Current Thoughts for 6/29/2016

We had a strong move up in silver today, past the $18 resistance we have been looking at for 2 months now. Silver closed off it’s highs but I still lean bullish until gold can take out that intraday high of $1,362 from Friday. That to me will signal the last leg up as long as the dollar continues to fall.

The dollar did fall today under 96 and still looks weak. Perhaps we have the dollar back in its inverse action to gold and silver which I have written about.

Post Brexit

Watch for a continued fall in the dollar short term and an overall higher price for the metals. While metals won’t go up every day, just as the dollar won’t go down, this is still the trend I see. For me, the dollar is still my key to watch. Interestingly enough, volatility is back down again so fear is NOT driving the metals higher, just as the lack of fear hasn’t driven prices higher since February.

I’d like to point out a good conversation I jumped into again with another article on Seeking Alpha. I do this from time to time to test whether my theories are correct or if I am missing something. I’ll always admit to not knowing everything and I continue to challenge myself so that I don’t miss what others might be seeing. My goal is not to argue and say I’m right, but try and get a discussion to see where my point of view could use some improvement. I’ll always learn from the conversation if they are kind enough to indulge.

This can also give you a little insight into what I am writing about in my forthcoming book Illusions of Wealth. I must have hit a wall of those interested as it seems no one has signed up to receive notice of it’s release lately. I am thankful for those that have. My guess is once you read the book you will be either handing it off to your friends or buying them a copy.

Article title; PCE, GDP: Stagflation Confirms Down Cycle To 2017 Please read article first to know what the author says.

and can be found here: http://seekingalpha.com/article/3985206-pce-gdp-stagflation-confirms-cycle-2017

Hi Elezar, partly agree but think a bit early. Can we explain away the money velocity increase with assumed CPI inflation?Until we get that moving, you have a deflationary scenario imo. Once this move in commodities peters out, around $1,400 by my estimates which I alluded to in April article here, the dollar will rise and gold will fall.http://seekingalpha.co…Current Thoughts posted daily (been micro bullish metals):http://tinyurl.com/prz…I’ll also take the lower rates (after small blip up) and very good chance of more QE the further we slip down the slippery slope. Don’t believe a word the Fed or CNBC’s Liesman says who were both calling for 3 to 4 more rate increases this year after the Dec. rate hike.
29 Jun 2016, 11:59 AM Edit/DeleteReply0Like
Author’s reply »
Hi Doug. its in the data. inflation is in the present. its not an expectation.
Fed is at their 2% inflation mandate just about. see what Mr Powell said last night… http://seekingalpha.co…
29 Jun 2016, 02:20 PM Report AbuseReply1Like
Hi Elazar,Thanks for the reply. Was hoping to have a discussion as I just finished a book on a lot of this and wanted to see if there might be things I’m missing.CPI may have been bumped up because of rise in commodity prices like oil of late, but it is 1% for the last year. http://tinyurl.com/84b4dSome of this inflaton can be explained away quite easily with government involvement in certain industries where prices have risen. For example, the 10’s of millions more on SNAP (formerly food stamps) hasn’t subsided much and this gives grocery store vendors a reason to keep prices higher despite the contraction we have had in the price of grains. Look at the recent nosedive in the price of corn. http://tinyurl.com/ohw… and wheathttp://tinyurl.com/pvu…It’s not all black and white.But money velocity is black and white. http://tinyurl.com/zny…We need to produce and we are not. Industrial production has declined again; http://tinyurl.com/zr9…Manufacturing still printing negative. http://tinyurl.com/hox…Treasuries buyers are still there and will continue to be so “as favored Fed inflation gauge misses.” http://tinyurl.com/h2j…One or two Fed members talking up what the Fed may be doing isn’t anything I pay attention to. This is what I wrote about the Fed in December 2015; “Those like Goldman Sachs predicting 4 rate increases next year haven’t a clue. CNBC consortium predicts 3 rate increases. Yellen says rate hikes will remain data dependent. I’m already telling you what the data will say; nothing good.”I’ve called their bluff every time this year too.Perhaps they like to talk the talk but when put to the test, can’t walk the walk. Maybe that’s the case with Powell who said there would be 2 Fed hikes in June 2015, and we got one. http://tinyurl.com/h6x…He said in May 2016 a rate hike looks appropriate “fairly soon.”http://tinyurl.com/hh4…And then there is this from Bloomberg:Circle Jan. 31, 2018, on the calendar. That’s the soonest the Federal Reserve hikes next. http://tinyurl.com/hos…Thanks for listening.
29 Jun 2016, 03:19 PM Edit/DeleteReply0Like
Author’s reply »
Doug good luck w/ the book. let me know when its outdeflation its not happening.
inflation is happening
whats going to happen, im leaning on low productivity and slwoign growth to mean inflation, meaningful and big infaltion
thats why greespan confirmed our inflation formula
29 Jun 2016, 03:25 PM Report AbuseReply0Like
Thanks Elazar.I have learned over the years, anytime you get in a discussion on inflation/deflation, one must first define the terms. I’m not going to get into that discussion now but have written about it extensively. It’s not just about prices but one must include “credit” in the equation.Based on the first link, you see “a huge supply of dollars coming.” We have had a huge increase in M2, but it has been swallowed up hence the economy, “pushing on a string” and nil money velocity. We haven’t even started the contraction yet, so yes, we are opposite on this. For the dollar to move lower, which we are on the same page for possibly a bit more, by default you need the Euro, Yen, Pound etc. that make up the Index. This means you have to justify why their currencies will not fall but rise (collectively). I come to the opposite conclusion and the strength of U.S. treasuries as proof (and continued proof despite micro moves in opposite direction).Regarding Greenspan’s comments, I’ll just pass on that. Another Fed member who caused problems and now has solutions or knows what to do? heheI will say what may be missing from your analysis, and I admit I have not read all your work, would be the credit side of things.I’ve had these discussions with the Austrians on their missing the credit too (people like Peter Schiff that only see printing money and claims dollar crash). Eventually they will be right. But I think we go the contraction route first.Thanks.
29 Jun 2016, 03:49 PM Edit/DeleteReply0Like
Author’s reply »
what do you mean credit side.
i’m with you i think things are contracting growth wise and will be down but inflation up
inflation aside. i think credit will tighten
but tell me what im missing on the credit side pls.
29 Jun 2016, 03:53 PM Report AbuseReply0Like
Elazar,We are in agreement on credit as far as credit tightening, but possibly not the outcome (inflation vs deflation first). Goes with my point about defining terms.The credit aspect to this is included in the definition of deflation that I use below;The third type of deflation we will consider results from the tightening of credit which normally occurs in the crisis and recession stage that follows all credit expansion. Just as credit expansion increases the quantity of money in circulation, the massive repayment of loans and the loss of value on the assets side of banks’ balance sheets, both caused by the crisis, trigger an inevitable, cumulative process of credit tightening which reduces the quantity of money in circulation and thus generates deflation. This third type of deflation arises when, as the crisis is emerging, not only does credit expansion stop increasing, but there is actually a credit squeeze and thus, deflation, or a drop in the money supply, or quantity of money in circulation.Money, Bank Credit, and Economic Cycles, Jesús Huerta de Soto, 2006 PP. 445-448, 452-53I expand upon this in my book Illusions of Wealth as I analyze this definition and correlate it with my research of (John) Exter’s inverse pyramid and conversations with his son-in-law Barry Downs and the work of Ned Davis Research Group and their take on Total Credit Market Debt as a % of GDP.I’m not sure how you get inflation just yet, but do agree it will rear its ugly head at some point, so perhaps our timing is different but result the same.


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