Anyone with 50-cents of net worth has heard by now that the Federal Reserve left their rates unchanged at the Yellen-session Wednesday.
But this just moves us closer to the point where I will finish ny dollar-cost averaging into the long side of the market for what my (twisted) logic screams MUST be a huge rally in the stock market to come. In fact, it should be along the scale of the 1928-1929 blow-off.
The reason is simple when you think about it: We have been in a decline of bond yields (which has driven their prices up) since 1985, or thereabouts. You can look at the 10-year Treasury note chart here, if you don’t believe it.
What’s more, at some point, this long wave economic decline in bond rates will reverse…and money will flow OUT of bonds and INTO other investments like the stocks that I started to wade into after the Fed decision came out.
This assertion – namely that money flows will begin to move out of stocks – is not blowing smoke: Barron’s had an article hinting in this direction back last month.
Now, fast forward to the aftermath of the Fed decision and what do you see? “Foreign selling of U.S. Treasuries in April was most since 1978: data” is one headline worth some study.
Around the Hallowed Halls of the Economic Crackpot Institute here in East Texas, it’s an article of faith that there is “only so much money in the world.”
When money comes out of one thing (like bonds in this case) it will go into OTHER investments.
My friend Robin Landry says IF this is a fifth wave up that’s about to get rolling, we might see things like oil prices firm, gold prices begin to really take off (bringing silver with them), as well as other things.
My own studies confirm this – and one of the reason’s I have been nattering on about new all-time highs before the presidential election is there is a sort of physical asset drive that would be nicely placed, about here.
My Brother-in-Law and his wife are on the road down to Killeen, Texas this morning. They will be stopping in Temple for some VA appointments, but then off house shopping again. For under $100K, you can get a house that in a frothy market, like Seattle, would be double the price or more. And with the bond market still in denial (the 10-year is down about 1.6%) the stage is set for the bond bunch to sell to doomporn victims who missed the start of the party in 1987…
The “move to other assets” like common stocks, I figure, along with gold, silver, eventually oil, and oh, did you see since we green lighted Bitcoins down around $300, they are up at $737 this morning, and if this really is an Elliott third wave up starting for Bitcoin, an eventual breakout over the $2,000 level seems possible.
The much-touted decline of the US dollar is massively misunderstood, I think, too.
Sure, the dollar will drop in value – which is what happens when a nation is making up money at an 11-12% per year rate.
But something else begins to happen, too: Inflation returns. Oh, sure, monetary inflation, not the healthier wage-driven sort, but hey, what do you think all this $15 per hour minimum wagte talk was about? Come on…stay on page with us.
This is why I am quietly pressing my Bro-In-Law and wife to grab a home at super-low rates while they can. It will be like printing money.
Think of it this way: Say they buy a home for $100,000. That is based on the amount of money in circulation right now.
Fast-forward 5-years: We will have all these immigrants to pay for, there will be complete government intrusion into every aspect of life, the Federal debt will likely go up to somewhere around $20 trillion.
How does it happen? Oh, simple: US bonds return home, the government has to soak them up or collapse the House of Cards, there’s the entitlement monster, baked-in increases for higher ed, more wars… yeah, forget what you read in forecasts, I can make a case for a $30-trillion national debt in 5-6 years.
What does that mean? Well, everything in that world would be 50% more expensive…which is why you want to consider locking prices in while you can for big ticket items like car, truck, home, and medical procedures that you might need in the future.
If the BroInLaw and the Mrs. can pop a zero down $100K home now, and I’m right, then in 6-years, they will have gained $50K in equity.
Sorry, didn’t mean to get off on a rant there, but you can almost smell what’s coming.
And one of the better investments with cheapening dollars will be? (Hint: Won’t be buying bonds) It will be STOCKS.
There, not only do you have the inflation effect on plant and equipment appreciation for big companies, but you also have a Wild West mentality over future prices that should set in within 6-months, but maybe as soon as this summer.
So yes, the market will go down – maybe for another week, but the close this week is loikely a simple fake-out – a buying opportunity for the Big Boys, who will buy now and sell to the late comers in a year or two – when they get long term gains and it’s time for that one-year into a new presidency economic crisis…where it will all be played again.
OK…enough, then. Ure is long the market in here, loves metals, and has been right on Bitcoin since the low 300’s.
What could possibly go wrong? Just watching the Fed H.6 money stocks reports and sit back and enjoy…love that the futures are down 90…you drop all you want, boys…
Falling purchasing power of dollars means it will take more of them and that will over time hit everything…
Consumer Price Report
Buckle up and read:
“The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in May on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 1.0 percent before seasonal adjustment.
The food index declined in May, but the indexes for energy and all items less food and energy rose, resulting in the seasonally adjusted all items increase.
The food index fell 0.2 percent, as all six major grocery store food group indexes declined. The energy index increased 1.2 percent as the gasoline index rose 2.3 percent and the indexes for fuel oil and natural gas also advanced.
The index for all items less food and energy increased 0.2 percent in May. The shelter index rose 0.4 percent, and the indexes for medical care, apparel, motor vehicle insurance, and education were among indexes that also increased.
These advances more than offset declines in an array of indexes including used cars and trucks, communications, household furnishings and operations, airline fares, and new vehicles.
The all items index rose 1.0 percent for the 12 months ending May, compared to a 1.1-percent increase for the 12 months ending April. The index for all items less food and energy rose 2.2 percent over the last 12 months. The food index has risen 0.7 percent over the last year, with the index for food at home declining 0.7 percent and the index for food away from home rising 2.6 percent.
The energy index has declined 10.1 percent over the past 12 months, with all major components falling over the span.”
The major number the Fed looks at it All Items Less Food and Energy which is up 2.2% in the last 12-months.
One of the items that really helps the average is that gasoline was down 16% but remember, this was May data and with the summer driving and vacation season here, we look for gas savings to (bad pun alert) evaporate.
Futures down 90…ain’t nothing pleases a worried market.
Getting Reasonable on Guns
Yes, I own a gun or two. Working tools on the ranch. But should someone on the government’s no fly list, or someone on a terrorism watch list be able to freely buy?
A democratic senator has ended a filibuster…but more important, keep an eye on how Donald “Art of the Deal” Trump may be able to broker a reasonable deal with the NRA and congress…and this before the election. I’d contrast that with how many years of…oh, let’s not go there…but high fives us for the effort.
Meantime, in Orlando, a shooter’s wife is under the microscope.
The Electric Shift
Volkswagen is planning to make a major effort into the electric car business.
The move to electric cars, when you think about it, may not do a lot for pollution overall (still have to burn fossil to get power stations running), but it will certainly help big city air.
Now, if car companies would just get rid of the silly annual model scam, there might be some hope for this rock.
Sorry, my money would be on we will be back to sticks and stones by then…besides, we’re already living VR…