not a big deal.

Bear in mind, inflation is already well over 3% now.

So, what does this mean?

The Fed will continue to keep interest rates at zero, while printing $125 billion per month all while ignoring the countless signals that inflation is already spiraling out of control. Yes, the Fed will eventually be forced to act once inflation becomes a political issue, but until then the Fed will have its “blinders” on.

Which means… inflation is going to rage and rage.

On that note, we just published a Special Investment Report concerning FIVE secret investments you can use to make inflation pay you as it rips through the financial system in the months ahead.

The report is titled Survive the Inflationary Storm. And it explains in very simply terms how to make inflation PAY YOU.

We are making just 100 copies available to the public.

To pick up yours, swing by:

https://phoenixcapitalmarketing.com/inflationstorm.html

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

Posted by Phoenix Capital Research in Inflation
03
May
2021

Inflation Watch: We Are Entering the Final and Most Critical Phase

It’s official, inflation is now deeply embedded in the financial system.

You see, inflation arrives in stages. It’s not as though it appears overnight and suddenly the cost of everything rises.

Instead, inflation slowly works its way into the financial system in phases.

  1. Phase 1: Raw materials
  2. Phase 2: Factory gate prices
  3. Phase 3: Retail prices

The first stage occurs in the manufacturing/ production segment of the economy when you see producers suddenly paying more for the raw goods and commodities they use to manufacture/ produce finished goods.

We first hit this stage several months ago as the below chart illustrates. The price of raw materials such as copper, lumber and even gasoline are all up triple digits in the last 12 months.

Chart, histogram Description automatically generated

Now, one or two months of higher commodities or raw goods is no big deal, but once you’re talking 6-8 months of steadily rising prices it’s significant. At that point manufacturers/ producers are forced to start raising the prices of finished goods or face shrinking profit margins.

This is when you see the next phase of price hikes, in factory gate prices.

You see, in today’s economy the company that makes something is rarely the one that sells it to the public. Instead, producers/ manufactures first sell their goods to retailers/distributors, who then sell the goods to the public.

The prices that producers/ manufactures charge retailers/distributors are called “factory gate prices” (the prices the goods cost as they leave the factory). And according to the Chicago Business Barometer, factory gate prices just hit a 41-year high.

Put another way, the last time producers were forced to charge this much was in 1980… and that was during one of the worst inflationary storms in history when the Fed was forced to raise rates to over 15%.

Retailers and distributors can stomach these prices increases for a time, but eventually they are forced to raise the prices they charge consumers or go broke.

As the Financial noted over the weekend, are now officially there:

Nestlé, Procter & Gamble and Unilever are among the global groups to have set out plans for price rises in their latest market updates following commodity price jumps and a spike in transport and packaging costs.

            Source: Financial Times

These are not isolated instances either as the below headlines reveal. Everyone from Coca-Cola to Costco is being forced to hike prices.

Coca-Cola CEO says company will raise prices to offset higher commodity costs

Kimberly-Clark raises prices on Scott toilet paper, diapers in U.S. and Canada

How Costco Is Masking A 14% Price Jump With Shrinkflation

That last term is key. Companies don’t always simply hike raise prices. Sometimes they engage in “shrinkflation” of the policy of selling less of a product for the same price. You’ve probably noticed when you open a food container than between 30% and 50% of the container is empty.

That’s shrinkflation: less of a good for the same price, means higher prices per unit.

Bottomline: inflation is DEPLY embedded in our financial system. Will the Fed act to stop it, or are we entering a true inflationary storm in which prices spiral out of control?

On that note, we just published a Special Investment Report concerning FIVE secret investments you can use to make inflation pay you as it rips through the financial system in the months ahead.

The report is titled Survive the Inflationary Storm. And it explains in very simply terms how to make inflation PAY YOU.

We are making just 100 copies available to the public.

To pick up yours, swing by:

https://phoenixcapitalmarketing.com/inflationstorm.html

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

Posted by Phoenix Capital Research in It's a Bull Market