The DOW Road has Ended. Now Welcome Hyperinflation.
Updated
The market has chosen a way to profit throughout all these years. This is the end of this way, QE lead us here... in this dead end. Equities was the "gold" of the time that passed. Now this is changing...
If you read until the end of this idea, you will realize that a lot is changing.
I will briefly analyze this chart and what it tells us. This is the ratio of equities compared to yields. I have modified yields using an equation I made up. This channel is drawn from 01/01/1950. This is a date I use since this is the day America 2.0 was born. I have talked about it on the MV = PQ idea linked in the end of this idea.
Well, we have just missed this trend... Right now we could be witnessing the very beginning of US 3.0. Long-term technicals on this chart are deadly for DJI.
So this chart above suggests that the new big thing is bonds.
As you will now realize, this is not the entire story...
The following are IMPORTANT:
There are some things that trouble me...
SPX compared to energy is showing signs of stagnation. There is substantial drop for equities ahead of us.
So okay, energy cost is going to increase compared to equities, that is something we have taken for granted the past few months. We have talked about this a myriad times... This is not the entire story.
This chart below shows that energy increases will overperform yield increases.
So in a sense, inflation (calculated from commodity cost) will overperform yields.
Inflation is poised to increase much more than yields. Until now yields were consistently decreasing, now there is no more room down for yields.
Even if yields remain stable on today's levels, this chart suggests that energy prices will still increase. If yields increase, energy prices will increase more compared to yields.
This is a recipe for hyperinflation...
This chart below, shows more evidence towards the same conclusion...
Basically, "long-term inflation" (PPIACO*GOLD) is creating bull-flags compared to "total money created from yields" (mod-yields*CURRCIR). This means that the cumulative price of production cost and gold cost, will substantially increase compared to what bonds yield in total.
Conclusion: Chaos. No matter what politicians want, things are out of control right now. These charts suggest that. This is a long-term phenomenon which cannot change from free will. Nature is more powerful than we could ever hope to be ourselves. These charts are simply scary. I don't have the words to explain much. The charts speak for themselves.
I am sorry for the rushed post, and any mistakes that I might have done. I began writing about DOW, and I found out that there is much more happening right now... We all knew that we could have increased cost of energy, and stagnating equities. I couldn't put the scale of them in perspective. I hope that these charts gave you some perspective, they certainly gave me a clear perspective.
PS. While we cannot avoid what is coming, we have the power to choose what boat to take. The stranger told us that we cannot be in two different boats. We are basically obliged to choose our path.
Tread lightly, for this is hallowed ground.
-Father Grigori
If you read until the end of this idea, you will realize that a lot is changing.
I will briefly analyze this chart and what it tells us. This is the ratio of equities compared to yields. I have modified yields using an equation I made up. This channel is drawn from 01/01/1950. This is a date I use since this is the day America 2.0 was born. I have talked about it on the MV = PQ idea linked in the end of this idea.
Well, we have just missed this trend... Right now we could be witnessing the very beginning of US 3.0. Long-term technicals on this chart are deadly for DJI.
So this chart above suggests that the new big thing is bonds.
As you will now realize, this is not the entire story...
The following are IMPORTANT:
There are some things that trouble me...
SPX compared to energy is showing signs of stagnation. There is substantial drop for equities ahead of us.
So okay, energy cost is going to increase compared to equities, that is something we have taken for granted the past few months. We have talked about this a myriad times... This is not the entire story.
This chart below shows that energy increases will overperform yield increases.
So in a sense, inflation (calculated from commodity cost) will overperform yields.
Inflation is poised to increase much more than yields. Until now yields were consistently decreasing, now there is no more room down for yields.
Even if yields remain stable on today's levels, this chart suggests that energy prices will still increase. If yields increase, energy prices will increase more compared to yields.
This is a recipe for hyperinflation...
This chart below, shows more evidence towards the same conclusion...
Basically, "long-term inflation" (PPIACO*GOLD) is creating bull-flags compared to "total money created from yields" (mod-yields*CURRCIR). This means that the cumulative price of production cost and gold cost, will substantially increase compared to what bonds yield in total.
Conclusion: Chaos. No matter what politicians want, things are out of control right now. These charts suggest that. This is a long-term phenomenon which cannot change from free will. Nature is more powerful than we could ever hope to be ourselves. These charts are simply scary. I don't have the words to explain much. The charts speak for themselves.
I am sorry for the rushed post, and any mistakes that I might have done. I began writing about DOW, and I found out that there is much more happening right now... We all knew that we could have increased cost of energy, and stagnating equities. I couldn't put the scale of them in perspective. I hope that these charts gave you some perspective, they certainly gave me a clear perspective.
PS. While we cannot avoid what is coming, we have the power to choose what boat to take. The stranger told us that we cannot be in two different boats. We are basically obliged to choose our path.
Tread lightly, for this is hallowed ground.
-Father Grigori
Note
The channel from 1950 is drawn automatically, using the Log-scale Linear Regression indicator. So there is no bias on how it is drawn.Note
Note
The channel is from 1985, oops!Note
Just an update:I now use the M2SL index are a more accurate calculation, instead of CURRCIR.
Note
Look at these unbiased trendlines, drawn using magnet tool.With Green and Red arrows, I have marked the points I used to draw the rays.
These long-term rays, prove as significant resistance.
Hitting one of them, was a fundamental reason the Black Monday was so severe.
Drawing the 1932-1999 trendline, using the magnet tool, on the 4M chart, we see the following:
We hit it in the LPSY DAY. MINDBLOWING!
Note
Do you know when the fakeout occurred? On the Monday after the 2020 US elections.Note
I'm calling it, DJI compared to yields to drop 70% from today's price.If yields stay constant, this will take DJI below the 2008 peak. Crazy right? In my opinion, not that crazy...
Note
Note
The violation of this trend marks the end of QE. This shows the true effect. I hope you all understand it.With Green and Red arrows, I have marked the points I used to draw the rays.
These long-term rays, prove as significant resistance.
Hitting one of them, was a fundamental reason the Black Monday was so severe.
Note
After Hubris and Atis, comes Nemesis...Note
I told you this chart was meaningful...LQD is the investment-grade ETF. On the first chart it is compared with SPX/(modified-yields) and on the second with SPX/(modified-yields*PPIACO)
The correlation is as good as it can get...
If that is the case, what could this analysis mean for the future of corporate bonds?
Note
I need to trademark these charts! They are absolutely beautiful...Note
As DJI/mod-yields increases, DJI becomes more profitable than lending money. As this chart decreases, lending money becomes more profitable.Dollar to become the next Equity?
Dollar to become the next Gold?
X marks THE SPOT. The 2020 "Black Swan" one. Black Swan hahahaha I know what an incredibly funny joke!
Note
Bonds have been problematic for years...P.S. I love that KST
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