Real Inflation is 9%… and the Fed Thinks It Can Stop By Raising Rates to 2%… GOOD LUCK WITH THAT!

By Graham Summers, MBA

And there it is: REAL inflation of 9%!

I’ve noted many times in the past that the official inflation measure, the Consumer Price Index, or CPI, is gimmicked to the point of fiction.

The reason for this is simple: this is the number everyone looks at. And if it reflected reality, Americans would realize that “quality of life” in this country has been in decline for the last 40 years as real costs of living have dramatically outpaced the rise in incomes.

Remember, if incomes do not rise at the same pace as inflation, your real cost of living is rising. Ever wonder why back in the 1950s most families got by on one income, while today both parents work and most families have massive mortgages, over $10K in credit card debt, and $50K in student loans?

Wonder no more!

What does this have to do with today?

Well, the official inflation data point, the CPI, claims inflation is at 6.8%. This is a 40 year high. But because CPI is gimmicked to UNDER-state inflation, the REAL rate of inflation is much, much worse.

If you don’t believe me, take a look at the Producer Prices Index (PPI), the CPI’s less known, less watched, but more accurate cousin.

Unlike CPI, which is crafted by bean counters at the government, PPI is based on actual information from actual producers of goods and services who must adjust their costs based on inflation or lose profits in the real economy…

Which is why the latest PPI data point is catastrophically bad, clocking in at 9.6% year over year (YoY) for the month of November.

Yes, 9.6% as in almost double digits.

Suffice to say, the Fed is WAAAAAAAAAYYYY behind the curve on inflation.

How high will the Fed need to raise rates to stop this? 2%? 4%? More? 

More importantly for the financial system, how will the mountain of debt that was issued based on interest rates of ZERO, going to react to the Fed tightening monetary conditions.

Some $2 trillion in corporate debt was issued in the U.S. last year alone. The U.S. Government issued another $5+ trillion. So right off the bat, you’ve got $7+ trillion in debt that was issued while rates were effectively at zero.

How is this going to adjust to rates at 1%? 2%? Higher?

For bonds with yields this low, every time the Fed raises rates, there is a dramatic impact. Remember, the yield on U.S. Treasuries represent the “risk free” rate of return against which the entire financial system is valued.

So, when the Fed raises rates, that $7+ trillion must adjust accordingly. This means those bond prices FALL and their yields RISE. And if they rise enough, the investors begin to default.

And we’re just getting started here.

As Lawrence McDonald recently noted, globally there is $30+ TRILLION MORE debt with sub-2% yields than there was the last time the Fed attempted to raise rates.

How is all that debt going to handle higher rates? What if the Fed has to raise rates way over 2% to stop inflation? What happens to the mountain of debt that was created BASED on yields being at 0%?

If you think the Fed can navigate this successfully, I would like to point out that the Fed wasn’t able to deflate the Tech Bubble nor the Housing Bubble without creating full-scale crises.

What are the odds the Fed can successfully deflate this current Everything Bubble… which is exponentially larger than the first two?

Look at the below chart and you tell me.

For those looking to prepare and profit from this mess, our Stock Market Crash Survival Guide can show you how.

Within its 21 pages we outline which investments will perform best during a market meltdown as well as how to take out “Crash insurance” on your portfolio (these instruments returned TRIPLE digit gains during 2008).

To pick up your copy of this report, FREE, swing by:

https://phoenixcapitalmarketing.com/stockmarketcrash.html

Best Regards,

The Government Created Inflation… and Has No Idea How to Fix It

As I outlined yesterday, inflation has arrived in the financial system… and there’s nothing policymakers can do to fix it.

When the U.S. opted to shut down its economy in 2020, it embarked on the single greatest mistake in policy history. Economies are not like Netflix, you can’t just pause them for a while without doing MAJOR structural damage.

That damage has arrived in the form of supply chain issues and labor shortages.

Everywhere you look, the manufacturing and delivery of goods and services is taking weeks if not months longer than usual.

  • Over 100 cargo ships are just sitting off the coast of California waiting to be unloaded by dock workers who have changed jobs or simply aren’t returning to work.
  • The trucking industry has been decimated as the shutdowns resulted in many drivers retiring early. Throw in vaccine mandates, and you’ve got even fewer truckers hitting the roads and transporting much needed goods.
  • Coal and energy resources are sitting in the earth, as coal workers and oil employees changed careers entirely or are refusing to return to work.

And on and on.

Meanwhile, demand for everything has come roaring back as Americans are keen to return to “normal life” after a year in lockdown.

Regular Demand + Fewer Goods and Services =HOT INFLATION

And get this… the craziest thing about this whole mess is that the same policymakers who created it, can’t do a thing to fix it.

The Fed, which has printed over $4 TRILLION to prop up the financial system can’t print new workers keen to return to work. Keeping interest rates at zero doesn’t make oil prices come down. And spending $120 billion on QE per month doesn’t result in cargo ships being unloaded and life returning to normal.

Similarly, the DC crowd, which didn’t just choose to crash the economy, but has spent over $11 TRILLION in stimulus (50% of GDP) over the last 18 months, has no idea how to fix the mess they made (aside from spending more money).

The Department of Energy Secretary, the highest official for the energy industry in the U.S. doesn’t even know how many barrels of oil the U.S. consumes per day. The Secretary of Transportation is on paternity leave during the single greatest supply chain crisis in decades. The President thinks releasing 50 million barrels of oil from the Strategic Petroleum Reserve (SPR) over several months will lower gas prices… when the U.S. consumes 22 million barrels of oil per day.

It would be hilarious if it wasn’t so tragic. And the reality is that it has unleashed an inflationary storm that is giving investors a ONCE IN A LIFETIME opportunity to get filthy rich from government incompetence.

During the last major bout of inflation in the 1970s, smart investors locked in gains in the QUADRUPLE digits (1,000% or higher). And THAT version of inflation was the kind the Fed could easily stop!

So you can imagine the profit potential of this crisis today.

I outline five investments that could explode higher as inflation rips through the financial system in a Special Investment Report titled Survive the Inflationary Storm.

To pick up a free copy, swing by

https://phoenixcapitalmarketing.com/inflationstorm.html

Best Regards

Policymakers Have Unleashed Inflation… and There’s Nothing They Can Do to Fix It

Government bureaucrats have accomplished what Central Bankers have failed to do.

For decades, Central Banks have attempted to “create inflation.”

They’ve cut interest rates over 800 times.

They’ve printed over $20 TRILLION in new money.

They’ve even tried buying every asset you can name (corporate bonds, municipal bonds, student loans, auto loans, Treasuries, Mortgage-Backed Securities, etc.).

None of these strategies worked. Inflation never ran HOT. Heck, it never even rose above 3% for more than a few months.

However, with one simple move, government bureaucrats have accomplished what Central Bankers failed to do.

By shutting down the economy, the government has managed to create crises in both labor (people are not returning to work or have changed careers completely) AND the supply chain (items are delayed for months: sitting idly in cargo ships or simply not being produced at all).

These crises in labor and the supply chain are resulting in lower supplies of much needed resources. Factories are operating at partial capacity or in some cases, not operating at all. Grocery store shelves are running bare. Orders are taking twice if not THREE times as long to be fulfilled.

Much lower supplies + normal demand = HOT INFLATION.

And there’s NOTHING central banks can do to fix this.

The Fed can’t print employees or oil.

QE doesn’t suddenly make factories operate normally.

Yield curve control doesn’t start unloading cargo ships that are sitting at docks.

And the bureaucrats who created this mess don’t have any solutions for it either.

The Biden administration announced today that it will try to force oil prices lower by releasing 50 million barrels of oil from the Strategic Petroleum Reserve (SPR) over the next few months.

This number (50 million barrels) sounds like a lot… until you consider that the U.S. consumes 20 million barrels per day.

Put another way, this release accomplishes nothing. Oil has already rebounded on the news and is back at $80 per barrel.

Again, this kind of inflation cannot be stopped by the Fed or the government. And it has presented us with the opportunity to profit from once in a lifetime event: the arrival of an inflationary crisis that cannot be slowed or stopped by the Fed or fixed by government policies.

During the last major bout of inflation in the 1970s, smart investors locked in gains in the QUADRUPLE digits (1,000% or higher). And THAT version of inflation was the kind the Fed could easily stop!

So you can imagine the profit potential of this crisis today.

I outline five investments that could explode higher as inflation rips through the financial system in a Special Investment Report titled Survive the Inflationary Storm.

To pick up a free copy, swing by

https://phoenixcapitalmarketing.com/inflationstorm.html

Best Regards

OK, Now This is REALLY Serious

OK, now things are getting really serious.

We all know the Fed is dead wrong about inflation. It is not transitory… and least not in the “it will go away by itself” kind of way the Fed claims.

Worse still, there is nothing the Fed can much of it.

As I’ve noted before, monetary policy cannot fix the supply chain/ labor problems in the economy. The Fed can’t print oil or coal. QE doesn’t make dock workers return to work and start unloading containers. Maintaining lower interest rates doesn’t resolve issues in shipping/ trucking/ manufacturing/ etc.

This situation was already a MAJOR problem when it pertained to microchips and other manufacturing goods. But now it’s spilling over into something more critical.

Food.

In case you missed it, yesterday Bloomberg reported that the current nitrogen shortage has become so problematic that farmers aren’t able to procure the necessary fertilizer to produce their usual crop yields.

So, are we going to have to add a FOOD crisis on top of the inflation that is headed our way? 

Take a look at the below chart of agricultural commodities and you tell me.

That’s a 12-year bear market ending in spectacular fashion. Food inflation was already here BEFORE this nitrogen shortage. So what happens when the next round of crops doesn’t get anywhere near what is expected?

A true inflationary storm.

It’s horrifying, but it has ALSO presented us with the opportunity to profit from once in a lifetime event: the arrival of an inflationary crisis that cannot be slowed or stopped by the Fed.

During the last major bout of inflation in the 1970s, smart investors locked in gains in the QUADRUPLE digits (1,000% or higher). And THAT version of inflation was the kind the Fed could stop!

I outline five investments that could explode higher as inflation rips through the financial system in a Special Investment Report titled Survive the Inflationary Storm.

To pick up a free copy, swing by

https://phoenixcapitalmarketing.com/inflationstorm.html

Best Regards

This Ridiculous Accounting Gimmick Has Opened the Door to Potentially Massive Profits

Inflation is bad… so much worse than the official numbers admit.

Dissecting all the gimmicks the Bureau of Labor Statistics (BLS) employed to understate the official inflation numbers would take pages and pages than we have this week. However, one of the more egregious examples concerns its “Shelter” component which is supposed to measure how much it cost to own or rent property in the U.S..

Now, “Shelter” comprises almost 33% of the CPI. So, it’s a MAJOR component of the official inflation number. And as such it is massaged to UNDER-state inflation in a MAJOR WAY.

The BLS counts “Shelter” via two different measures called “Rent of Primary Residency” and “Owners Equivalent Rent.”

Rent of Primary Residence is meant to represent what you would pay to rent a residence including extra charges such as parking or garage facilities.

Owner’s Equivalent Rent is meant to replicate your cost of owning a home based on what you could potentially rent it out for.

The BLS calculates both measures via public surveys. Setting aside the fact that NO ONE wants to talk to the BLS about their expenses (which renders them highly accurate), the BLS still massages the data it does collect to an absurd degree.

Case in point, according to the BLS, Rent of Primary Residence is up only 2.4% over the last 12 months while Owner’s Equivalent Rent is up only 2.9%.

In the REAL world, apartment rental costs are up 8% to 20% depending on the specific market. And Home Prices are up 20% in the last 12 months.

Even if you already own a home, meaning that you don’t need to buy one so the rise in home prices doesn’t hit you right now, you’re still paying more in property taxes and other items related to the spike in home prices.

Put simply, unless you live in a cave, your real-world Shelter expenses are up triple if not quadruple the BLS’s claim of ~3%. And remember, Shelter comprises almost 33% of CPI!

So, what would happen to CPI, which is already clocking in at 5.4%, if the BLS were to use ACCURATE REAL WORLD data for its Shelter component?

It would tell us that REAL inflation is at 7.95%.

It’s terrifying, but it also presents us with an extraordinary opportunity.

During the last major bout of inflation in the 1970s, smart investors locked in gains in the QUADRUPLE digits (1,000% or higher). And THAT version of inflation was the kind the Fed could stop!

So, you can imagine the profit potential of this crisis today.

I outline five investments that could explode higher as inflation rips through the financial system in a Special Investment Report titled Survive the Inflationary Storm.

To pick up a free copy, swing by

https://phoenixcapitalmarketing.com/inflationstorm.html

Best Regards

The Bond Market Just Called the Fed’s Bluff… Big Gains Are On The Way!

By Graham Summers, MBA

The bond market is calling the Fed’s bluff.

The single most important bond in the world is the 10-Year U.S. Treasury. The yield on this bond serves as the “risk free” rate of return for the world: it is the rate against which all risk assets (real estate, stocks, commodities, etc.) are valued.

I mention all of this because the yield on the 10-Year U.S. Treasury is exploding higher. As I write this Friday morning, it is closing in on 1.7% and is just a hair below its March 2021 high.

Why does this matter? 

Because this yield moves based on inflation (among other things). And the speed of this move is suggesting that the inflation situation is getting worse. 

Remember, the only reason bond yields fell from March until July of this year was because the Fed promised to tighten monetary policy. Put another way, the bond market believed the Fed would take the necessary steps to stop inflation from getting out of control. 

Not anymore.

The bond market is now showing us that the Fed won’t act in time and inflation is going to spiral out of control.

You can see this clearly in the below chart which illustrates the ratio between Treasuries that trade based on inflation (TIPS) and long-term Treasuries (TLT). I call this the “inflation vs deflation ratio.” 

When inflation is the primary driver of the financial system, the chart rallies. And when deflation is the primary driver of the financial system, the chart falls.

As you can see, this ratio has just broken out of a 14-year downtrend. What this means is that for the first time in 14 years, the financial system is moving into an inflationary regime. 

And the Fed is WAAAYY behind the curve.

This has presented us with the opportunity to profit from once in a lifetime event: the arrival of an inflationary crisis that cannot be slowed or stopped by the Fed.

During the last major bout of inflation in the 1970s, smart investors locked in gains in the QUADRUPLE digits (1,000% or higher). And THAT version of inflation was the kind the Fed could stop!

So, you can imagine the profit potential of this crisis today.

I outline five investments that could explode higher as inflation rips through the financial system in a Special Investment Report titled Survive the Inflationary Storm.

To pick up a free copy, swing by

https://phoenixcapitalmarketing.com/inflationstorm.html

Best Regards,

The Fed is Now Cornered… and There’s Nothing It Can Do to Fix This!

Aside

The Fed is now cornered (to a degree).

This is not to say that the Fed cannot continue to print money, nor does it mean the Fed is “out of ammunition” as many bears like to claim.

The Fed is technically never out of ammunition as it can print money forever. Moreover, as the Fed’s policy response to the COVID-19 pandemic has shown us, the Fed is more than willing to engage in policies that are technically illegal (buy corporate bonds, buy municipal bonds, etc.) by using loopholes (print the money and give it to the Treasury to buy these assets) when it’s necessary.

However, there are some problems that Fed policy simply cannot solve. And today, the markets are facing two of them.

They are:

  1. Supply-chain issues.
  2. The global energy crisis.

Printing money, Quantitative Easing (QE), maintaining low interest rates, even buying assets and securities that are technically outside the Fed’s legal mandate…. NONE of those policies can remedy supply-chain issues, or their inflationary effects.

The Fed can’t MAKE people return to work… or force them to give up their new careers and go back to unloading cargo ships or working in manufacturing facilities.

Similarly, for the Energy Crisis, the Fed can’t print oil or coal. QE doesn’t lower energy prices. And maintaining lower interest rates doesn’t make coal miners/ oil employees go back to work and start drilling or mining.

Meanwhile, inflation expectations are erupting higher. They’ve just taken out their May 2021 highs, which marked the PEAK for the last inflationary thrust.

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These problems (supply chain issues and an energy crisis) aren’t going away any time soon either… Copper has just hit an all-time high!

Meanwhile, Oil just broke out of a 13 year bear market!

With the right investments, we are talking about the opportunity to make literal fortunes here as inflation RIPS through the financial system igniting MASSIVE price spikes in key sectors.

I outline five investments that could explode higher as inflation rips through the financial system in a Special Investment Report titled Survive the Inflationary Storm.

To pick up a free copy, swing by

https://phoenixcapitalmarketing.com/inflationstorm.html

Best Regards

If You Think Inflation is GOOD For Stocks… Take a Look at This

The Fed continues to push the narrative that inflation is transitory.

On one level, Fed officials are correct. Everything is transitory. But the Fed isn’t being philosophical here…it’s attempting to argue that they don’t need to do anything, and the current wave of inflation will naturally dissipate.

I know, this is ridiculous. But the Fed is so desperate to maintain its $120 billion per month money printing scheme, that it must come up with ridiculous excuses.

First it tried Climate Change, but since it’s not clear how printing money fixes the weather, they’ve shifted gears to claiming inflation isn’t an issue and will go away on its own.

Why do this?

Well, it’s difficult to claim that printing $1.4 TRILLION per year is a benign enterprise when the cost of living is rising by double digits. And so we end up with ridiculous situations in which Fed officials are forced to make foolish claims such as their biggest concern is that we won’t have enough inflation.

I’m not kidding.

Yesterday, Chicago Fed President Charles Evans stated the following whopper: “I am more uneasy about us not generating enough inflation in 2023 and 2024 than the possibility that we will be living with too much.”

It’d be hilarious if it wasn’t causing so much suffering for everyday Americans. Anyone who’s been to the grocery store or filled up their cars at the gas station knows this is bunk.

The same goes for anyone who is paying attention to what the markets are actually saying. If you turn off the news and simply focus on the charts, it’s clear the market is SCREAMING “inflation!”

The top performing asset classes this year are Energy (XLE), Financials (XLF) and Real Estate (XLRE). They are up 43%, 33% and 26%, respectively.

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These are all inflation plays.

Energy and real estate are obvious. And Financials rally when yields rise (and yields are rising due to inflation). Heck, even Goldman Sachs has figured this out and is warning its private clients about a commodities super-cycle courtesy of an inflationary storm.

If you think this will be great news for the stock market, think again. During the last major bout of inflation in the 1970s, stocks collapsed some 50%. Even worse, they finished the decade DOWN.

Put another way, a crash is coming. The big question is, “WHEN?”

To figure this out, I rely on certain key signals that flash before every market crash.

I detail them, along with what they’re currently saying about the market today in a Special Investment Report How to Predict a Crash.

To pick up a free copy, swing by

https://phoenixcapitalmarketing.com/predictcrash.html

Best Regards

Ok, This is TRULY Horrifying!

 Yesterday, I outlined a terrible secret.

That secret?

That the Fed knows the official inflation measure, the Consumer Price Index (CPI) is practically useless for forecasting future inflation.

In a little-known paper published in 2001, the Fed found that food inflation, NOT CPI or PCE, is the best predictor of future inflation. Fed researchers wrote the following:

We see that past inflation in food prices has been a better forecaster of future inflation than has the popular core measure [CPI and PCE]…Comparing the past year’s inflation in food prices to the prices of other components that comprise the PCEPI (as in Table 1), we find that the food component still ranks the best among them all

Source: St Louis Fed (emphasis added).

I want you to focus on these two admissions:

  1. The Fed has admitted that its official inflation measures do not accurately predict future inflation.
  • The Fed admitted that FOOD prices are a much better predictor of future inflation. In fact, food prices were a better predictor of inflation than the Fed’s PCE, non-durables goods, transportation services, housing, clothing, energy and more.

I mention all of this because today food inflation is erupting higher.

We already noted that agricultural commodities are ripping higher.

But the situation is even worse than I imagined. The below quote is truly horrifying…

Adjusted for inflation and annualized, [food] costs are already higher now than for almost anytime in the past six decades, according FAO data. Indeed, it’s now harder to afford food than it was during the 2011 protests in the Middle East that led to the overthrow of leaders in Tunisia, Libya and Egypt, said Alastair Smith, senior teaching fellow in global sustainable development at Warwick University in the U.K.

Source: Yahoo! Finance

Put simply, food inflation today than at almost any time in the last 60 years. That would include the 1970s, when inflation went into the double digits and the stock market crashed over 50% in a matter of months.

If you think we’re immune to something like this now, take a look at the below chart. This is a massive bubble, looking for a pin. And by the look of things, inflation is it!

On that note, we 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 made 100 copies available to the public.

Today is the last day this report is available to the general public.

To pick up yours, swing by:

https://phoenixcapitalmarketing.com/inflationstorm.html

Best Regards

Trust Me, the Fed Doesn’t Want You to Know This

Yesterday I explained how the official inflation statistic used by policymakers, the Consumer Price Index or CPI, is practically useless.

I realize this is quite controversial. After all, everyone on the planet from hedge fund managers to social security administrators uses this data point as THE inflation measure.

Unfortunately for them, CPI is pretty much useless. It doesn’t accurately measure inflation in any way shape or form.

Today, I’m going to let you in on a little secret.

The Fed knows this.

In fact, the Fed has known this for years… since 2001 to be exact.

Back in 2001, the Fed had several researchers dive into the subject of inflation. Their goal was the analyze whether the Fed’s preferred measures of inflation (the CPI and the Personal Consumption Expenditures or PCE) are decent predictors of future inflation.

The Fed also investigated a whole slew of other inflation measures for comparison purposes.

The results?

The Fed found that food inflation, NOT CPI or PCE, is the best predictor of future inflation. Fed researchers wrote the following:

We see that past inflation in food prices has been a better forecaster of future inflation than has the popular core measure [CPI and PCE]…Comparing the past year’s inflation in food prices to the prices of other components that comprise the PCEPI (as in Table 1), we find that the food component still ranks the best among them all

Source: St Louis Fed (emphasis added).

I want you to focus on these two admissions:

  1. The Fed has admitted that its official inflation measures do not accurately predict future inflation.
  • The Fed admitted that FOOD prices are a much better predictor of future inflation. In fact, food prices were a better predictor of inflation than the Fed’s PCE, non-durables goods, transportation services, housing, clothing, energy and more.

With that in mind, take a look at what is happening with agricultural commodities, which are the primary supplies for food.

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You are looking at the end of a 12-year bear market… and the beginning of a new bull market.

If you think this is going to go well for stocks, you are mistaken. During the last major bout of inflation in the 1970s, stocks initially ripped higher for a few years before crashing ~50% erasing all their gains and then some. Even worse, the stock market finished the decade having gained ZERO in 10 years.

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 made 100 copies available to the public.

There are just 9 left.

To pick up yours, swing by:

https://phoenixcapitalmarketing.com/inflationstorm.html

Best Regards

This Company Gave Us a Glimpse Into What’s Coming to the Broader Market

The deflationists had another bad day yesterday.

Deflationists argue that inflation doesn’t exist because the Treasury market isn’t acting as if inflation is a problem. They always fail to mention that the Treasury market is ALSO the most manipulated market on the planet. The Fed is currently spending over $1 trillion per year buying these bonds, effectively cornering them.

So why was yesterday a bad day for deflationists?

Because it was revealed that apartment rents are up almost 15% year over year since June. Yes, 15%. This is the highest annual increase since 1993.

By the way, the Bureau of Labor Statistics, which compiles the official inflation data for the U.S. claims “rents or shelter” is in fact only up 2.6% over the same period. As Bill King notes, if CPI accurately reflected the real jump in rent inflation, CPI would be at least 4% higher (north of 9%).

So, while the bond market continues to exist in a manipulated state of fantasy, real people are experiencing real jumps in prices, which is causing real economic damage.

This will eventually lead to catastrophe.

Stocks initially LOVE inflation but that love eventually turns to hate when costs rise so much that they eat into profits.


This was the case during the last real bout of inflation in the 1970s. At that time stocks initially rallied aggressively from mid-1970 to 1974. Then inflation spiraled out of control and the markets crashed some 50%.

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This time around will prove no different. We are already beginning to see signs of this in individual stocks.

Consider Clorox (CLRX). The company lost over 11% of its market cap yesterday when it revealed that the company’s cost of products as a percentage of net sales spiked from 53% in 2Q20 to 63% in 2Q21.

The reason for this spike in costs?

Inflation.

CLRX shares erased months’ worth of gains in a single day and are now back to where they were in early 2020, erasing the ENTIRE COVID-19 ramp.

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This kind of collapse will be spreading more and more throughout the stock market as inflation roars.

With that in mind, we’ve reopened our Stock Market Crash Survival Guide to the general public.

Within its 21 pages we outline which investments will perform best during a market meltdown as well as how to take out “Crash insurance” on your portfolio (these instruments returned TRIPLE digit gains during 2008).

We are making just 100 copies available to the general public.

To pick up your copy of this report, FREE, swing by:

http://phoenixcapitalmarketing.com/stockmarketcrash.html

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

Buckle Up: Jerome Powell “Cut a Deal” And Inflation is Going Roar!

Over the last two days, we’ve outlined how the bond market is predicting a surge in inflation.

By quick way of review:

  1. Real rates, as measured by the difference between yields on Inflation Treasury Inflation-Protected Securities or TIPS and regular Treasuries have been surging higher (see the chart below).
  • This means that TIPS are dramatically outperforming Treasuries right now. Since TIPs trade based on inflation expectations, this suggests that the bond market is predicting much higher inflation.

What would cause this?

Another round of massive money printing.

We’ve already noted that the Biden administration hopes to sign a $2-$4 trillion infrastructure program into law in the next few weeks. And after that there is talk of a $1.7 trillion climate change program.

Today, I’d like to tackle the Fed’s role in all of this.

The Fed is currently engaged in a $120 billion per month Quantitative Easing (QE) program. This comes to over $1.4 trillion in month printing per year.

Recently the Fed has been hinting that it intends to taper this program, and possibly start raising rates sometime in 2022/ early 2023. But by the look of things, that will no longer be the case.

Why?

Because the Biden administration recently leaked that it intends to give Jerome Powell as second term as Fed Chair starting in 2022.

The story was leaked via Bloomberg, which has a close relationship with the Biden administration. And it suggests that Jerome Powell has “cut a deal” with Joe Biden to stay on as Fed chair. After all, the only way that Joe Biden would give Jerome Powell a second term would be if the latter “got onboard” with Biden’s agenda.

That agenda?

Keep the economy as strong as possible going into the 2022 mid-terms.

This means NO tapering, NO rate hikes, and NO tightening of monetary conditions for the foreseeable future. Sure, the Fed might jawbone things or stage verbal interventions here and there to provide political cover, but there is no way on earth Jerome Powell can tighten monetary conditions in the near future if he wants to stay on as Fed Chair.

Which means…

Inflation is going to ROAR in the coming months.

On that note, if you’re concerned about inflation, we have 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

Why Inflation is About to Get a Whole Lot Worse

Yesterday I outlined how real rates suggest gold will be moving MUCH higher in the coming months.

By quick way of review:

  1. Because we are in a fiat-based monetary regime, gold trades like any other asset.
  • Specifically, gold typically tracks “real rates” or the actual cost of money as illustrated by the difference between yields on Inflation Treasury Inflation-Protected Securities or TIPS and regular Treasuries).
  • Real rates typically lead gold at major turns. We saw this at the bottom in March 2020 and more recently in June 2021.

Recently a massive divergence has developed between real rates and gold with real rates rising and gold lagging (see the chart below).

This would suggest gold will be going MUCH higher in the coming months.

What would trigger this?

 Inflation.

Remember, real rates represent the difference between the yields on Treasury Inflation-Protected Securities (TIPS) and regular Treasuries. So, when TIPs outperform regular Treasuries, this line rises, and when regular Treasuries outperform TIPs, this line falls.

So, the fact real rates are rising so aggressively means that TIPS which focus on inflation are dramatically outperforming Treasuries right now. This means the bond market is predicting greater inflation is coming.

What would trigger this?

Two things:

  1. The $2-$4 trillion infrastructure program the Biden Administration is hoping to sign into law in the near future.
  • Jerome Powell’s continued tenure as Fed Chair in 2022.

Regarding #1, policymakers have already made it clear from their response to the 2020 shutdowns that their entire blueprint for dealing with crises, boils down to just two words.

PRINT MONEY.

Shutting down the economy triggers a depression?

Print money.

Stock market experiences fastest 30% crash in history?

Print money.

Municipal bonds collapse because the bond markets don’t believe cities and states will be able to meet their debt obligations?

Print money.

The economy still hasn’t come back because state officials continue to keep their economies on partial or complete lock downs?

Print money.

The economy isn’t coming back fast enough despite vaccines and states reopening?

Print money.

Indeed, policymakers printed so much money to combat the impact of the COVID-189 lockdowns that if you add up all of the money the U.S. has ever printed… over 40% of it was printed in 2020.

And the Biden administration doesn’t intend to stop anytime soon. It has already implemented a $1.9 trillion stimulus. It’s now attempting to get a $2-$4 trillion infrastructure program signed into law. And after that it hopes to implement a $1.7 trillion climate change program.

Inflation is already roaring. What do you think another $2-$4 trillion in money printing will unleash?

And bear in mind, that’s just the Federal Government. We’re not even accounting for the Fed here.

I’ll dive into that tomorrow.

In the meantime, if you’re concerned about inflation, we have 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

Is Gold About To Rip Higher?

On Friday we outlined the strange price action in gold.

As a quick recap:

  1. Because we are in a fiat-based monetary regime, gold trades like any other asset.
  • Specifically, gold typically tracks “real rates” or the actual cost of money as illustrated by the difference between yields on Inflation Treasury Inflation-Protected Securities or TIPS and regular Treasuries).
  • Recently a massive divergence has developed between real rates and gold.

Regarding #3 in the list above, the divergence between the two items is quite large, which means either real rates need to come down, or gold needs to catch up.

Chart, histogram

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I believe we will see gold begin it next leg up relatively shortly.

Why?

Because real rates usually lead gold on turns.

Let’s go back to the COVID-19 meltdown. Note that real rates (top box) bottomed a few days before gold did (bottom box). Real rates bottomed on March 12th, while gold bottomed on March 20th.

Chart

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We saw this same dynamic play out again more recently in June of 2021 when real rates bottomed on the 17th of June (red circle) while gold didn’t bottom until the 29th (blue circle).

Chart, waterfall chart

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This would suggest that real rates will in fact lead gold higher going forward. Again, real rates have been soaring while gold is struggling to ignite higher. The below chart suggests gold will eventually be running to $2,000 per ounce in the coming months.

Chart

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What would trigger a run like this?

Inflation.

I’ll outline how and why in tomorrow’s article until then.

In the meantime, if you’re concerned about inflation, we have 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

Why the Fed’s Bluff Will Cost Investors’ Trillions, Pt. 2


Yesterday I outlined how the Fed is extremely late to curb inflation. 

As a brief recap, it only took CPI clearing 5%, multiple signals that inflation is running hot, housing entering a bubble, stocks roaring to new all-time highs, and signs of frothiness including: someone sold a Non-Fungible Token (NFT) of a fart, crypto-currencies including ones that were designed as a joke exploding higher, etc.

Put simply, it only took an extreme level of frothiness as well as some of the worst inflation prints in decades for the Fed to decide it needed to do something. 

We’ve already assessed how the markets initially reacted to the Fed’s move. But now it’s time to digest what the Fed actually did.

Did it actually hike rates?

No. 

Did it actually taper QE?

No.

Did it do anything besides change inflation expectations?

No again.

The Fed has clearly decided it is willing to stomach higher inflation in the near-term to sustain the bubble in stocks/ recovering economy. However, with inflation expectations rising (within 10 minutes they recovered over two years’ worth of declines)…

 and Treasury yields getting dangerously close to breaking their long-term downtrend (see the chart below)…

… the Fed was forced to temper these expectations.

So, the Fed did what it does best… it made a verbal intervention.

But was the Fed really serious?

I can’t claim to be psychic in the sense that I can read Fed officials’ minds. What I can tell you is that I don’t think it’s coincidence that within 48 hours of stocks selling off:

1)    The Biden White House convened a meeting with the President’s Working Group (the so-called Plunge Protection Team).

2)    There will be SIXTEEN (16) Fed official appearances this week, the vast majority of which have been to issue dovish statements about how the market overreacted to the Fed and that the Fed is nowhere near thinking about tightening monetary policy. 

Since that time, Fed Chair Jerome Powell has appeared before Congress during which he stated:

  • Fed Will Wait for Actual Inflation as Trigger for Rate Rise
  • Fed Won’t Raise Rate Preemptively
  • 5% Inflation Is Not Acceptable (We’re old enough to recall the 2% threshold)
  • Inflation Effects from Reopening Larger Than Expected
  • High Inflation Temporary, Will Abate
  • Factors Weighing on Labor Supply Should Abate 
  • May Take Some Patience to See What Is Really Happening
  • Hard to Say When Supply Bottlenecks Will Disappear
  • Enhanced Unemployment Benefits May Be Factor
  • Expects to See Strong Job Creation in the Fall
  • ‘Very, Very Unlikely’ U.S. Will Suffer 1970s Inflation Experience

So… Powell is basically telling us the Fed is NOT going to act preemptively concerning inflation… that the Fed still believes inflation will disappear by itself… and that the Fed is in “watch and wait” mode.

Put another way, the Fed spooked bond yields into dropping, and until they start rising again, the Fed is happy to let things bubble up in the markets.

In this sense, what the Fed has done is move to curb future inflation expectations without actually doing anything. This in turn has pushed long-term bond yields back down again… which has opened the door to stocks roaring to even higher levels before crashing down in a spectacular crisis.

I’ll explain why in tomorrow’s article… until then.

In the meantime, we have 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​

Why the Fed’s Bluff Will Cost Investors’ Trillions, Pt. 1

So the Fed finally moved… but what precisely did it do?

After a full year of the most extreme monetary policy in history, including…

  1. Over 12 months of ZERO interest rate policy despite the economy growing.
  2. Over $3 trillion in money printing.
  3. Buying corporate bonds, muni bonds, corporate bond ETFs, Treasuries, Mortgage-Backed Securities Student Loans, Certificates of Deposit, etc.

…the Fed finally announced it is thinking about tightening monetary conditions.

It only took CPI clearing 5%, multiple signals that inflation is running hot, housing entering a bubble, stocks roaring to new all-time highs, and signs of frothiness including: someone sold a Non-Fungible Token (NFT) of a fart, crypto-currencies including ones that were designed as a joke exploding higher, etc.

Put simply, it only took an extreme level of frothiness as well as some of the worst inflation prints in decades for the Fed to decide it needed to do something. That something?

The Fed announced that intended to start tapering QE in late 2021/early 2022 while also potentially raising rates late in 2022/ early 2023.

Regardless of whether or not the Fed will actually do any of this (more on that in a moment), what matters for us today is how the market reacted to the Fed announcement.

Treasuries, particularly long-term Treasuries (20+ years) caught a major bid on the news.

The long-term Treasury ETF (TLT) jumped 4% in the span of a few days. This forced widespread liquidations at hedge funds in their short bond positions. And when hedge funds start liquidating losses, they often will liquidate winners as well to free up capital.

You can see this in the stock market when compared to TLT: they are a mirror image of one another (blue rectangle in the chart below) with stocks falling in near perfect synchronization as TLT rallied.

Chart

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This suggests that the sell-off in stocks was collateral damage from the move in bonds, NOT necessarily a bearish development outright for stocks.

With all of this in mind, we need to take a look at what the bond market is currently doing for signs of where things are headed. Remember, it was Treasuries, that forced the Fed to act. And it was Treasuries that forced the sell-off in stocks last week.

So, what precisely did the Fed do?

We’ll address that in tomorrow’s article.

In the meantime, we have 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​

Stocks Are Preparing For a Major Breakout

Stocks continue to churn.

The S&P 500 has been in a consolidation phase since mid-April. Yes, we’ve had a few runs to new all-time highs, but as the below chart shows, most of the action has been sideways (see the blue box in the chart below).

Whenever markets enter a consolidation phase, the eventual breakout tends to be violent. And the longer the consolidation, the more violent the breakout.

Considered the last market consolation which took place from February through late March 2021. Stocks chopped back and forth in a significant box pattern before finally breaking out to the upside. They then ripped higher by 5% in the span of a little over a week.

Indeed, this has been the hallmark of this bull market since the March 2020 lows: stocks rip higher, then enter a six to eight week consolidation phase before breaking out to the upside again. I’ve identified the consolidation phases in blue boxes in the chart below. All of them resulted in breakouts to the upside.

With this in mind, I see no reason to overthink the current consolidation. Until the Fed begins to tighten monetary policy, it’s difficult to see a reason why stocks should collapse. It is clear the Fed has decided to let inflation run hot, and as I’ve outlined multiple times in the past, stocks initially LOVE inflation.

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

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

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

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