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It is ironic that right when most Bears where capitulating, a geopolitical event in a small country far away from the US started something that may potentially lead to the next Bear Market and actually trigger a global meltdown that could make the 2008 crisis look like a small correction.
The boyz ran out of runway, and had to throttle back for another try.
The story referenced in the title being whether or not global policy
makers can cook up an inflationary up phase in the global economy. I
had used the term ‘i2k12′ early last year referring to the prospects for
what might ultimately be an inflationary 2012. Well, they came with
the QE at year-end and now the theme shifts forward to the prospects for
i2k13.
A subscriber forwarded to me an audio of Don Coxe talking
about the changes coming out of Global Policy Central in “Basel
Greenlights Banks Big Time” and it turned out to be a good starter for a
post in which I would like to try to delineate some things.
You may have heard me belly ache in the past about the raving
inflation bulls who lump gold and gold stocks in with the entire
inflation trade? Gold is copper is oil is hogs?
The signal would be toward inflation. This is crazy talk I know.
The Fed is going to get all austere and end QE. Yes, it must be true;
they said so in yesterday’s delayed expectations management exercise.
This is a flipped over view of the Continuum AKA our monthly view of
long-term interest rates. Maybe the most recent red arrow on the chart
will not result in an inflationary phase this time. But then again, didn’t the Bond King think that it would be different ‘this time’ in spring, 2011? *
What if it is not different this time? I give all due respect to
Prechter because I happen to believe he is due respect. Indeed, I think
EWI are forecasting a top in T bonds as well. So we must realize that
there could be a scenario where T bonds top out and yet deflation
ensues. But if the Continuum is to continue, 2013 could turn out to feature obvious signs of inflationary excess before all is said and done.
* Bond King Bill Gross famously shorted the bond just before it
began a huge rise in a flight to the safety (ha ha ha) to US T bonds.
