In this morning’s mail bag we have another interesting article sent to us from taki tsaklanos of goldsilverworlds.com regarding the inflation/deflation battle which you may find interesting:
Two months ago, Incrementum Liechtenstein released its chartbook entitled “Monetary Tectonics” which illustrated the raging war between inflation and deflation in 40 charts. Meantime, the authors of the chartbook have launched the “Austrian Economics Golden Opportunities Fund,” a fund that takes investment positions based on the level of inflation. The key tool in their investment decisions is the “Incrementum Inflation Signal” (also referred to as the “monetary seismograph”), a continuing measurement of how much monetary inflation reaches the real economy based on a series of market-based indicators.
The Incrementum Inflation Signal started showing rising inflationary momentum after a period of 19 month of disinflation. Is Inflation making a comeback just as the consensus worries about deflation risk? That was the subject of Incrementum’s first Advisory Board in which much respected names have a seat, including James Rickards, Heinz Blasnik, Rahim Taghizadegan, and Zac Bharucha. The Board was led by Ronald Stoeferle, managing director of Incrementum Liechtenstein, and its partner, Mark Valek. This article summarizes Incrementum’s Advisory Board meeting. The full transcript is at the bottom of this article.
The direction of inflation is important in Incrementum’s Inflation Signal, not the absolute figure. At the moment, especially central bankers and mainstream economists are scared of deflation. Further easing by central bankers could be expected going forward. Related to the Fed’s policy, Rickards expects a pause in the taper by July and perhaps increased asset purchases later this year. “They tapered into weakness. They should have not tapered in December by their own metrics, specifically inflation, employment and a few other things. I expect the sequence as follows: I think they will taper another $10 billion in April, pause in June and July, and then probably increase asset purchases later in the year (maybe August or September). That should be bullish for equities but also signal to commodity investors that inflation is on the way, because it just says that the Fed will do whatever it takes to get inflation.”
To read this post in full and view a number of interesting graphs please click here. to continue reading this post.
The miners have started 2014 very well indeed on the back of rising gold prices, so the question is; is this the real deal or another head fake? Is the bottom really in? Could there be a final capitulation just ahead of us? Will the summer doldrums take the PMs lower?
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