Wall Street Would Just Love a Whiff of Inflation

Gold and crude oil are ascending in tandem, suggesting the rally could get legs. If so, it would have bullish implications for the stock market, since Wall Street has been praying harder than ever for signs of inflation’s return.  A Martian invasion is more likely in my estimation, but that’s no reason why stocks cannot surf this latest wave of delusion and move higher, even without the support of earnings.

  • Cam Fitzgerald April 12, 2016, 6:25 am

    I completely agree Rick. Even the desired hint of inflation if it has arrived is going to be nothing more than a Siren beckoning traders to the rocks. In the background we have the makings for something far more ominous than what was seen during the Asian Financial Crisis. So those positioning on the beaten down commodity sector are most likely hedging against a stock market retreat that they are betting will do less damage to commodities than overpriced equities in general. That is to say that they may have found they can stay more or less fully invested while reducing exposure risk by simply rotating into the sector that is objectively near its bottom while lightening up a little on the debt laden and popular but heavily distorted P/E wise group of stocks. So I don’t think this is really about an inflation trade at all but rather a flight to reduce risk and exposure with the hopes a little more upside is in the wings. I cannot imagine any one sane really believing that genuine inflation is about to break out when the real hazard remains an epic debt deflation and potential collapse in asset values around the globe. As the months wear on China and its tottering tower of unstable credit menaces the entire world and threatens to tip the whole house of cards in its crater as it comes down. We cannot easily chart this gloomy scenario either because crashes just don’t fit the usual technical models being as they usually just break all our most reliable charting patterns. I do however have one indicator that is absolutely alarming and I think may allow me to time the Chinese credit bubble collapse. I am still working on it though so won’t relate it today but I will post it as soon as I can safely conclude I am tuned in to this coming economic disaster. I will only add that I see the trouble coming this year. It is possibly just months away. Once that moment arrives there will be no more discussion about the Chinese economic miracle nor will we be regaled with endless blather from the China bull retards about the impenetrable size of their foreign exchange reserves. They are just floating fishing bobbins up against a tidal wave of unrepayable debts and an avalanche of defaults.