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« Marine Le Pen establishes lead in first round French election poll | Main | Sprott's Thoughts Precious Metals Market Commentary »

Dear Gold Bugs, Grow Up: The 1970's are Back 

The Inflationary Path Forward

by Soren K- When inflation really kicks in: Real estate will not save you, stocks will not save you, Bonds will kill you. Only monetizable dollar denominated assets will save you. Stocks will have already discounted inflation and go sideways to lower in the next 3 years. In a higher rate environment, how can they institute stock buy-back programs?

Crazy as it seems, Trump will likely preside over QE4 and higher rates. Sterilized printing (QE) and rolling out our debt to 100 years (Helo Money).  The Helo money is going to drop on corporations, not people. It will come in the form of subsidies, abatements, and handouts. The people will finance it. Jobs will be created, but wealth will not trickle down.

This is the 1970's all over again

Nothing has changed. The Dollar will stay strong because Trump says so. And it helps orchestrate the biggest short squeeze ever. Emerging markets (and US citizens) will be long dollars when the greenback finally starts its descent. The US and China will laugh it off as they will be out. US citizens will be deciding on hot dogs or cat food again as inflation kills their buying power. We will be forced to buy American because it is cheaper. But it will be crap product again because the raw materials will be more expensive to import. Meanwhile real rates will remain negative as the Fed (intentionally) chases inflation higher. It took 10 years to stop deflation. 

Inflation in Stages

  • Stage 1= Bonds Down, Stocks up, Industrial Commodities Up. PM ignored. Gold lags in a 1970's type inflationary market. 
  • Stage 2= Stocks sideways, Bonds volatile, Industrials Volatile, Precious Up.  Bonds lead. Stocks discount inflated earnings in Stage 1, then stagnate on squeezed margins. 
  • Stage 3= Volcker 2.0

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